How 'no-spend January' works (and what to do with the money you save)
As we inch closer to the New Year, many people are preparing their resolutions. Whether it's abstaining from alcohol for January or going on a diet, a new year is a great time to make a life change. One January challenge you may not have heard of – but may want to consider – is focused on improving your financial well-being.
It's called "no-spend January," and it's all about cutting back on frivolous spending that can leave you with less money for the important things in life. If you choose to participate in no-spend January, though, it's worth it to take another step and do something productive with the money you save, like put it in a high-yield savings account where it will earn you interest.
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How 'no-spend January' works
Obviously, you can't literally spend no money in January – you need someplace to live, food to eat and a way to get around, after all. Here are some of the rules you'll need to follow if you want to do no-spend January correctly.
Rule 1: No coffee shops
Look, there's no denying the joy of walking into Starbucks, Dunkin' or your local favorite and getting your favorite latte or cold brew – and maybe a donut on the side. For this month, though, you'll need to make coffee at home or in your office.
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Rule 2: No online shopping
The internet has made life better in many ways, but the ease with which one can start a shopping binge online probably isn't one of them. For this month, stay off of Amazon or whatever place you do your online shopping. Chances are you were buying things you don't need.
Rule 3: No entertainment
During January, don't buy movie or concert tickets. Don't buy books and don't rent movies on demand. You can use the streaming services or cable you already have, and if you want to read a book, you can use the library. Many libraries even let you borrow e-books, so you won't even need to leave your house.
Rule 4: No eating out
If you are already an accomplished cook, think of this as your time to shine. If you aren't, consider it your time to learn a new skill! Many people will also cut all alcohol for the month, so you'll be completing a "dry January" as well.
Rule 5: No buying clothes
Unless you're starting a new job and need a fresh wardrobe, chances are you don't need to buy any new clothes for this month. Resist the urge to hit up the mall and wear what you already own this month.
What to do with the money you save
Saving money is great. Using the money you save to make more money is even better. Whether you do it each week or just at the end of the month, you should take the money you saved and deposit it into a high-yield savings account. This way, it will earn you interest and give you even more money to work with in the future.
High-yield savings accounts are offering fairly high interest rates right now. Those might come down soon, but if you open an account now you'll still be able to take advantage of the high rates. High-yield savings accounts, unlike certificates of deposit (CD) accounts are flexible, too, as you can take the money out whenever needed. Some even allow for ATM transactions.
The bottom line
The key to no-spend January is right there in the name – for January, don't spend any money you don't have to. That means no coffee shops, no restaurants and no shopping sprees. If you want to make an even bigger positive impact on your finances, though, take the money you save and put it into a high-yield savings account so that it can start earning you interest.
