Does TikTok's 'no-spend' challenge work? Here's what you need to know

The "no-spend" challenge has been around for years but gained new life in 2024, thanks to TikTok and No Spend January at 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.

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.

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 budgeting system 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.

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.

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.

LendingClub's HYSA does have a $100 opening deposit requirement, but it offers a 5.00% APY and comes with a free ATM card.

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 .

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, plus 3% back at U.S. gas stations and eligible transit. (Terms apply.)

There is a $95 annual fee (which is waived the first year), so make sure you're spending enough to come out ahead.

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."

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.

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.

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.