Saving Money With A Purpose

By John

Pretty much everyone is trying to save money these days, either because they are feeling the squeeze right now, or want to save up for some future purchase or project. They know how they should save, by cutting out extravagant expenditure, being conservative, wasting less and so on. However, it’s worth considering a few of the more analytical approaches to saving money to ensure that it is being done in the most effective and purposeful way.

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Philosophy

There is the old saying that every dollar you don’t spend today is a dollar you won’t have to earn tomorrow. That’s true, of course, but only to an extent. There is a school of thought that says the dollar you have today will be worth less in, say, a year’s time (due to inflation). So if you spend that dollar today you will have to work harder to earn its equivalent value next year. This same school then says that if you spend it today you not only lose the dollar but also the benefit you would receive if you made it work for you instead. In other words, you should invest whatever money you manage to save in an interest-bearing savings account, or to finance a side business that will produce revenue. There can be little argument with that reasoning.

Purpose

You need to have a purpose for saving that gives you a goal that will enable you to make a realistic plan. Defining the goal means that you need to establish what you want the money for, and when you want it, in the short-term or long-term. Sub-questions that will help you to decide how to make the money you save work for you include: how quickly would you need to be able to withdraw it if it were invested, how will it affect your tax position, and how much risk you are willing to take with it.

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Saving Big

Having a goal for saving, and also a plan for the amount of savings you need to achieve in the time-frame you have given yourself, you can now set about working out where to make reductions in your expenditure. The big-time items should obviously be addressed first.

Could you live in a smaller house, in a different state with lower taxes, or in an area with a lower cost of living? Would renting be a cheaper option? Do you need more than one car, and the boat? All your annual payments and subscriptions should be scrutinized – can you cancel anything, or at least get better rates or a different type of membership or insurance policy that reflects any change in your circumstances? Many people blindly renew such things without question.

There are some other big-ticket items that may not be so obvious. A tip we like is to annualize your spending habits to bring home to you just how much your smoking habit, or the daily stop-off for a latte, or taking the car to a carwash is costing you every year. There’s bound to be something there for you to think about.

And Saving Small

Now you can start economizing by smarter shopping, saving on utilities, cutting out on unnecessary TV channels, wasting less, eating out less, getting more value from your mobile data plan and so on. Savings on these items may amount to a few dollars or several, but taken together you should be able to reduce your monthly expenditure by at least 10 or 15%.

Saving with a purpose frees up money which you can then put to work for you.

Click here to compare money-saving offers and save hundreds of dollars on credit cards, long distance, cell phones, Internet, insurance, mortgages, and much more.