The "no-spend" challenge has been around for years but gained new life in 2024, thanks to TikTok and No Spend Januaryat the beginning of the year. Participants are encouraged to go on a spending "fast" by abstaining from buying anything but the barest essentials.
The idea is to use the you'd spend on Starbucks and other luxuries to pay down debt, save for a vacation or reach some other financial goal. But financial experts warn the no-spend challenge can actually be counterproductive.
CNBC Select breaks down the no-spend challenge and shares some more sustainable strategies.
What we'll cover
- What is the no-spend challenge
- What are the benefits of the no-spend challenge
- What to do with the money you save
- Watch out for revenge spending
- Bottom line
Find the best savings account
What is the no-spend challenge?
This viral trend involves going as long as possible without spending money on non-essential. (Rent, groceries and other necessities are okay.) Participants track their progress on a calendar, trying to rack up as many consecutive no-spend days as possible.
Things commonly forbidden during a no-spend challenge include:
- Eating out
- Coffee
- Alcohol
- Clothes
- Haircuts
There is no set timeframe for a no-spend challenge. January 2024 emerged as No Spend January, when people tried to go the whole month without shopping, eating out or hitting the town. But for others, a weekend or even a day without impulse buying is a victory.
What are the benefits of the no-spend challenge?
Spending less on non-essentials frees more money up for the important things, including paying off high-interest loans and saving for retirement. Kendall Meade, a financial planner at SoFi, says joining a no-spend challenge can help you budget better in the long run.
"When they going through these no-spend times, people realize what they were spending money on wasn't that important to them, Meade said. "It can help them figure out what they can cut out moving forward."
For those new to money management, Meade suggests the 50/30/20 budget, which allots 50% of your income towards expenses like rent and car payments. Another 20% goes towards savings and investments and the last 30% goes to things you want — like dining out, shopping and travel.
You can always adjust the percentages based on your lifestyle and priorities.
"It's not going to be those exact numbers for everybody," Meade said. Some people may have higher living expenses or need to squirrel away more retirement.
Budgeting apps can also foster sustainable spending changes. You Need A Budget (YNAB) uses the zero-based budgetingsystem to assign every dollar a "job." The YNAB app syncs across devices, allowing couples and families to manage their money together with a single subscription.
While it is a paid service, YNAB claims the average user can save $600 in the first two months.
You Need a Budget (YNAB)
Cost
34-day free trial then $99 per year or $14.99 per month (college students who provide proof of enrollment get 12 months free)
Standout features
Instead of using traditional budgeting buckets, users allocate every dollar they earn to something (known as the "zero-based budgetingsystem" where no dollar is unaccounted for). Every dollar is assigned a "job," whether it's to go toward bills, savings, investments, etc.
Categorizes your expenses
No
Links to accounts
Yes, bank and credit cards
Availability
Offered in both the App Store (for iOS) and on Google Play (for Android)
Security features
Encrypted data, accredited data centers, third-party audits and more
Terms apply.
Goodbudget is a free app that modernizes the envelope-stuffing method by allowing users to divide their money into categories like rent, groceries and dining out. When an envelope is empty, you're done spending in that category.
Goodbudget
Cost
Free for 20 total envelopes; $8/month (or $70/year) for unlimited envelopes
Standout features
Allows users to plan their household's spending using the "envelope method," where they allocate a certain amount of their income into categories like groceries, rent and debt payoff. Users are only supposed spend what's in their envelopes and if they go beyond their budget the envelope will show red to indicate that they overspent
Categorizes your expenses
Yes, but users can customize
Links to accounts
No, users manually create "envelopes" and input their transactions
Availability
Has a web-based version, and also offered in both the App Store (for iOS) and on Google Play (for Android)
Security features
256-bit bank grade encryption in a secure data center
Terms apply.
What to do with the money you save
A no-spend challenge is more effective when the money you save is earning a healthy return. High-yield savings accounts (HYSAs) can deliver returns of over 5% while allowing you to quickly access your money.
The Marcus by Goldman Sachs HYSA, which doesn't charge any fees or require a minimum deposit, offers a healthy 4.50% yield.
Marcus by Goldman Sachs High Yield Online Savings
Goldman Sachs Bank USA is a Member FDIC.
Annual Percentage Yield (APY)
4.40% APY
Minimum balance
None
Monthly fee
None
Maximum transactions
At this time, there is no limit to the number of withdrawals or transfers you can make from your online savings account
Excessive transactions fee
None
Overdraft fee
None
Offer checking account?
No
Offer ATM card?
No
Terms apply.
LendingClub's HYSA does have a $100 opening deposit requirement, but it offers a 5.00% APY and comes with a free ATM card.
LendingClub High-Yield Savings
LendingClub Bank, N.A., Member FDIC
Annual Percentage Yield (APY)
5.00%
Minimum balance
No minimum balance requirement after $100.00 to open the account
Monthly fee
None
Maximum transactions
None
Excessive transactions fee
None
Overdraft fees
N/A
Offer checking account?
Yes
Offer ATM card?
Yes
Terms apply.
When you do buy essentials, you should still try to earn a return on your spending with a rewards credit card. The Bilt Mastercard® , for example, lets card holders charge their rent without paying a transaction fee and even earn points .
Bilt Mastercard®
On Bilt's secure site
Rewards
Earn Bilt Points when you make 5 transactions that post each statement period - up to 1x points on rent payments without the transaction fee (up to 100,000 points each calendar year), 3x points on dining, 2x points on travel, and 1x points on other purchases.
Welcome bonus
None
Annual fee
None
Intro APR
N/A
Regular APR
See Terms
Balance transfer fee
Up to 5% for each balance transfer, with a minimum of $5.
Foreign transaction fee
None
Credit needed
Excellent/Good
See rates/fees and rewards/benefits; terms apply.
A grocery credit card can score you points and bonus bucks at the grocery store: The Blue Cash Preferred® Card from American Express earns 6% back at U.S. supermarkets up to $6,000 a year (then 1%), plus 3% back at U.S. gas stations and eligible transit. (Terms apply.)
There is a an intro $0 annual fee for the first year (then $95), so make sure you're spending enough to come out ahead. (see rates and fees.)
Blue Cash Preferred® Card from American Express
On the American Express secure site
Rewards
6% cash back at U.S. supermarkets on up to $6,000 per year in purchases (then 1%), 6% cash back on select U.S. streaming subscriptions, 3% cash back at U.S. gas stations, 3% cash back on transit (including taxis/rideshare, parking, tolls, trains, buses and more) and 1% cash back on other purchases. Cash Back is received in the form of Reward Dollars that can be redeemed as a statement credit or at Amazon.com checkout.
Welcome bonus
Earn a $250 statement credit after you spend $3,000 in eligible purchases on your new Card within the first 6 months.
Annual fee
$0 intro annual fee for the first year, then $95.
Intro APR
0% for 12 months on purchases from the date of account opening
Regular APR
19.24% - 29.99% variable
Balance transfer fee
Either $5 or 3% of the amount of each transfer, whichever is greater.
Foreign transaction fee
2.7%
Credit needed
Excellent/Good
See rates and fees,terms apply.
Watch out for revenge spending
While the no-spend challenge can initially save you more money, it could boomerang on you if you're not careful.
"What I think is a big con is that it can cause 'revenge spending,'" Meade says. "Sometimes I see that people end up spending more afterward because they tried to cut out so much the week before."
Instead, Meade said people can use the no-spend trend as an chance to rethink longstanding money habits.
"Instead of focusing on everything at once and cutting everything out, focus on those little changes," Meade says. "I find that people are more able to stick to that long-term."
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Bottom line
While cutting out non-essentials might work for a while, it probably isn't sustainable long term. If you want to try the no-spend challenge, set yourself a goal and a timeframe. When your spending fast is over, make sure you don't overcompensate buy revenge spending.
Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Kendall Meade, a certified financial planner at SoFi.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of personal finance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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For rates and fees of the Blue Cash Preferred Card from American Express, click here.
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