Spending Freeze: Is Going Cold Turkey a Smart Way to Dig Out of Debt?
A spending freeze (or, as some call it, a spending fast) is similar to the Atkins diet, except instead of cutting carbs, the participants cut out all non-essentials. No movies, no morning lattes, no dinners out, no happy hours, no cable, no new clothes -- the list goes on and on. Money is only to be spent on what it takes to keep the lights on and food on the table. The cash one saves goes towards debt repayment or fattening a savings account.
To me, a spending freeze sounded akin to a yo-yo diet. It also conjured up images of Oprah's "wagon of fat" (even though that episode aired a year before my birth). My first (strong) instinctive reaction to the concept was that people resorting to such extremes with their finances were setting themselves up for failure. It seemed only logical that periods of deprivation would lead straight back to bouts of fiscal gluttony.
Perhaps I Was Wrong
"I decided to do a year-long Spending Fast to try to eliminate my $23,605.10 in debt," said Anna Newell Jones, creator of the blog AndThenWeSaved.com, which she started to keep herself accountable for her spending.
"I was hopeless about my financial situation, and I was sure I would die with my debt," said Newell Jones, who trademarked the term "Spending Fast" after her experiment. "So I was shocked by how effective the Spending Fast was and that through it I was able to eliminate all of my debt in only 15 months."
How Do You Start a Spending Freeze?
Not unlike my original yo-yo diet analogy, Newell Jones also compared the journey of a spending freeze to being on a food diet. Yes, people have to eat, but they should only consume what's good for the body. The same mentality can be applied to a spending freeze.
To determine what was "right," the spending freeze maverick made a list with two categories.
"You create a 'Wants and Needs' list, and that makes buying decisions black and white by cutting out the gray, discretionary area that gets so many people into trouble with money and over-spending," she clarified.
But the best-planned diet can be discarded when a cupcake is on the table, and no number of cleverly made lists can shield us from the lure of consumerism.
"It's not realistic to think that anyone will be do a Spending Fast perfectly," acknowledged Newell Jones, who fell into a splurge trap when a beautiful $200 pair of sunglasses caught her eye.
"I bought them, felt very guilt, realized I didn't truly need them, and ultimately returned them," she admitted. "Mistakes happen, it's about forgiving yourself and remaining committed to the process."
Wait, Maybe I Was Right
I, like your average millennial, love a trophy and wish I could claim victory in the spending freeze debate. Unfortunately, I it appears a spending freeze can indeed be effective both to save money and dig out of debt. Those who stay the course can ultimately change their relationship with money.
%VIRTUAL-article-sponsoredlinks%"I developed the habit of telling myself 'no,' " said Newell Jones. "I found that the freedom and excitement I got from paying off huge sums of debt replaced my desire to have the items I previously wanted."
Would You Fail?
Even though she's the poster-child for a successful spending freeze, Newell Jones recognizes that it isn't the remedy for everyone burdened by debt. A spending freeze is for the desperate. It's for those who've found other debt-repayment methods to be inadequate. Perhaps most importantly, it's for those doing it because they want to and for no other reason.
"Changing habits is hard, and doing a Spending Fast requires sacrifices," she said. "It's definitely not for everyone, but for those who stick with it, it's completely life-changing."
Those who fail to successfully complete a spending freeze will be required to haul around their debt in a Radio Flyer.
Erin Lowry writes for DailyFinance on issues relating to millennials, money and personal finance. She's also the blogger behind Broke Millennial, where her sarcastic sense of humor entertains and educates her peers. Popular posts include:
- The Joys of Credit Card Churning: Cheap Trips and Extra Cash
- 3 Good Reasons Not to Pay an Accountant to File Your Taxes
- You and Employed, but Still Short on Cash? You Need a Side Hustle