While it may sound like saving money and spending less are two ways of saying the same thing, the truth is that there is a big difference, and understanding it can lead you on your way to a more secure financial future.
An Example of Spending Less
If you are shopping for a new TV and instead of buying the $1,500 3D version, you buy the $1,000 version which is still great but has a few fewer bells and whistles, you spent less money. Yes, you could have spent more, but you made a conscious decision that you didn’t want to spend all that money and instead chose to spend less money on the things you wanted.
An Example of Saving Money
You were shopping online for a new suit and were trying to keep it under $500. You found a suit you liked for $400, but before checking out, you did a quick search on Google for a coupon code for the store, and found yourself a 10% discount, cutting the total price down to $360. Congrats, you were fully prepared to pay full price but spent 30 seconds and found yourself a code that saved you $40. You saved money that would have otherwise been spent, and now you’re $40 richer than you would have been had you done what many others do and simply checked out and paid full price.
Why The Difference Is So Important
We see dozens of ads each day, many of them trying to get us to spend money. They claim that we’ll save money by taking advantage of one of their deals. Groupon serves up lots of deals for fun activities and restaurants, and while if you eat out a lot and a restaurant you want to eat at is on the list, taking advantage can actually save you money.
However, if you are constantly perusing deals looking for something that looks cheap, you will likely end up spending money when you didn’t have to. If you ever go to the mall just to peruse, you may see deals for 40-50% off normal prices, which sounds great, but if you are spending money on something you weren’t interested in before you stepped into the mall, you’re spending money, not saving it.
How To Take Advantage
If you focus your energy on truly saving money and not paying full price, you’ll find that you’ve got more money left over at the end of each month that you can put toward your savings goals.
If you don’t have the discipline, try using the 100% personal tax rule for all purchases that aren’t necessities. You can spend as much as you want as long as you equal your spending with matching amounts sent to your savings.
In the end of the day, spending less is not a very impressive achievement. In fact, if you are simply spending less instead of saving money, I’m not impressed!