One of the things I’ve learned along my own frugal journey and through helping others with their financial problems is that the reasons behind living frugally/saving money often dictate just how far a person is willing to go in order to cut spending. I’ve learned that in order to have the greatest chance of success, you must first know exactly why you want to save money because that reason often dictates your savings strategies.
There are many reasons why people choose to save money and/or cut consumption. They may want to pay off debt, save for a specific goal like a car or a trip, create an emergency fund, pay for education, ensure a comfortable retirement, or to reduce their impact on the environment.
Just as there are many reasons to save money, there a many different ways to go about it. You can have a set amount deducted from each check and put into an account. You can give up things like eating out, cable, and trips to the movies. You can clip coupons and shop sales. You can give up vices like cigarettes and your morning Starbucks. You can do home maintenance yourself. You can make your own cleaning products. You can take a second job and earn more money. You can sell stuff you don’t need. The list goes on.
The thing is, while every savings strategy will save you money, not every strategy works well with every reason for saving. For example, the person who wants to cut consumption/spending for environmental reasons may decide that making his own laundry detergent is worth the effort because the end product is less toxic to the environment. But this same environmentalist wouldn’t see the benefit in taking another job because the commute would be detrimental to his goal of helping the environment. On the other hand, the family looking to pay down debt may decide that the time and effort required to make their own detergent could be better spent working a second job and then getting the best deal they can on store bought detergent.
Similarly, the family that has no debt and wants to save up an emergency fund quickly may have no trouble selling things they don’t need and skipping the annual vacation in order to gain large chunks of cash in a hurry, but they may not see the value in clipping coupons and giving up the daily Starbucks. But the person who wants to save for a college education far in the future may decide that they have plenty of time to save up and opt for smaller changes to the budget over time, such as giving up Starbucks every other week, or cutting meals out down from two to one per week. They may not be as willing to give up big fun in the “now” for a savings goal that’s far in the future.
Generally speaking, big goals that are coming up fast (retirement’s five years away, you know you’re going to need a car this year, you want to pay of $20K in debt this year, you have nothing in the emergency fund and you want $5,000 this year, etc.) require more aggressive savings strategies. You may need that second job, you may have to sell that car, you may have to sell a lot of stuff, or you may even have to downsize your house in order to raise big chunks of cash quickly. Smaller saving strategies like coupons, electricity conservation, and switching to store brands will certainly help and will get you there faster, but they won’t give you the big bucks that, say, another job will. You have to ask which is more worth your time and effort to reach your goal.
On the other hand smaller goals, or big goals that are a long way off (a vacation with a date to be determined, retirement’s thirty years away, a college education for a yet to be born child, adding to an already funded emergency fund, etc.), can be accomplished with less drastic measures. Clipping coupons and putting the savings in the bank, automatic deductions from a paycheck, giving up the daily coffee, making your own lunch and eating out less can all help you save up a little at a time without requiring drastic lifestyle changes. Big changes and money raising ideas will certainly get you there faster, but you may end up resenting giving up the vacation or selling your prized guitar if another method would work.
Of course if you’re in a big financial hole, you may need to do everything large and small to get out of it. You may only be able to save your sinking ship by taking a second job, couponing, selling your stuff, and cutting out everything not essential for survival. But once you get that sorted out and you’re looking at more manageable goals, knowing why you’re saving is as important as the method you choose.
In order to understand the strategies that are most likely to help you reach your goal in the least amount of time and with the least amount of hassle, you have to know why you’re trying to save. If you don’t know and understand that, saving money becomes like throwing spaghetti at a wall. You try every strategy you run across and throw it all out there, but only a little bit sticks and you have to clean the rest up off the floor. When you fully understand where you’re trying to go, you’re better able to pick the best strategies to help you get there.