If I have the belief that I can do it, I shall surely acquire the capacity to do it even if I may not have it at the beginning.
—Mahatma Gandhi

I am a firm believer in 30-day challenges. They are an effective tool for making real, significant changes in your life, primarily because you’re more likely to actually do something if you put a fixed time span on it, rather than commit to a permanent change. After all, 30 days isn’t that long. No matter how onerous the change you have in mind may seem, surely you can manage it for that long, right? Yet 30 days is also long enough to get over the initial shock to your comfort zone, and to adjust to new circumstances. At the end of those 30 days, the change may not seem so onerous after all.

My first 30-day challenge this year is something I’ll call the Cheapskate Challenge.

A Month with No Income

The plan is simple: For the month of January, I’m contributing 100% of my income to my 401(k), and living off my emergency fund. The fund presently holds about a year’s worth of my regular living expenses. The challenge is to get through the month while depleting it as little as possible.

Of course for a one-month challenge I won’t be making the really big changes, like moving to a cheaper area, so I’m going to have to find my savings elsewhere. Every penny that goes out the door is going to be under even greater suspicion than usual.

Also, while I pride myself on having minimal clutter in my home (my mother called my place “austere,” which made me grin), there are a few items lying around the house which, in all honestly, I have been meaning to get rid of. I have been procrastinating because selling stuff is a hassle, but those few extra dollars will make getting through the month easier.

What’s my Motivation?

Why on earth would I want to do such a silly thing? There are a number of reasons. First of all, investing the money up front increases its total time in the market. Of course this can cut either way, depending on which way my investments go. Historically, though, a lump-sump investment in the stock market has resulted in higher returns than monthly investments about 2 out of 3 times. There are no guarantees in the investment world, but I’d rather have those odds on my side. (Note: if you’re considering trying this idea with your 401(k), be sure to check your employer’s matching policy, first. Some employers require monthly contributions to get the full match. My 401(k) has no matching, so this is not a concern for me.)

Practicing Stoicism

Second, you might recall my new year’s resolution to begin practicing Stoicism. Practicing adversity is a classic and highly effective technique of the Stoics. So this month, I’m going to practice being broke. I’m going to live this month as if I had suddenly lost all my income, and had to stretch my savings for as long as possible. I won’t be faking it, either, as I really will be losing my income (never mind that it’s to my own retirement account). From the perspective of Stoicism, the benefits of this are many, but first among them is a better appreciation for the lifestyle I’ve grown used to. There’s nothing like going without something for a while to make you see its true worth.

Hedonic Adaptation

Lastly, I can’t think of a better way to permanently ratchet down my lifestyle just a little further. Simply cutting back your spending by 5% may seem like a chore, but after 30 days of cutting back far more drastically, going back to 95% of your current level can still feel like a pleasant return to luxury. That’s how you put the old specter of hedonic adaptation to work for you, instead of against you.

Now I fancy my “frugality muscle,” as Mr. Money Mustache is fond of calling it, to be pretty strong these days — certainly much stronger than it was in my foolish youth. There is plenty of room for improvement, though. I am still a good long way from reaching Jacob’s level of mastery. A little challenge to root out complacency is good no matter where you are along the path to financial enlightenment.

The Upshot

So to sum it all up, when all is said and done, I’ll come out of this with:

• A better appreciation for my good fortune in life
• Less clutter in my house
• A 66% shot at better investment returns this year
• Some new frugal habits, at least some of which will hopefully stick
• A nice bump up in cashflow for most of the rest of the year because I’ll be maxing out my 401(k) much sooner.

Of course that raise I’ll be receiving from getting those 401(k) contributions out of the way will be going straight into my emergency fund until it’s back at a year’s expenses, then into my brokerage account. I’ll be saving more, and won’t even notice the difference.

Try The Cheapskate Challenge Yourself

If you want to try this idea out for yourself, but can’t swing a month without income just yet, you need not be so drastic. Ask yourself, what would happen if you had to take a sudden, unexpected 20% cut in pay? You’d hardly be the first in this economy. If nothing else, it’s a nice exercise in negative visualization.

It may be rough, but I’d be willing to bet you could find a way to adjust and make it through the month. Do you agree? If so, why not put it to the test? Take an extra 20% of your income one month and put it in a savings account. Force yourself to live off the rest. You may have to make some significant sacrifices, but it’s only 30 days, right? Surely you can scale back for that long. (Remember, the money will be in a savings account, so you can always get to it if you absolutely must.)

One of two things will happen if you try this experiment. You’ll find that you can adjust, or you can’t. If you can, awesome, you can rest easier knowing you’ve proven your resilience, and as a bonus, you’ve added a chunk to your savings. Now see if you can make some of those cuts permanent. I’ll bet after 30 days you hardly miss some of them, anyway.

What if You Didn’t Manage It?

If you couldn’t make it, then you need to take a long, hard look at your finances, and make some big changes. You can’t afford to wait for an emergency — in fact, you’re in an emergency situation right now.

In our modern economy, there simply is no such thing as job security anymore, and being so dependent on your present job that you can’t even survive a 20% cut for one month means you’re at serious risk. It may be an unpleasant realization, but at least you know, now. Hopefully that knowledge will spur you into action.

You can start by signing up at Mint.com and tracking every penny — and take heart. As the saying goes, anything that can be measured can be improved. So measure, and then get to work improving.

It’s a Win-Win

As you can see, you win with the Cheapskate Challenge no matter what the outcome. It can also be a lot of fun, if you approach it with the right attitude. I personally am looking forward to flexing my frugality muscle this month.