What’s a Spending Freeze — And Should You Try One?

By June 4, 2019Credit Cards
Worried about a spending freeze? Don't know what a spending freeze is? Find out here.

Planning to pump the brakes on your spending habits? There are plenty of ways to accomplish your goal — such as creating a budget or avoiding social media — but none are quite as dramatic as the “spending freeze.” What’s a spending freeze? The concept is simple. For a designated period of time—such as a weekend, a week, or a month — you resolve not to fork over money for anything other than your household bills, necessary groceries, medications and gas, or transportation fare. The idea of a spending freeze has been picking up steam lately, fueled by the minimalistic philosophy of Marie Kondo. It can also kick-start your savings and bring you closer to achieving financial goals. Read on to find out everything you need to know about this popular phenomenon — and whether it’s the right move for you.

The Ground Rules

You’re ultimately in charge of your own spending freeze. As a result, you decide how strict or forgiving the restrictions can be. Most spending freezes allot a certain amount for groceries and fuel, as well as payments for regular monthly bills. Unnecessary items would include any restaurants, coffee on the way to work, entertainment purchases, and clothing. For a family, you would typically agree on the ground rules and post them in an easily accessible location — and make sure everyone is as dedicated to the buy-nothing mentality as you are.

Your Goals

Choosing a goal is the smartest way to stay committed during a spending freeze. Think about what you want to accomplish — whether it’s paying off your credit card debt, saving up for a vacation, or finally starting your emergency savings fund. Write down your goal and place it in areas where you’re likely to see it any time you might feel the urge to buy something. Next, figure out what you’ll do with the amounts you save from the spending freeze. Most experts recommend creating a savings account where you can automatically transfer the money you saved during the spending freeze. For example, if you normally spend $75 dining out during the weekend, you’d transfer the $75 you saved during the spending freeze into your savings account.

Disadvantages

A spending freeze can be very demanding, even for a short period of time. The all-or-nothing mentality of a spending freeze can seem too daunting for some people. You might fully commit to the idea, only to feel your resolve weaken around the time you’d normally order takeout on a Friday night. In addition, some people follow through on the spending freeze, only to return to their poor financial habits once the spending ban ends. Most spending freezes aren’t sustainable over a long period of time, and financial experts often recommend them only as a quick “refresh” when you want to rein in your spending and tidy up your monetary habits a bit.

Advantages

A spending freeze is a temporary exercise — but it can jump-start a lifelong commitment to budgeting and smarter money management. You’ll need to take a hard look at your finances and nix anything you can live without — and then force yourself to actually do so over that period of time. When you are successful, you may realize that those items weren’t as necessary as you had thought. A spending freeze also prompts you to search for other sources of free entertainment and encourages you to use what you have — whether it’s the food in your pantry, the clothes in your closet, or the sporting equipment in your garage that’s been collecting dust for years. You might discover different hobbies that don’t cost any money — a valuable life lesson.

Is It Right for You?

A spending freeze comes down to your own personal goals. If you have found yourself making unnecessary impulse purchases and want to curb those bad habits, a spending freeze can be a savvy choice. You’ll become more in tune with the state of your finances — and you’ll learn what motivates you to spend, and what you can enjoy doing as an alternative. However, spending freezes don’t work for everyone. If you find the idea to be too restrictive, you might feel more comfortable simply reviewing your finances, deciding on areas where you can save money, and designing a budget.

Partners in Financial Success

While you’re pondering the next steps toward financial freedom, check out the rest of our offerings here at Ovation Credit. We can help guide you in your efforts to live a better credit life. Find out more about how we can help with a free consultation.

References

https://money.usnews.com/money/blogs/my-money/2014/03/27/5-reasons-to-try-a-two-week-spending-freeze

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