Six Ways to Break Free of the “Purge and Splurge” Cycle

Just this morning, I was leafing through my favorite personal finance book of all, Your Money or Your Life, when I came across the idea of the “purge and splurge” cycle. From page 148, discussing what happens after you start buckling down and paying serious attention to your financial state:

In the first month of recording your figures you might confront one of our national foibles. Your income entry might well be lower than your expense entry. You may have spent more than you earned. (It is, after all, the American way.) Seeing this reality might come as a bit of a shock. Chances are you’ll want things to change – and change now. Accustomed to budgets, diets, and New Year’s resolutions, you swear on a stack of bank statements and credit cards that next month will be better.

This is when people often go on a “wallet fast” with the kind of zeal characteristic of first-time dieters. They scrimp. They save. They deprive themselves and their families, putting everyone on beans, rice, and oatmeal rations. They concentrate daily on that expenses line, determined to cut it in half in one short month. Amazingly enough, many do. Entering the expense figure the second month, they proudly note a steep decline.

This kind of austerity, however, isn’t sustainable. By the third month expenses often rebound with a vengeance, making up for the second month deprivation.

Now what?

I’ve been there. Have I ever been there. In the years before my financial meltdown, I went through this “purge and splurge” cycle several times. I’d have one month where I really cut back and saved a lot of money, then I’d “reward” myself in the next month by massively overspending on unnecessary stuff. When the bills came in, I’d panic again and go into belt-tightening mode, just to toss it all out the door once again.

There were several big things that I was doing wrong, though – things that I didn’t see at the time because I didn’t really understand how personal finance worked. If you’re having trouble escaping this cycle, just as I once did, here are some techniques to try.

Use a longer period for evaluation. Don’t just look at your spending over one month – that doesn’t really matter. Instead, look at your spending over a long period, like six months, and compare that to your income over that period. The short term really doesn’t matter that much – the difference is made over the long term.

Focus on not just avoiding spending, but changing the underlying behaviors that lead to spending. During those belt-tightening periods, I’d still go to bookstores and electronics stores, but I’d walk out the door proud of myself for not spending. The problem was that I was still in the mindset of a consumer – I would still go into the stores, tempt myself, and just use sheer willpower to pull myself away.

There’s only so much pure willpower can do. Use that willpower instead to change the habits that tempt you. Don’t use willpower when you’re in the store drooling over a new goodie – use willpower to decide to take another route home from work every night so you’re not tempted to stop in.

Make changes that are hard to undo during the belt-tightening phase. That’s the perfect time to cancel your credit cards or freeze them up in a big block of ice. Call up your service providers (your cell phone company, your cable company, etc.) and cancel some of the services. Look at your monthly bills and see what else you can trim that will take action to undo. Doing these things will ensure that some of the savings will remain with you, even if your resolve weakens a little.

Set tangible goals on a very regular basis – and keep setting them. Don’t just promise to trim the fat. Set a clear numerical goal to reach and, when you reach it, set another goal for the next month. If a month is hard for you, set week-long goals: I won’t eat fast food this week, for example. Make the goals very concrete and clear so that the things you need to do for success are obvious, then just keep setting them over and over again. Eventually, the techniques will become natural to you.

If you make a mistake, don’t follow it with another one. So you splurged. That doesn’t mean it needs to be followed by more splurging. Recognize that you slipped and then go back to your goals. The point is to keep generally heading in a good direction – everyone slips up on occasion. The winners, though, are the ones who don’t use “I splurged already, so it doesn’t matter” as an excuse to splurge even more.

Investigate new, inexpensive things that you like to do. One big problem that people have when following a newly frugal lifestyle is that they get bored. They wonder if pinching pennies is all there is to life, and they get tempted to spend. My advice is to do some research and load yourself up with as many free and inexpensive activities as you can find. Look up your community calendar and plan for events for the next two months. Check out a series of books from the library. Keep trying things that don’t cost much until you find things that bring you a lot of enjoyment, then start using those things as your regular recreation.

Just a few pages later in Your Money or Your Life, Dominguez and Robin nail the most fundamental key of all:

There are two keys to making this process work for you:

1. Start.
2. Keep going.

That’s really it – success in a nutshell.

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  1. Mike says:

    Thanks for addressing the splurge factor! I know I get that false confidence when I have made a dent in expenses with splurging as a result. Knd of like “wow extra money, let’s celebrate”… Not a good idea.

  2. I like your point about only having so much willpower. I’ve found that to be true with dieting, as well. I only have so much willpower to not eat the cake sitting on the counter. What I really have to do in not make the cake to begin with!

  3. squawkfox says:

    In order to break the “purge and splurge” cycle I had to evaluate who I was purging and splurging with. Many of my friends are chronic over spenders, so in order to break the cycle I really had to limit the time spent with certain groups of people. Basically, surrounding myself with those who’s habits matched a less expensive lifestyle really helps. This also drastically cuts down on entertainment expenses (eating out) and just plain over consumerism (shopping). It’s kinda like being on a diet where some people enable failure by bringing you “treats” while others enable success by signing up for a running race with you.

  4. KMunoz says:

    I like this article and it’s funny that for pretty much all of your suggestions, you can substitute diet for finance and they’d still be applicable. For example, when trying to change your eating habits, don’t look at what you eat in one day, but what you eat every day for several weeks to get a realistic picture. Don’t go to McDonald’s and buy a salad, just don’t go in at all. Don’t try to lose 20 lbs. in one month, but set a more reasonable goal to work for. Great post!

  5. boardmadd says:

    Great advice and yes, this works with diet and with finances. This is why it’s so very important to do something that will keep you “perpetually accountable”. I blogged an incredible weight loss last year (50 pounds in jsut under 6 months). When I stopped bloging, some of that crept back, because I found myself tired of the upkeep and because I wan’t holding myself accountable in the same way any more. Money can be the same way, so find a way to keep yourself externally accountable, whether that’s a fillable “thermometer” on the fridge, or a daily money journal, or some other method that will daily energize you to keep going. Likewise, it’s important to break up your goals into truly digestable chunks, and find daily ways, if possible to say “yes, I’m on track” and just keep at it. I’m also a huge fan of setting things up that require jumping through numerous hoops to undo.

  6. Heidi says:

    This couldn’t have come at a better time for me. I am just now feeling like I have my spending AND my diet under control, and have been thinking about how I should reward myself. I was leaning towards a spa day or an iPhone. Probably not the best way to spend my hard-saved money.

    I usually reward myself with food and shopping – clearly that isn’t the way to go this time. Maybe I’ll take a day off and spend it doing things I really love that don’t cost much(blogging, taking my dog to the park, and cooking).

  7. shannon says:

    That is why each weekend I ‘splurge’ by going to Goodwill. I pick up old VHS movies for us and our son for $1 each. I find clothes or shoes for work. I find things for the kitchen. Usually I don’t spend more than $17 tops.

    Since we’ve been shopping at Costco and getting fresh produce from local CSA, instead of going to Whole Foods for all our organics….we’ve saved over $150 on groceries. And will save more next month b/c we bought in bulk (which is like investing).

  8. Really great point. That’s why it’s so important to budget a little “fun” money into your daily life. Even if your budget is super tight, $.50 for a newspaper or $1 for a donut once a week can make a huge difference.

    And the connection between diet and finance holds again. Many, many diets advocate a “cheat” meal once per week to keep you from feeling deprived.

  9. Frugal Dad says:

    I have discovered that I feel too deprived I begin to resent whatever plan I’m working on (diet, finances, etc.) and eventually blow the whole thing. I have been in “purge and splurge” cycles for most of my adult life, which is why I am overweight and broke! I only recently came to this realization and started trying to do something about it.

  10. Graham Lutz says:

    we love the dollar theater! And there’s this awesome park by our house with a little lake and a really nice walking trail, so we bring the dogs up there. It’s free and it’s fun!

    I have this “purge and splurge” issue with losing weight. But I have made sure to stay focused and focus is what helps me.

  11. Phil A says:

    I have been saving up my money to buy a gallon of gas.

  12. thehungrydollar.com says:

    You make some great points. I especially like the part about trimming the fat. This was key in my journey to financial freedom. I called and changed my cable and cell phone plan, and was impressed with how much money was freed up to send to credit cards.

  13. Rejjii says:

    For many years I went along aimlessly spending money on nothing in particular – and I had no savings. I had always dreamt of travelling to distant lands, but never thought I would get there, as I had no money.

    It wasn’t until I began to set very specific goals did I manage to save up enough money for my dream trip to New Zealand. I never felt deprived when I reduced my spending (for many, many months) because I knew exactly what I was working towards. I did travel to New Zealand for 3 amazing weeks and the trip was so rewarding I managed to save up enough money to travel to Australia for 2 weeks the following year!

    The great part is that the more goals I set for myself, the better I have become at managing my money. Sweet!

  14. Adfecto says:

    I just read your post and got energized to make a couple phone calls I’ve been putting off. It was time to cut the unused long distance plan from our land line phone and premium channels from our TV subscription. It isn’t a lot, but now I have $20 a month more to send to the credit card company! I wrote a blog post about it too. Thanks for spurring me to make the changes.

  15. Dannalie says:

    We call it Feast or Famine at our house. My husband is a commission only sales person and when it’s good it’s very good. Problem is we don’t save during the good months to off set the bad months. Good post! I love the idea of looking at 6 months worth of your expenses and income vs one month.

  16. AlainaOfArc says:

    As others have suggested, this will also work for dieting. However, it will also work for smoking, drinking, biting your nails, or any other bad habit you shouldn’t be doing (or would like to change).

    I used a method similar to this when I was quitting white bread, and later on when I was quitting Coke (the drink).

    One thing I’d add to this is to remember why you’re doing it. If you’re making the change because someone else thinks you shouldn’t be doing it, but you secretly don’t want to quit, then you’ll likely fail. You have to actually want to make the change in lifestyle for the change to happen. Keep a visual aid (something Trent has mentioned before) to remind you of why you’re making the change.

  17. Rob Madrid says:

    “I never felt deprived when I reduced my spending”

    It’s funny, I’m spending less but I’m not feeling deprived, if anything the freedom from stress is really encouraging me to keep going. I can’t tell you how good it feels not to be worried about how’ll you meet the bills at the end of the month.

  18. Beth says:

    Tracking money is SO helpful to this. I’ve recently picked up knitting, and am finding excuses to spend money, such as making gifts for friend to whom I *never* give gifts. It’s not bad to be giving unexpected gifts, but I think I need to be aware of what I’m doing, and that I’m justifying expenses to myself.

    In dieting parlance, it’s like making a cake “for a friend” even though I know full well I’ll eat plenty of it. Buying yarn “for a friend” is still spending… but I’m also really enjoying the process. I’m not sure how I’m going to handle it, but at least writing down my spending is making me be honest about it.

  19. My wife can attest to the “austerity” I tend to exhibit from time to time. Fortunately she is able to smooth out our reduction so that it isn’t so volatile.

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