What is the “no-spend challenge” and how could it help people in all tax brackets?

In an attempt to tackle the effects of the cost of living crisis, many people, especially young people who are not high earners, are taking part in a “no-spend challenge”.

According to the Guardian, the no-spend challenge can take many forms depending on the participant’s goals. The overall aim is to reduce your spending on unnecessary costs and exercise greater discipline over your finances while times are tight.

Two common variations on the no-spend challenge include:

• Allocating one day each week in which you spend no money whatsoever. For instance, Sundays could be spent using what you have in the fridge to create homemade meals, cleaning your home, reading, watching a film at home, or going for a walk – all of which are entirely free.
• Setting aside one week a month in which you ban non-essential spending. When looking at your calendar for the next month, you could pick a quiet week and set yourself the challenge of making only essential purchases during that week. This means no meals out, no clothes shopping, and no paid-for leisure activities.

Although this challenge is designed for young people who may not be earning much compared to you or your partner, it’s important to understand the benefits of this exercise for people of all ages, and in all tax brackets.

Let’s take a closer look at how the no-spend challenge could benefit you.

The no-spend challenge requires you to focus on the little things that add up

We all know that the little things add up, but it’s hard to put this knowledge into practice, especially if you are a busy person with many plates spinning.

Whilst it is crucial to enjoy life and spend your money on fun experiences, the no-spend challenge requires you to pay greater attention to your small costs.

For instance, if you spent every Sunday doing the no-spend challenge for the entirety of 2024, that’s 52 days in which no money leaves your bank account.

Even if you’d only normally spend £20 on an average Sunday, your no-spend challenge would save you £1,040. If you usually spend around £50 on a Sunday lunch out for two, you’d save an incredible £2,600 after a year of the no-spend challenge.

That’s why the no-spend challenge could be helpful for those in even the higher- or additional-rate tax bands: by exercising discipline over your spending for just one day each week, you could actually save thousands of pounds across a year.

What’s more, you could use these savings to create further wealth opportunities for you and your family (more on this later).

Your financial discipline may improve in all areas, not just spending

Create good habits in one area of your life, and they are more than likely to spread through every part of how you live.

If you adopt better spending discipline by trying out the no-spend challenge, this action could also make you a more responsible saver, investor, and overall financial strategist.

One example of this is “paying yourself first”. Once you have mastered the no-spend challenge, you could try adopting the habit of paying into your pension(s), savings accounts, and investment vehicles as soon as you receive your income.

Creating this foundation means everything that’s left is yours to spend, and you begin every week, month, quarter, or year (depending on your income regularity) with a positive act of financial discipline.

Moreover, the no-spend challenge could be the first step towards creating a more financially disciplined life for yourself and your loved ones.

You may gain greater savings and investment opportunities

Saving money just “for the sake of it” using the no-spend challenge will likely result in a feeling of immense satisfaction.

Plus, you could take this challenge one step further by:

• Rerouting the money you have saved into your pension, savings account, or investment portfolio
• Offering the money as a tax-efficient financial gift to the next generation
• Putting the funds towards a meaningful goal, such as a family trip abroad.

Visit our news page for plenty of helpful articles about making the most of your money.

Get in touch

Whether your goal is to build up a bigger emergency fund, create a diverse investment portfolio, or begin transferring wealth to the next generation, we can help.

The no-spend challenge could be a great place to start becoming more financially disciplined. And, if you want a more comprehensive approach, speaking to a financial planner could be suitable.

Email enquiries@prosserknowles.co.uk or request a callback from one of our advisers.

Please note

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.

The Financial Conduct Authority does not regulate estate planning.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.