According to CNBC, the “No Spend Challenge” has been around for years, but hit the mainstream in 2024 thanks to TikTok. It encourages people to do a financial fast for a whole month, usually January, so you can pair it with your New Year’s Resolutions. This episode explores the challenge and welcomes Larry Sargent Jr. CEO and founder of the Teen Finance Academy. Teen Finance Academy’s primary mission is to give high school students, middle school students, and college students the tools they need to win with money.
Addison Asks Question 1: So let's start with the basics. What is the no spend challenge?
Larry: So basically you're going to make a decision, if you're married you and your spouse, to cut back on your spending and only focus on the essentials. Now it's really important that you kind of have a duration on it. So you may want to start off with like a month. I don't recommend a week because most people who work are W-2 employees get paid every two weeks, so you're not really going to see any benefits and you're not going to feel it. So I think about a month is pretty good. Of course you could go longer, but if you're single, you can go as long as you want. But if you have a spouse, kind of work that out ahead of time.
Cristina: So why a month? Why do you recommend just starting with a month?
Larry: So a month again is like 30 days, and then you have a lot of transactions that happen. You know, you're going to pay for your apartment or your mortgage, you're going to pay for your car if you have a car payment. All of those things that you normally do, like get a haircut or see your dentist or just kind of all of those things all kind of can be compressed inside of a month. So you have a good let's say, let's use the word audit trail. And it'll give you an opportunity to see the luxury or the careless in some cases frivolous, spending that you're doing over the course of 30 days. 30 days is usually a good barometer.
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Cristina Asks Question 2: All right, so how do I go about starting the no spend challenge? Because I have a spouse. How do I get them? Like, how do I even get started?
Larry: Sure. So I'm going to go back to grade school, and I have to make a confession. I didn't like all of my teachers. I didn't like all of them. And I particularly didn't like the teachers who would only tell me what I did wrong versus those who tell me what I did right. So if I got a teacher who gave me an A, but she put 96, I'm like, okay, that's a 96, that's an A, but if I got a teacher that gave me an A and then put minus four, I'm like, what? So I didn't really like that at all. I liked the other approach. So before we talk about what we can't spend on, let's talk about what we should be spending our money on. So, a long time ago, some really smart people got together and they said, you know what? Every man and woman need to have food, clothes and shelter. Now, if you ask that question to kids in Florida, they'll say water, clothes and shelter because it's hot here. So Dave Ramsey came back and said, hey, you need to update your list. And he said you need to have utilities because if you have a building or a shelter and you can't heat it and cool it when you need to, that's a bad place to be. Transportation to and from work, to and from church, to and from the grocery store. And then communication. There's that cell phone. And then another smart guy came up who's even smarter than Dave Ramsey and those other people. His name was Larry Sargeant Junior.
He said, you need one more thing. You need to add health care, because from the moment you arrive here to the moment you leave, you're going to need some kind of health care coverage. And after paying twice for two of my children to have braces. Boy, you're going to need to have some health care. In fact, they're going to need additional health care if they don't pay me back that money.
Once we know what we're going to spend our money on, then you can look at the things that are non-essential, and you can break those up into two camps. And that will begin with your spouse or a single or accountability partner. So if you're single, have somebody who can hold you accountable.
Cristina: So we really have to dig down. It's almost like two things like this is what we have to buy. To buy our mortgage, our cell phone bill, all those those are a must have. And then really deep down, dig down into like, what else do we spend our money on.
Larry: Correct. Like, for instance, in that space of transportation, it's not just gas and oil, but you have to pay for car insurance, right? That's an essential. You have to have that.
Addison Asks Question 3: Absolutely. So what are the rules of the no spend challenge? What are the guidelines?
Larry: So what you want to make sure is you lay out your spending plan, and then stick to it and make sure you're predetermined. I mean, you sit down with your spouse or your accountability partner. If you're single and work to make sure your spending plan is what you need, you would hate to be two weeks in and be like, oh, I forgot to buy toothpaste. And that's part of your healthcare. So you need to make sure you have that and then also have some grace with yourself. Life happens and there are unplanned emergencies. You know, we talk about when your tire goes flat, you know, you may want to pull on your savings to replace your tire or all four tires, depending on what happens. Your kids could get sick. They may fall down and break something.
So you have to allocate some money towards that. So give yourself a little grace, right? And sometimes you have habits of spending. And so you're sitting there in your car with your iced coffee, and you don't realize, oh my gosh, I didn't allocate for this. I'm just spending it because. You have a habit. So you have to kind of watch yourself and monitor yourself because you could be just dropping by at Chik-Fil-A just because.
Cristina Asks Question 4: So what are some of the benefits of doing the challenge?
Larry: So I took a test a long time ago that said that I was an achiever. So I like accomplishment. So just getting through the tape and finishing the race in this case, the challenge is awesome. But I think the more tangible benefits are you're going to see an increase in your savings and almost your mental attitude about money and how you deal with money. I think that you are now in control of you and your money versus the other way around. Yeah, I think that's incredible. And of course, if you have additional savings, let me say share this experience. I always find that there are great savings and discounts when I don't have any money in my savings account or in my spending plan. But if I would start saving for, let's say, unplanned land purchases, as well as unplanned events such as emergencies, then I might be in a better space. So just to reiterate, number one, you have more savings. Number two, I think your attitude and your ability to accomplish it. And then of course, you'll get insight and then you can buy that thing you really wanted to buy, which might be a goal for you as a part of the no spend challenge.
Cristina Asks Question 5: Where do you put unplanned savings in your in your five areas?
Larry: So when you do your spending plan there's always some money left over. And if there's not, oh go back because that means you need some cut some things out right. But there may be 20, 30, $40, $100 that are left over that you can just put into your savings account. Now, I, I'm very much a follower of Dave Ramsey. I think you should have an emergency fund and you should have what I call a fast emergency fund. So the emergency fund is some number of months of your personal expenses. So 3 to 6 months is usually the average. And then you need to have maybe like $1,000. And I hate to use money, actual money dollars because everybody's financial situation is different, but have some that you can access really fast for that flat tire or that injury, or just something that you need to spend money on quickly to resolve some issue that you have. So you can have, you know, even a Christmas account.
You can just put money in an account and credit unions will give you multiple savings accounts. So it's fantastic. So you can just put money in that account and just don't touch it. Right. That's part of the no spend challenge. Don't spend money in your Christmas account. And so then you can use that. And I call it Christmas because it's Christmas anytime I'm spending money out of that account. I love set it and forget it.
Addison Asks Question 6: So now on the back side of that, what about revenge spending? Now you're like, oh, I've saved all this. Let me just get a have at it. How do you handle that?
Larry: So let me make another confession here. I wasn't a big saver. Before I got married, my wife was a saver and when she showed me kind of the power of savings by us doing it, I got a little protective. So she says, okay, now we can spend. No, no, no, let's keep saving.
So you may find out that you have a reverse attitude. You're like, oh no, no, I have that money there. I don't want to touch it. Right. Or you may find it difficult to spend afterwards, but really what you're describing is like binge spending, right? So it's best to defer or block yourself off of that by saying, when I save this much, I'm going to buy this thing or these things. That keeps you in budget and in alignment. And again, as I said, once you decide the amount of money you're going to spend, that's when Amazon will have their deal at your 30 days, and you'll be able to buy even more than what you wanted to. But if you have that goal that you want to buy this, when you save this much at the end of the challenge, that should help you overcome that.
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Cristina Asks Question 7: Okay, here's the first one. So what are some things that people can commonly cut during no spend challenge.
Larry: Money that you spend going out to eat.
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Addison Asks Question 8: How can I stay motivated during this no spend challenge?
Larry: It's going to be your goal. Why are you saving and what are you going to buy at the end of this thing? You got to have some kind of goal that's reachable, attainable, that you want to do it right. Like a smart goal.
Cristina Asks Question 9: Next, what can I do with my savings from the challenge?
Larry: So I teach young people that there are four things you can do with your money. When you get it in your hand, you can spend it, you can save it, you can invest it, and you can give it. So since we're doing a no spend challenge, the other three are available.
Addison Asks Question 10: And so in this no spend challenge, I know some people feel like, oh, I'm not going to be able to do anything fun. So what are some low cost activities that they could still enjoy while doing this no spend challenge?
Larry: So let me talk to two groups. Talk to couples. My wife and I purchased a book called 52 Uncommon Dates. One of the dates is called a Gardening Challenge. So we literally got we had to buy a few things...soil, shovels and gloves and stuff. But we made a garden and that was a couple of hours. It was outdoor in the cooler times of the day. And it was a great opportunity for us to kind of do a date. For if you're single, you should find ways to give. There are a lot of community service activities you can involve yourself with. For our children, we made them do a garage sale to sell all of their toys.
And that was actually a money raising event. So you can do the same thing as well. Get your get rid of your old stuff or just give it away. Salvation Army, Goodwill, particularly with all the events that are happening in the country and around the world, you're giving could really help. I'm a big advocate of giving.
Cristina Asks Question 11: All right, so, Larry, tell us how can we learn more? How can our listeners learn more about what you're doing?
Larry: So I'm on Instagram at thewealthcademyfl, and so if you reach out to us there, there's some material and we do videos and stuff like that. And then on YouTube we're at the Teen Finance Academy and you can go right there, and I have a bunch of videos, and I go very deep into some of the other topics around money there. I'm teaching more about financial literacy versus the instruction stuff that I do with young people. We talk about you and your money because there are things we didn't get a chance to talk about.
The hosts share a resource from the Addition Financial's blog, “Our Best Money Advice & a Personal Finance Checklist.” Listeners can use it to help put together thier essential and non-essential budget for the no spend challenge and it is a perfect place to start.