I got a survey the other day about my attitudes on the economy. I had to laugh when I got to the question that read, “Do you find yourself striving to save more money on your everyday purchases or foregoing those purchases so you can treat yourself to a more expensive indulgence?” (Evidently, this is something that research has shown people do in times of financial crisis. Keep the indulgences and fund them with cuts in necessities.) I guess my participation blew the bell curve because every time they made some suggestion like this, I said no and explained why their questions were stupid.
It was the wording of the question that got to me. The question made it seem as if this should be an everyday strategy for people who are having financial difficulty. It was like saying, “You don’t have to give up your goodies, just give up other stuff or trim your spending in other areas and you can still blow your money on your pricier indulgences. To me, this defeats the whole purpose of “saving” money.
When I trim my expenses on utilities, clothes, household items, or groceries, the money is truly saved. I put the extra into a savings account or investment and it becomes part of my emergency fund, retirement fund, next car fund, or travel fund. I don’t turn around and blow my savings on some pricey perfume or cool shoes.
If you’re turning around and spending your hard earned savings on some frivolous indulgence, you’re defeating your savings. If your budget is tight and you’re saving to try to get things under control, you need to bank your savings, not use saving you received on toothpaste and dog food as an excuse to buy a new video game. You can only lift your finances out of the hole if you use your savings wisely and that means either keeping them in the bank or applying them to your debt.
Saving on everyday expenses and blowing it on an indulgence can be a useful strategy if used once in a while. For example, if you are saving for a vacation you might decide to plow any “saved” money into the vacation fund for a year so that you can have the trip of your life. After the trip, you go back to banking the savings. This assumes, of course, that you are in a position to go on such a trip in the first place and that doing so won’t harm your overall budget or eat up all of your savings. It can help you reach your goal that much faster to cut back on your everyday spending and apply those savings to your vacation fund.
To use your savings to fund indulgences all of the time isn’t a sound strategy, however. You can never get ahead that way. If you save $20 at the grocery store thanks to coupons and then you turn around and buy a $25 facial cream while telling yourself you can afford it because you “saved” $20 at the store so it’s like the cream only costs $5, you’re kidding yourself. At best you’ll break even, at worst you’ll dig yourself a deeper hole.
Granted, if you don’t have a tight budget you can get away with blowing your savings on fun stuff. If you don’t need the savings for retirement, emergencies, education, or transportation, you can afford to blow your coupon savings on other stuff. Then again, if you’re on that kind of budget, you probably don’t have to watch your spending that closely to begin with.
While saving money on the everyday small things to free up money for your wants isn’t necessarily a bad strategy once in a while, if you are blowing everything you save on indulgences, you’re defeating the whole purpose of trimming your spending. All of your treats will come back to bite you one day when you really need that money you saved, but blew.
(Photo courtesy of Sean MacEntee)