The Save What You Spend Challenge

There are a lot of different savings challenges like the 52 week money challenge and the 365 day money challenge, but this isn’t the only way that you can create an opportunity to save money. One of the most effective ways to increase your savings is to create a challenge that forces you to look closely at your discretionary spending, and lets you decide if it’s really something important and worthwhile.

If you want to quickly increase your savings, one surefire method is to reduce or eliminate any unnecessary or frivolous purchases. However, many people don’t want to give up all of their fun cold turkey. It’s too painful to eliminate everything all at once. A compromise approach is to “save what you spend.”

Here’s how it works: Whenever you want to make a purchase for something fun or unnecessary (dinner out, a video game, tickets to a movie or concert, etc.) stop and ask yourself, “If I buy this thing, can I also put that much into my savings account?” So, for example, if you want to take the family out for dinner and a movie that will total $80, can you also put $80 in your savings account? If the answer is yes, go have your fun and then transfer the money to your savings immediately. If the answer is no, you may need to rethink your spending and save a bit longer so you can more comfortably afford this frivolous thing.

Note that the money you use for this challenge should come only from surplus. For example, if you’re already depositing $100 per month into a savings account, you cannot count that as your additional savings. So you can’t say, “Well, I put in $100 this month so that covers that dinner and a movie.” You want to increase your savings above and beyond your normal rate. If that $100 is your normal rate, you can’t count it for this challenge. The money you save to match your spending must come from money that’s not otherwise allocated, or which is trimmed from other categories such as groceries or utilities.

This challenge keeps you from blowing all of your discretionary income every month. Some people see (for example) $300 “left over” each month as money that can be blown on nothing but fun and unnecessary purchases. There’s nothing wrong with that. As long as you’re meeting your obligations, extra money is technically fair game for anything. But it can also be used to boost savings if that is a goal or need for you. Some don’t find it fun (or fair) to dedicate that full $300 to savings, so this preserves a bit of fun while also boosting savings. So maybe you blow $150, but by matching that, you also save an extra $150.

This challenge also keeps you from living too close to the edge on a daily basis. If you’re always keeping some money back to match your discretionary spending, you’ll always have a little extra in your account.

Saving what you spend also forces you to carefully consider your discretionary purchases, find substitutes or ways to get the items at a lower cost, and maybe put them off until you’re a little more comfortable. It may also force you to rethink your spending in other budget categories so you’ll have more available to match your discretionary spending.

If, for example, you can’t match that $80 dinner and a movie, maybe you scale back your plans to something you can match. Maybe the movie is one you can see at the $1 theater, or one that you rent. If you can’t match that weekend getaway, maybe you save for it a bit longer. If you can’t match that handbag you’ve been coveting, maybe you can find one at a consignment or thrift store for half the price. If you can’t match that video game purchase, maybe you get more aggressive about reducing your utility use so you have extra money available. Forcing yourself to save as much as you spend makes you more selective and creative when it comes to your discretionary spending.

You don’t have to make this a permanent challenge, unless you want to. You can try it for a month, or you can set a dollar limit that you’ll try to match. For example, you can say that you’ll match anything up to $100, but that week-long vacation is too much of a stretch to match. If you want to take it up a notch, you can also try matching some of your essential spending, as well.

Even if you only match smaller amounts, you’ll still see a boost in your savings. You might also discover that you don’t need or want many of the things you thought you did or that you can reduce spending in other areas without much difficulty. Over time, that will boost your savings even further.

(Photo courtesy of Ken Wilcox)