Who cares if you saved money by spending money?!
This is a guest post by Daniel Packer"I walked home to save bus fare."
"Gee, you could have saved a lot more by not taking a taxi." - old joke
We make a huge deal about the amount we save on ordinary items. "I bought this $4,000 TV for only $2,800. I saved $1,200!" I hate hearing that. Big deal. In that case I saved $1,000 by not spending $1,000 on lottery tickets.
This line of thinking leads us to think that what's really important is how much we spend, not how much we save. Who cares if you saved $5 a month by getting "free" HBO if it meant upgrading to the premium service which included a sports package you didn't really need but also came with a $15 price tag?
If you're spending money, you're spending money. Not spending even more isn't a big accomplishment. I am not going to pat you on the back.
The only time I can think of when I actually saved money is when I negotiate. When I haggled down the price of my haircut, I was ready to pay $20, but getting it for $15 was just a bonus. After years of my family being on the $160 phone plan, I negotiated it down to under $100. I wasn't overpaying, I was simply paying what everyone else was paying. But by doing some research and negotiating with the customer service representative, I was able to cut costs while still getting the same service. In these types of situations, we actually save money that we would have otherwise spent.
People need to find a better way of calculating how much they are saving. Instead of adding up everything they could have spent minus what they actually spent, we need to focus on what we're really saving: The percentage of take-home salary that we put in various accounts. In this case, all that matters is what we save, not how much we spend. Who cares if we had $300 in restaurant expenses for the month if we have a fully funded emergency fund and contributed the maximum to our retirement accounts? And that's what really counts.
After all of your expenses (housing, utilities, food, shopping, etc.), are you saving the 10-15% of your paycheck you planned?
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This is a guest post from Daniel Packer over at Sweating The Big Stuff. Daniel writes about negotiating, budgeting, and saving, while maintaining a high quality of life. To read more, subscribe to his feed or follow him on twitter.
Labels: guest post, saving, shopping
posted by J. Money at
7:38 AM
2 Comments:
Yeah, I get this from my wife a lot :)
"But, I got it on sale!" ... "But, you still SPENT money"
Good post
i dont have many bills so save/invest most of what i make..... not bragging btw :)
I talked about this too on my blog- http://www.williampeiffer.com/are-you-really-saving/ . My daughter would always buy something and say she "saved" money when in reality she just got a "discount". It was most likely something she would not have bought if it weren't on sale so I don't think she had "saved" anything. I think even if she received a deal on something she was going to buy anyways (say a haircut)- it's only saving if she put the money she "saved" into the bank and really "saved" it. She normally just goes out and spends it on something else.
I see that a lot with some folk who coupon shop. Yes they get great deals but they take the money they 'save' and spend it on something else.
Then there are those who coupon and sale shop and do a fantastic job living on less. Those folk impress me a lot.
OH YEAH! Throwing that money you just saved from haggling/using coupons right into the bank is KEY. Or else you'll just spend later like some of you have mentioned. Although, if it's something you needed anyways it's still GOOD to get a cheaper rate, just not *as* sexy unless it goes right back into your checking/savings account.
On the other hand if you actually take the difference and stick it in your savings account then you really did save that amount.
I admit to considering it saving, if it's an item I otherwise needed to buy. For a luxury item it's straight spending, but for something like groceries, I think of it as saving if I get a sale price or a coupon. Of course I still need to be careful that I'll actually need/use the item and it's not something I'm getting just because it's 'too good a deal to pass up'.
This is why I don't fall for "sales" -- I don't care if I have a coupon, if I don't need, it, I don't buy it! Why would I buy a $100 coat just because I have a 30% off coupon, when I could likely get a similar coat for $40 without a coupon? You have to look hard for your deals, and it has to be an item I really need.
I love this! My mom always used to tell her grandfather this, and one day great-grandpa said: "Show me your passbook. Let me see all this savings." :)
The only time I agree with the not spending = savings equation is when you apply it to expenses you have to make but find ways to cut (food, shelter, utilities, necessary fun so you don't shoot someone), provided you do something effective with the money. For example, if I use coupons to cut my grocery bill by $10, and forward that to debt, I really am saving because I'm cutting the interest I have to pay.
Great post. Its almost a psychological way of looking at the entire situation of a transaction and the downstream impacts it has on our lives. I pride myself on the fact that i just dont buy things for myself... other than neccessities (food & beer). I dont care if a 10k 80" super 3d tv is now $1k... i want to pay $1k for a tv, id rather get it for free. And until that happens, im not spending on it... so consider me a saver... indirectly.
I think something got lost in translation with your joke... If you're walking home, you're not taking a taxi, are you?
Joy, the "joke" is that it's just as easy claim to have 'saved money by walking instead of taking a taxi' as it is to have 'saved money by walking instead of taking a bus' or 'saved money by walking instead of taking the train' for that matter. In any case you're not 'saving' money, you're just not spending it.
this is my BIGGEST weakness!
I think in this case, "saving" is just shortened "I saved myself from spending." At lesat, that's how I use it.
The bus example: if the guy normally takes the bus, but walks home, he saved himself from spending money on the bus. Noted: this only applies for things you were going to pay for anyway. The taxi example doesn't work, because he had no plans to pay for a taxi. (The joke, of course, is still funny!)
its meaningless if your save mo0ney on one item and spent balance for others item...yes you got two items but spent is always spent...
Exactly. It's like saying "I saved $4,000 by buying a BMW without turbo-charged engine!" Well, you could have purchased a Honda for about 20k less and saved even more!
Wow, really great comments guys. A lot of you made the point that it's important to put the saved money in the bank so you're not tempted to use it. Consider it used - just build it into your budget.
@Rainy Day Saver - My policy is to find what I went and then find a deal. If you find a deal first, you sometimes end up wanting it.
I carry very little cash to avoid the temptation to impulse buy, but I have always laughed at the signs that say "Huge Savings!" right below the price of an item...just doesn't make any kind of sense. I also enjoy sale signs on the windows of knick knack stores advertising how much you can save if you would just spend some money on a couple sea shells glued together to look like a hula girl.
People justify stupid purchases by pretending they were going to buy even bigger, stupider purchases.
I just wrote a post about how people need an excuse to spend money and I think this is a great example of that. "I have a coupon" is their justification for buying something they have talked themselves into thinking they need. I say, wait till you need it then buy it. If there is a rocking deal on something I buy a lot of I may stock up if there is a better deal---but at least I know I'll use whatever it is.
In 2010 I know I am going to save money by SAVING MONEY! GOAL: $15,000
This is a fantastic post Daniel!
I've written about it before, but I can tell you that if you tried giving up ALL SHOPPING for an entire month (minus necessities), you will look at spending money SOOOOOO differently.
What started as a "let's see if I can do it" game for Lent 2 years ago has kept with me ever since...although I still slip up at times ;)
This was me when I used to shop as a hobby! I had to stop visiting the deals websites and my unplanned spending is WAY down.
Daniel...
Excellent Job on the Post!
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