Are You Saving Money or Just Spending Less? Why You Need to Do Both

If you buy a flat screen TV at 20% off the retail price, saving over $100, what happens to the savings? Are you saving money or just spending less? The answer is more than likely no to both questions. Do people actually SAVE the money, or are the “savings” diverted onto yet another sale? In this instance, saving is a misnomer.

What do You Mean by “Saving?”

The definition of save means an individual stores an object or tucks it away for safekeeping or later use. In order to save the money, a person would deposit the excess into some type of account. The money would grow at some form of exponential interest rate and produce something more. How many people currently have an emergency fund, retirement account, and plans for the future?

According to the Employee Benefit Research Institute, fewer and fewer people plan, or make a physical effort to have a retirement future. More frequently, people put off retirement to a later time. According to studies and surveys, in 2009, only 69% of working individuals save for retirement.

This number decreases annually. Some retirement issues directly correlate with the economy. Many people experienced unexpected job loss. Along with losing an employment position, individuals endure loss of insurance and 501K matches.

You Don’t Have Forever. Start Now.

Some muddle through the trials and tribulations of divorce, devastating accidents, serious medical conditions or other catastrophic, and life changing events. However, more often than not, people just procrastinate when it comes to actual planning and saving. Individuals mistakenly believe they will have plenty of time to get around to thinking about retirement.

Nevertheless, the years pass and financial goals remain nonexistent. On the other hand, the “I need that, I want that,” mentality takes control and there never seems to be enough money to originate a plan. Many unfortunately, learn too late the importance of saving for the future let alone unexpected events. Compulsive spending and procrastination causes many people to stop and reevaluate the current financial situation.

Curb Your Spending Before it Curbs You

The first step in getting an economic grip is to curb spending. Some suggest relinquishing the use of credit cards until reaching a point of self-control where paying monthly balances in full becomes routine. Carry cash instead of credit cards, which effectively limits spending amounts.

Once you are better able to control spending habits, bills begin to shrink and disappear. Actual savings start to materialize. Develop a budget and stick to it. A meager existence may be required for a time until spending habits change, bills are paid and savings begin.

Any savings realized from purchasing an item at a reduced price must disappear into some type of account where it is out of temptation’s reach. Generate automatic savings diversions from paychecks. Try to store money where it has the opportunity to grow. Start small. Put spare change in a jar or other container and let the amount accumulate. Every little bit helps.

Sell whatever you can to get money for your savings. Consider what household services are unnecessary and downgrade. This includes cable or telephone services. Maybe you can use a prepaid phone for a while. Stop unnecessary magazine or book club subscriptions. Shop around for better deals on homeowner’s and auto insurance. Refrain from eating meals out and bring a sack lunch to work. Find cheaper or better yet, free forms of entertainment and recreation.

Consider a Second Job

Alternate forms of income assist in efforts to having an emergency fund and eventually, into some form of retirement plan. Ideally, accumulate 6 to 12 months worth of wages. Obtain health coverage so in the event of accident or illness, your finances do not become devastated. Turn a hobby into a business. Research and participate in various avenues of investment. The more passive income individuals establish, the less time and money spent on acquiring income.

Without a Plan, There Can Be No Action

Devise an actual retirement plan. Calculate how much required money is essential for monthly and annual survival. Depending on the desired age of retirement, determine the amount needed for 20, 30 years or longer. Divide that number by the period left to achieve the goal. Search out methods to obtain that goal and make it a priority. When you finally start to see those savings grow, you’ll experience less anxiety about your future and less pain when the economy goes south again.
 

Jessica Bosari is an Internet copywriter and blogger for various publications and her own blog. You can read more of Jessica's work here. If you have any comments or questions about SavingTools or about saving money, leave your comments in the form below or email jessica@savingtools.com. Thanks!