How to Use the $5 Challenge to Change your Financial Future
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Here’s the truth: a $5 bill has the power to change your life.
Here’s the harder truth: It’s completely up to you whether that power is for your benefit or your downfall.
I first learned about the $5 challenge from someone on Pinterest several years ago and decided to add that into my envelope system lifestyle. Basically, the idea of the $5 challenge is that you never spend a $5 bill, and instead you collect it in a jar (a mason jar with burlap for me please, #basic). Over the course of the year, the cash builds and builds and it becomes a visualization of how much money you might have spent without even noticing.
This is, of course, much easier when you use cash for everything, which is why it was easier to implement when we did this challenge. Keep reading to see what we are doing now, but first –
My Greatest Fear of the $5 Challenge
When I first committed to the $5 challenge, I was honestly scared.
What if I run out of money?
What if I run out of gas?
What if I run out of grocery money one week and I starve?
What if I start this $5 challenge and all I get in change is $5 bills when I go shopping and then after one day I only have $3 left and what will I do?
I was just starting to date my husband when I was deep in the middle of the $5 challenge. One day (before we were dating), I started off my morning buying coffee. I paid with a $20, and received a $10 and a $5. Then he and I went out for lunch, and (since we weren’t dating) I paid for my lunch with my $10. And received another $5 in change.
Just like that, my “entertainment” budget envelope for 2 weeks was gone, and I had $10 in my savings account.
Spoiler alert: I didn’t die.
Lesson: Sometimes, you do things because you know they are good for you and will benefit you in the long run, like having money in savings.
The Power of $5
I’ve talked about this before, but in our first year of marriage we made only $16,000. Over half of this went to paying rent on our apartment, we had a grocery budget of just $25, which I talk about at length in my free book, Dirt Cheap Nutrition.
Let me tell you my favorite story that illustrates the power of $5:
I mentioned about that a $5 bill has the power to make or break you. Well, this is a story of how spending $5 gave us motivation to keep going in our commitment to budgeting and staying debt-free.
It was our first year of marriage (that tight year). We were scrimping and saving and really in need of a pick-me-up. You know, the kind where you are reminded that the hard times don’t last forever? We realized we had $5 and some change at the end of our budget for the week, and we wanted a treat.
We walked across the street to Aldi (yes, Aldi was literally right across the street, we could see it from our porch) to buy a simple cheese pizza for $4.99. We ended up finding two large Hawaiian pizzas on clearance at Aldi for $2.49 each, which we made stretch for 3 meals.
A $25 budget for groceries doesn’t really allow for any sort of non-homemade meals, so being able to eat pre-made pizzas was such a…a smile to my heart that I truly needed in that time as an encouragement to keep scrimping and saving, knowing that someday soon it would all be worth it.
How To Change Your Life With $5
Aside from clearance convenience food bringing hope to tired souls, $5 can have a lot of different uses to improve your lifestyle:
One of the tips in my new book, Dirt Cheap Adult (sign up here for the launch updates) was to set aside $5 from your grocery budget and use it to stock up on loss-leaders to help support your pantry supply. Watch the circulars and find the best deals for your pantry staples. Sticking to $5 means that you are keeping to a small budget, but it also allows enough room to stock up on some basics that will relieve some pressure for the next few grocery trips.
Pro-tip: don’t pass up on produce loss-leader deals just because they are perishable. Some produce (like onions and bell peppers) can be chopped and frozen for later use. Most fruits can also be frozen on a sheet tray and stored in containers (freezing first keeps them from sticking together in a giant clump in a container).
Pay Down Debt
If you have debt, chances are that you are (hopefully) already making regular payments. Paying an extra $5 on each payment will decrease the amount of money you waste paying on the interest (not the actual amount of money you originally owed). This means your debt will be repaid faster and and you will save money in the long run.
Save and Invest
I mentioned before that there is a way to save $5 regularly without using the cash budgeting system. We use the Acorns Investing app, and I have it set up to automatically invest $5 every week, which means $260 a year is invested (not just saved!) into our retirement account. You can choose any amount to automatically invest, how frequently, and even the day of the week it withdraws.
I also have the Round Up feature turned on on the app, which means that for every purchase we make when we swipe our debit cards, the change is rounded up to the next dollar and added to our investment account. It’s a super simple way to intentionally save without thinking about it. It’s truly a set it and forget it system, which is why I love it so much.
It’s never too early to start planning and saving for retirement and advancing years. Since I work in a nursing home, I see firsthand just how expensive it all is, and I don’t want any of that stress to go on my future self or my family.
Check out my full review of the Acorns Investment app for more info to get started putting your investment on autopilot, and a code for $5 from me to get you started.
Create Your Own Adventure
Obviously, there are several ways for you to decide to save $5. You can save $5 a week via either cash jar or Acorns app, save $5 a month, or overpay your debt to pay it down faster. If you use a debit card more than cash, the Acorns app is probably going to be more effective, especially because it is invested in a separate account where you won’t be tempted to dip into it.
As usual, the key to rocking the $5 challenge is to decide what your challenge is going to be, and then to commit to it.
I created a $5 challenge printable for you to help you track your savings progress throughout the new year. Be sure to grab that and get started saving today!
Don’t forget to save this post and share with your friends! What are your favorite ways to save money? Leave me a comment!