Spending bans are all the rage right now.
Said no one, ever…
If anything consumer spending is on the rise and in a big way. You might be able to find some quarterly information that would prove otherwise. But realistically, the closer we get to having our instant gratification care-packs dropped down the chimney by an autonomous Amazon drone, the more money we are likely spending on completely useless things that offer little real value to our lives.
This is where some problems begin to arise for some people.
The combination of banks softly raising your credit limits, and modern day super-sized FOMO consumer advertising is a dangerous one. You are either in season or out of season, get in season by picking up the latest trends at your local highway robbery mega-mall. Or even easier, online!
These consumer goods and services can cause some people to find themselves drowning in debt as spending goes unchecked or actively ignored to keep the short-lived gratification supply lines unobstructed.
If this is you, know that you are not alone. Huffington Post Canada tells us what the average Canadian’s debt situation looks like right now.
Enter: The Spending Ban
The spending ban is named exactly for its action: a restriction on consumption, or a stop to wasting money. It is kind of like a financial fitness program to keep our financial health in check.
(Also to Note: Although extremely effective for those in debt, you do not have to be debt ridden to find advantages in a spending ban! Even people in good financial health can find an edge in spending bans.)
Financial health can be just as important as physical health. As financial health begins to break down, physical health goes right along with it due to increased stress levels that can cause elevated anxiety levels, possibly leading to depression or other not so good states of the mind.
Temporarily pushing out social norms can allow us to implement a spending ban type regime in order to sift and separate the needs from the wants, simply focusing on the needs for a time. We can sift our spending using our banking statements. Credit card statements, line of credit statements, checking account statements. Anywhere we have money coming in and going out… starting with the places where it’s going out faster than it’s coming in.
Want a really great breakdown of a spending ban, check out this piece at moneycrashers.com
Where is your Money Going?
Using our banking information we can see what is being spent where. The idea is to make a list of all the items. Once this list is created we can separate the needs from the wants.
This is a critical point as you must be sure there isn’t a bunch of want stuff that ends up in the need pile, that would completely defeat the purpose of this financial fitness regime. If you are one of those people who have a really hard time with discipline or committing to a goal, this isn’t any easier. But it definitely pays off in the long run.
How long does a Spending Ban last?
The length of the spending ban is totally up to you! It all really depends on what your goals are. Here are some examples of reasons one may want to execute a spending ban, including but not limited to:
- Deferring spending on non-essential items indefinitely in order to save for a down-payment on a home.
- Holding back spending money for six months to help buy a new car without financing it, saving on interest.
- Reaching a savings goal for the year to keep an emergency fund in tact.
- Spending the last quarter of the year topping up annual contributions to an RRSP for tax benefits and compound growth.
- Reallocate 3 months of spending to a yearly vacation plan.
- Eliminate unneeded spending for as long as it takes to pay down debts quicker such as student loans, credit cards, or lines of credit.
As you can see the reasons can vary, the timelines aren’t concrete, and they could apply to people in both poor and great financial health.
Identify and Eliminate Spending
If you are starting to feel the squeeze financially, don’t kid yourself. There is no better time than now to launch your spending ban and dig yourself out of the hole you ended up in. Or as mentioned maybe you are just looking to cut spending to stack up your tax return via RRSP contributions.
What ever the reason, or timeline, grab those balance sheets from your bank and zero in on your wants spending. Identify your unnecessary spending and begin to terminate. Here are some easy wants that can have high cost, and some viable solutions for them during your spending ban:
Brand New Designer Clothing:
Forgo this buying habit, at least for the time being if not forever. If you must freshen your wardrobe, try selling currently owned items and use that money to scour thrift shops or boutique consignment stores. You’ll be amazed at some of the items discovered.
Dive into the world of minimalism. Get rid of everything! Not entirely necessary but some do find emptying their homes of extra stuff to be transformational in a good way. Sell items that are not needed and easy to part with first. A good practice to get into is for every item coming into the home, one item must leave. Instead of buying new things, try reorganizing everything.
Eating Out/Social Gatherings:
These activities although seemingly crucial to maintaining a good social life are silent killers of bank accounts. $5 coffees, $20 lunches, and $10 alcoholic beverages add up in a real hurry without much notice. If you don’t want to be lonely during your spending ban, host a potluck with your friends or co-workers. Find a small cluster of breweries somewhere that all offer free brewery tours and tasting and make an outing of it. Take a walk in a park with a friend or gather some people for a hike. There are plenty of things to do that don’t have to compromise your cash. Check online for what is fun and free in your locale.
There is probably several more things any person could cut out of their life for a bit or maybe forever to save money. These are just a few, but identify your heaviest spending items and you will be surprised how much more money you have around after stomping them out.
Need more ideas of costs to cut? This list of 25 from frugal-millennial is magnified.
It will probably Suck. But Don’t Give Up.
Dampening or completely extinguishing any habit is always a challenge. Certain things will trigger us to go back to our old ways. You must be able to recognize when this occurs. Remain unwavering in your spending ban. After all, that’s why it is called a ban! Set realistic goals and best them.
The spending ban might cause some turbulence for you initially as you alter your lifestyle a bit, or maybe extensively. Rest assured it will get easier and eventually you’ll be extremely glad that you did. In some cases they can save people’s lives in a way, by protecting well being and increasing standard of living. Depending on your situation you may begin to see results quite quickly.
In a world of consumerism, keep your head up and eyes on the finances. Spending bans can be a super effective tool for meeting goals. I hope you discover the advantages for yourself.