Save, Save and Save

There are 3 definitions of save/savings that relate to your personal finances. We will explain these 3 definitions using the “big 3 tools” of personal finance. The first definition of save is to reduce costs. This means that you find ways to buy the same thing for a lesser price. The second definition of save is to simply not spend. When you are faced with the personal choice of buying something or not, choose to not spend the money. This leads to the third definition of save which is to set money aside in an account where you can access it later. It can be used later for consumption. It may be used in case it is needed for contingencies, emergencies or creating retirement income.


Reduce costs


The goal of budgeting is that you spend less than you make each month. One way to do this is to reduce the spending side of your budget. You do this by searching for ways to get these spending items for less. There are hundreds of ways for you to do this. You just need to take the time to do them. You need to make reducing what you pay for the items on your budget a priority. This way you can make the same amount each month and either reduce your deficit each month or increase the monthly surplus in your budget each month. There are lots of websites and books that identify ways to reduce spending. These range from using grocery coupons to driving an older car to renegotiating your mortgage and their monthly payments.


Author’s note…We went through a period where we had a set income and were too busy with obligations to make more income. The only way was to cut costs. We did everything…coupons, shopped flyers, shopped sales, shopped in box stores, consolidated debt to pay less in interest charges, and reviewed and lowered bank account costs. Nothing was spared. It was interesting that we still did as much and ate as well but it just cost a lot less.


Wherever you leak “they” hang a money bucket on you. The image that comes to mind is how the maple tree is drained of its syrup in the spring for sugaring off. In this case you want to get the buckets off of your budget so “they” stop draining your cash.


Simply don’t spend


Another way to reduce the spending side of your budget is to remove items from the spending side of your budget. List at all of the items you spend your money on in a month. Study them to see if you really need to spend your money on them. Check your budget to see if you spend less than you make or the opposite. Then decide how much you really want the items that you know are just wants and indulgences. If you are looking at making new purchases large or small, examine them the same way. If they make you spend more than you make then don’t buy the item…don’t spend. You can even examine past purchases. If you bought something that makes you spend more than you earn, sell it and buy something that you can afford on your budget. You will pay the loss with your budget surplus and then have money left over once that loss is paid off.


Author’s note…We went through a period where we had a set income and were too busy with obligations to make more income. We cut our budget spending to bare bones. We sold our very nice car at a loss but reduced my budget spending by $700 per month. The loss was offset within 3 months. We cut everything that was not essential right down to cable TV. We finally had a budget surplus to pay off other debts. Once they were paid we had even more cash surplus every month. Then we could afford indulgences such as cable again.



Set Money Aside in an Account


Q…What do you do with your budget surplus once you have created one?


A…You set it aside in a savings account. You allow it to grow. Then you find ways to make it grow faster. The easiest way is to use compound interest over time to make your asset grow.


Conclusion


Q…Why would I do that?


A…You want to accomplish certain goals in your life and you need to manage your money properly so that you can achieve them. You can achieve these goals by reducing costs that you have to pay for them, by not paying for things that you don’t really want and by not paying interest on debt. You will achieve your goals sooner. You will achieve them more easily. You will achieve more of them. And you will achieve them with less stress.


Happiness is when your expectations are your reality. Save, Save and Save and you will make yourself much happier than if you don’t Save at all.