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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Spend Your Money Wisely

Looking for wise ways to save money?  Here are some ways to spend money wisely:

  • Drink tap water and pocket the $25.00/gallon monthly fee for bottled water delivery.
  • Shop your local farmer’s markets and prepare healthy meals at home to save money.
  • Survey your closets, see what clothes fit, and donate those you do not want to wear. Shop resale stores for bargains.
  • Cut transportation costs by using public services. Walk or ride your bike when possible.
  • Consider needs vs. wants – ask yourself if you really need a daily latte, premium cable, or a weekly manicure.
  • Go to local beauty/barber schools to get less expensive grooming treatments.
  • Visit your local library! Check out movies and books and read current magazines.
  • Barter to get your children piano, karate, or dance lessons.
  • Purchase prepaid phones to keep your family in touch and save on cell phone bills.
  • Delay your purchase. When you want to buy something, wait one week to see if you still think the purchase is really important.

Savings will come your way if you try some of these suggestions.

Susan

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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Need an Emergency Fund?

Only one in four Americans has an emergency fund that meets most experts’ minimum recommendations – one that would cover their expenses for three months if their income was cut off.  What is an emergency fund? Why do you need one?

An emergency fund can help relieve stress and give peace of mind. The recommended minimum goal is to save an amount equal to three or more months of living expenses. You might use this fund for emergencies such as: an unexpected car repair bill; new glasses for your child; or living expenses if you lose your job.

Try to save 10 percent of your paycheck. If you save 10 percent each pay period, it can take up to two years to build an emergency fund. Put your emergency fund into a savings account, so the money will be available when you need it.

One way to start is to pay yourself: think of savings as a bill which needs to be paid.  Along with saving from your regular weekly or monthly paychecks, you can speed your progress by saving lump sums of money such as tax refunds, bonus payments, and gifts. Even saving loose change can add up.  Keep envelopes addressed to your bank together with your monthly bills.  Send money to your savings account when you pay your monthly bills.  In this way, you pay yourself first.

By saving money – either small or large – you will have your emergency fund available when you need it.

Susan Taylor

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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Little Things Add Up

Have you ever paid attention to how much money you spend during a day? Do you make regular daily purchases, such as coffee or pop?

The little things add up quickly:

  • If a can of pop is$1.00, then a daily pop adds up to $365 per year.
  • If you eat fast food lunch each workday and spend $5 to $9, that totals $25 to $45 per week. As a monthly expense, that equals $100 – $180, and the yearly total is $1250 to $2250 (50 weeks).

You can trim your spending money by cutting back on cups of coffee or try more “brownbagging” for lunch.  If you decide to cut back or do without, you may save a lot of money!

Suggestion:  estimate your “little spending” by writing down your frequent expenses and estimating how often you make those purchases.  You may be surprised at the total. 

Here is an example:
Item              How often           Price            Potential savings/year
Magazine          1/week                 $5.00                $260.00

Try it for yourself – see how much you are spending on small stuff. See how much you can save.

Susan Taylor

Susan Taylor

Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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