Cost-Cutting vs. Saving: Not the same thing!

Most of us have dozens of ways we “save money:”

  • We “save” by using coupons and shopping sales.
  • We “save” by saying NO to ourselves and others when temptation arises.
  • We “save” by cooking at home instead of eating out.

Are you wondering why I put the word “save” in quotation marks in all those examples? Here’s why: even if we did all those things every single week, there is no certainty that our savings account balance will increase.

All those steps are ways we reduce costs, but do they automatically lead to deposits to savings accounts? No. Take me, for example: I have never once taken the money I did not spend at a restaurant or grocery store and deposited it into a savings account as a direct result of the decision not to spend. Instead, the money I “saved” would usually just get spent on something else!

A decision not to spend is a key step in saving. But by itself, that decision is not enough; it only turns into saving when we actually move the money into a savings account (or to a dedicated savings location such as a piggy bank).  When I come to a coffee shop or an ice cream store and I go on by without stopping because I want to save that money, I should probably just stop right there and transfer money from one account to another. Or I could carry a “saving” envelope in my purse and move cash into the envelope every time I resist temptation. That would be the way to make sure the actual saving occurred.

Saving is a two-step process. It involves deciding not to spend and  putting money in a designated location. Either step can come first. I can decide not to buy something and then save the money; OR I can put the money away first and then (out of necessity) spend less than I otherwise would have spent.
Note: many of us do better if we put the money in savings first!.When there’s no money in your billfold or your account, it’s easier to resist temptation to spend! 

Do you sometimes wonder why you aren’t getting ahead, despite your efforts? It may be because you’re skipping one of the steps.  How can you turn your cost-cutting into true savings progress?


Barb Wollan

Barb Wollan

Barb Wollan's goal as a Family Finance program specialist with Iowa State University Extension and Outreach is to help people use their money according to THEIR priorities. She provides information and tools, and then encourages folks to focus on what they control: their own decisions about what to do with the money they have.

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