Saving Money vs. Spending Money. We’re still in the Financial Literacy Month and the goal is to challenge you to get your finances in tip top shape.
This week, we’re talking about Saving money vs. spending money. Last week, we started by talking about Setting smart financial goals and why this is important. We said in setting your goals;
- Write down every goal you can think of and be specific.
- Categorize your goals by length of time to accomplish – immediate (within three years); intermediate (next three to seven years); and long-term (seven-plus years).
- Set priorities. Which of your goals do you want to accomplish first, second and so on.
- Figure out a plan for achieving that goal and the others on your list.
Hope you have done this.
This week, we are talking about Saving money vs. spending money.
The eternal struggle of saving money vs. spending money: should you spend on something you really want, or should you save the money instead? Most personal finance advice is geared toward getting people to cut down on their spending and boost their savings – and this is understandable.
After all, the formula for financial stability is to live within your means, spend less than you earn and gradually save and invest to maximize your long-term financial security.
It’s always best to say “no” to short-term indulgence in favour of long-term financial gains, right?
Not surprisingly , “It Depends”
Well, the truth is sometimes more complicated. Many people are constantly told they need to save more money. And it’s good to make sure that your basic financial needs are covered, you have an emergency fund, and you’re saving for retirement and your kids’ university funds and other long-term needs.
But sometimes, striking the right balance of saving money vs. pending money is not so simple. Sometimes it really can be better to spend than to save – if a few conditions are met. As Carl Richards wrote in The New York Times, sometimes instead of “saving for tomorrow,” people should give themselves permission to “spend for tomorrow.” When can spending be better than saving? When your basic needs are met, and you have some disposable money that you’re spending on a valuable life experience that is important and memorable.
Memories are priceless; time with your loved ones is invaluable. So if you have a chance to take a memorable trip or have a once-in-a-lifetime experience with your family or friends – and you can pay back debt in a reasonable time frame – then maybe you should think about spending. Having a strong spending decision making ability is great tool to “give yourself permission” in evaluating the decision to spend some money instead of saving it.
Tracking your expenses daily can really help you save a lot of money. One of the most important things you can do when trying to get your personal finance under control is figure out WHERE all your money is going each month.
If you start off by tracking your expenses each day, you’ll be able to get a better idea of where your money is going. Once you have tracked your spending for thirty days, multiply that by 12 and that is roughly the amount of money that you spend in one year. This is just an estimate because there are months where you’ll spend more money and less money, but this gives you an idea.
For young adults especially, keeping track on spending is something nearly everyone can benefit from. It doesn’t take much for someone to get off track and start getting caught up in their finances by overspending. Having a handle on what’s going in and out lets people see the reality of their finances, and most would agree that getting started right away is best.
So, this week, we talked about the difference between Saving Money vs. Spending Money, how to strike a balance between the two and how to prioritize what is important to you and at what time. We also talked about how tracking your expenses can save you a lot of money.
Today, in celebration of Financial Literacy Month, we’re issuing a challenge to help you get your personal finances in shape. This week, we encourage you to look at your spending and saving habits. Track all of the money you spend (essentials/needs and wants) and how much you save. In order to get your finances in tip top shape, you have to know what money is coming in and what’s going out.
- Record and categorize (as a need or a want) all your spending
- Eliminate any items that you can do without
- Determine how much you want to save each day to hit your goal. Make adjustments to your spending to increase the amount you’re saving
Next week, we will talk about how to Set and Stick to a Budget.
In the meantime, do you have any ideas, questions, suggestions, comments you’d like to share with us? We’re happy to read them in the comment box below.