Save, Don't Consume

If you are like 99.9% of all of the people in America, you spend practically everything you earn. No doubt, we are a consumption society. And while spending is undoubtedly the best lubricant to keep society’s wheels going (nothing is worse than a halt in spending), we need to keep things in perspective and not live beyond our bounds. While I am not suggesting that we make a shift in our values to solely embody saving rather than spending (which impacts the economy so negatively as can be seen in today’s times), those values need to be put in balance.

Charles Dickens once said in David Copperfield, "earn 20 spend 19, eternal happiness; earn 20 spend 21, eternal misery.” While it speaks few words in terms of literature astuteness, it speaks volumes in terms of how you should lead your life. Most people find themselves living just to get by; spending everything they earn and then eventually, finding themselves in a world of debt that they can’t swim out of. Generally, people spend practically everything they earn. We work endless hours throughout the week to buy things we simply don’t need. Did you need that new jacket or did you want it? Did you have to get a new car or could you have made do with what you had? Economists would suggest that this is a result of what’s called Keeping Up With The Jones’.

We look around us…at society..at our friends..at our peers..and we try to “one-up” them in every regard. We want better personalities, a better TV, a better girlfriend, a better apartment, a better car…better everything. And while this internal Darwinian struggle to be the best is often a good thing that propels success, sometimes we do it at the expense of ourselves, shooting ourselves in the foot; wearing ourselves down and making us miserable in the process.

A lot of people measure success and value in financial terms and one way to show off and personify that success is through material goods. Driving a Mercedes as opposed to a Hyundai or wearing a Prada belt instead of a generic belt are ways to “augment” your status and add value to yourself. However, we have to stop being so obsessed with the materialism when it often involves spending past what our budget can handle. While it is OK to purchase these upper-echelon products for the right reasons (their quality, functionality, precision to detail, attractive appearance, and overall astuteness), most of us purchase these things for the wrong reasons (boasting or flaunting your pretentious intentions) and at the wrong times of our lives. Often people take their paychecks and go straight to the department store to blow it all. We can’t spend to the outer limits of our budget, thinning our wallets to a mere fragment at each day’s end. What would that lifestyle be good for? Are we just programmed to work harder and longer every successive day for more goods? We work to live and it should not be one that includes living to work. We should always work hard, but for the right reasons. We should work hard to get what we want, but shouldn’t spend 100% of our income on products. That’s just senseless and you’d be doing it at the expense of your health. Work hard to buy goods you want, but after you’ve already established a backbone of securing yourself first. You shouldn’t’ be stressed about paying your bills. You shouldn’t be wondering on June 15 how you’re going to scrounge up cash to pay for July 1st’s cable bill. Because somewhere along the line you probably purchased something you shouldn’t have. Keep that in perspective at all times and stay sensible to never extend yourself past your capabilities.

With that being said, you need to put money aside frequently, sacrificing those other purchases that seem like necessities now, but in due time will be just another luxury. You should be using that money to invest in the future to realize returns that will set up a life down the road filled with the opportunity to satiate your expensive taste. In your younger years, you must make the sacrifices now to propel yourself into a position to one day be able to buy those material goods for the aforementioned right reasons, without worry about paying for the real necessities (college tuition, food, mortgage payments, car payments, gasoline, etc.). You can make do with many of the stuff you have now and have to ask yourself every time you even think of making a purchase: “Do I really need this? Could I live without it?”. While this seems like an excessive, over-the-top remedy, you must take the appropriate measures necessary to put yourself in the proper position to benefit your health and future life.

Right now, you should use your hard earned money for future investments. A consumption product like a car has only one kind of value- depreciating value. A consumption product works opposite of the time value of money, in that the product becomes less valuable than the preceding year. A product’s value decreases year by year until it is practically worthless. However, real investments like those of an investment portfolio are supposed to appreciate. But, be aware that not all investments are equal. There is one investment that is above and beyond all those stocks, equities, mutual funds, and commodity investments. Nothing is more valuable than yourself and the potential that you contain. And the reason why you should lay down the good sacrifice and save your money rather than spend it on products you don’t need, is so that you’ll have money to invest in yourself through a business idea or a venture (the most profitable return on investment- view the article “Invest in Yourself”).

Forfeit luxuries. Do the minor things in life. For instance, take appropriate measures to save money in every regard. Don’t go out to eat and instead, eat at home. Cook for the week and maybe go out once during the week. Also, when you go grocery shopping, only purchase what you need. If you’re not going to eat it, don’t buy it. Don’t waste money on things you won’t use. Instead of purchasing a $60 Lacoste v-neck, purchase a $12 Gap v-neck. Things like these will make a big difference in your wallet and the sacrifice is so minimal (in terms of the appearance/logo on the shirt in this instance), that you won’t feel or look any different. But for instance, if you spent $12 on a shirt instead of the $60 you were going to spend, put the difference of $48 in the bank right away. If it sits, you’ll spend it on other things. You don’t realize it at the time, but you’ll justify spending that $48 on junk like food for the day or taking a cab instead of the subway. But if you don’t have the money at your disposal to spend, you won’t buy things that are useless. If you buy things like 6 sodas, a pack of cigarettes, 5 bags of potato chips, and 6 coffees a week at $2.00 a pop, you’re thinning your wallet and not to mention your health while expanding your waistline. Those inconsequential things add up to around $2000 a year. Don’t you wish you were spending your $2,000 on something more fulfilling like an investment or had that $2,000 in the bank as a crutch when the times got rough. The little things make a difference. That $2,000 can be a month’s worth of advertising in your potential business, which can translate into $10,000 in revenue from the increase in customers you received from the advertising efforts. You get the point?

Furthermore, pay your bills on time. Nothing is more wasteful than paying a credit card company a late fee. Paying interest is the biggest waste because you get absolutely nothing in return for your “generosity”. They might as well hold their hand out like a charity, because that is essentially what you’re doing with your money. Do everything in your power to pay off those bills on time to avoid penalties.

Only spend cash. This will force you to live within your means and not over-extend. You’ll be more aware of what’s coming in and going out of your allotted funds. Plastic is great for emergencies and convenience, but should not be used as a crutch or dependency to pay for things. You lose track of how much you spend and it accumulates real fast without you even realizing. If you spent $30 a day on your credit card, that adds up to $900 a month. That’s a large sum to be paying all at once. Be conscious and aware of what you are spending.

Put annual raises, year-end bonuses and even income tax returns directly into the bank. Do nto spend these. Don’t view this as part of your annual income but a lump sum that is a gift for you to put away. Pretend it’s a bond or a financial instrument that is not liquid. You can keep the same standard of living, without the splurge of the lump sum payment to spend on something that’s practically worthless. You won’t miss it.

Saving has its benefits and doesn’t require all that much sacrifice. Everyone wants to do it, but it’s the process of actually implementing a plan of action to do so.