Looking to Cut Down on Spending? Try a Financial Dry January to Get Your Money Back On Track
Looking to save money? A financially dry January could help you spend less and build better habits
Whether you’re trying to get your budget back on track after the holidays or simply want to save money, experimenting with a financially dry January might be a good place to start. While many people choose to partake in dry January—a month where you abstain from drinking any beer, wine or spirits—a dry financial January encourages you to cut back on unnecessary spending. To help you get started, we turned to the experts. Keep reading to learn more about a financially dry January and how you can benefit.
What is a financially dry January?
Setting up January to be a dry financial is like giving your wallet a reset. “You commit to only buying things you need rather than allowing yourself to buy things that you want,” says Trae Bodge, smart shopping expert at TrueTrae.com. “It can help to make you aware of spending habits that aren’t serving you, plus it can help you save money.”
Jack Prenter, CEO and personal finance expert at Dollarwise adds that it’s a great way to understand your money and your budget. While it’s only a month, it sets you up for smarter, more sustainable habits for the rest of the year.
Who can benefit from a financially dry January?
Anyone looking to save a little money should try Financial Dry January— which can be especially helpful to those living paycheck to paycheck. Chris Markowski, financial expert and founder of Markowski Investments, says living paycheck-to-paycheck is similar to treading water. If you want to stop feeling like you’re drowning, Markowski suggests tackling the problem head-on. ”Something like Dry January is going to lead to a positive change for your whole life because you’re not getting yourself continually in the hole.”
How to start limiting your spending
@theorganizedwallet It doesn’t make sense to say I won’t spend *any* money this month, so I’m putting some realistic expectations in place with these rules and exceptions. Excited to see how I do over the next 30 days! #nospendchallenge #moremoneychallenge #nobuychallenge
The first step is to take a realistic look at your finances. Prenter suggests tracking your spending because “just seeing where your money goes can be eye-opening.” Next, you’ll want to set a goal.
Determining why you want to spend less or save more is key, explains Ashley Lapato, personal finance educator at YNAB. “Don’t spend less just for the sake of spending less, ask yourself what you want that money to do for you,” she says. “Whether that’s building an emergency fund or saving for your next vacation, having a goal to keep you motivated during a period of low spending will help you be more intentional about spending decisions.”
Also, online shopping can be tempting during this time, but instead of buying something on impulse, try adding those items to a wishlist. Lapato suggests waiting two or three days and asking yourself if that purchase really aligns with your goals. Oftentimes, you’ll forget about those items and wind up saving money without realizing it.
What can you spend money on?
As much as we’d all love to be completely spend-free, essential items do cost money, so make sure to write down your no-spend exceptions. “All essential items should remain on the table,” says Bodge. “You don’t want to restrict buying the things you need (as long as you can afford them, that is!), so food, gas and essentials for the home, such as cleaning and paper products, should all be allowed.
She suggests using one card for all the purchases you have to make throughout the month. You want one that has good benefits and will help you in the long term. Her recommendation is the PayPal debit card because you earn five percent cash back each month in a chosen category.
Easy ways to keep track of savings
A financially dry January isn’t just about limiting your spending, and you’ll want to know how much you’re saving as well. “If you don’t already have an emergency fund of three months’ worth of expenses, then keep the money in a high-interest savings account that you can immediately access,” says Prenter. This gives you an easy safety net that you can always add more into. He adds that if you don’t have one, it’s best to put the extra money that you save from dry January into a long-term investment account like an IRA or Roth IRA, to save for your retirement.
Lapato adds that you should create a plan for the dollars you work so hard to save. “You can do this with a pen and paper or an app like YNAB, but the most important thing is that every dollar gets a job.” Ultimately, this will help you focus on how you want to use your money without using your bank account balance to influence your spending decisions.
Easy money-saving tips for ‘dry financial January’
Getting started is the hardest part and once you do that, there are a ton of easy ways to save even more. Here, expert tips for a successful financially dry January:
- Choose a buddy to do the challenge with you. Bodge says it’ll hold you accountable throughout the month by sharing saving updates.
- Make no-spend rules that work for you: “That might be bringing your own coffee to work, cooking more meals at home, and avoiding online shopping,” says Prenter.
- Find no-spend hobbies. Lapato says this might mean exploring some new hiking trails in your area or checking out a book series at the local library because things don’t have to cost money to be enjoyable.
Another piece of advice: “Don’t worry if you slip up. The point isn’t to be perfect. It’s to start building a better relationship with your money,” says Prenter.
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