The Secret to Saving Without Sacrifice

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Categories: saving, spending

“I believe that thrift is essential to well-ordered living.”
John D. Rockefeller

John D. Rockefeller was one of the wealthiest men of his time, and this quote is insight into a great mind. These 10 words encompass the underpinnings of a wealthy life. Thrift in money and time, leads to “well-ordered living,” contentment, and wealth. Thrift means not only be conservative in how you spend your money, but also with whom you associate, in what you eat, and in how you balance your time.

MAIN TOPIC

Let’s assume you have a general idea of what you want in life and maybe it reads like this; a satisfying job, marriage (now or later), a kid or 2, a vacation once in a while, your own home, ability to retire someday. OK, this stuff is pretty traditional, and whatever your life aspirations are, just keep them in focus. Maybe you just want a flexible job so you can have lots of time to snowboard and surf! All of that is for you to decide.

Where I come in is helping you LEARN the skills to pay for your dreams!

Here I talked about getting an idea about some of your short, medium and long term goals, and how much they cost. Today, we’ll get into the nitty-gritty of getting the money to pay for your dreams.

I picked up a copy of The Complete Idiots Guide to Personal Finance in Your 20’s and 30’s   and jumped to Chapter 10, Getting into the Swing of Savings. If you’ve been reading this blog for a little while, you already know, I am big on SAVING. But I also want say that I’m not big on sacrifice or complicated!

So, in the vein of keeping things simple, this post will focus on practicing some behaviors that teach you to save, without realizing it!  

Whether you are a born saver, or more inclined to spend,

saving skills can be learned!

Now, I do a lot of my computer work out at the library and coffee shops and since I am nosey by nature, I always look at what others order. In most of the shops, you can get a basic coffee for $1 to $2 dollars, and a fancy one for $3 – $4. To my amazement dismay, many of my fellow coffee drinkers go for the $4+ coffees! I never ever get the fancy one! That way it’s a no-brainer, I don’t even look at the fancy coffees on the menu, because I know that I am getting the SMALL REGULAR COFFEE every time.

PRACTICAL APPLICATION:

DELIBERATE SPENDING:

Make a decision about what you are willing to spend,

based on what is important to you.

For me, it is never worth the extra couple of bucks and calories, to buy the expensive coffee! I take this strategy and pretty much apply it to everything. I have a limit on what I will spend on a sweater! If the sweater costs more than that limit, I’m not going to buy it, no matter what. When my husband and I go out to dinner on Friday nights, except for special occasions, there is a ceiling on what we will spend. If the restaurant is a bit upscale, I find something I enjoy that is within my price limit to order.

Consequently, there is not much deliberating about most spending, because I have already determined how much is reasonable for me and my family to spend! Even my mom, who is fairly wealthy, almost always splits a meal with my dad at a restaurant, rarely orders alcohol at the restaurant (because it is so overpriced) and always splits a dessert! If I could venture a guess, I wouldn’t be surprised if John D. Rockefeller had a limit on what he would spend!

If you are not yet convinced of the benefit of watching you’re spending on the small things, let me throw in a quick example:

Typical spending:

Weekly fancy coffee (3 times at $4.00/cup) = $624.00/year

Weekly dinner out with drinks & dessert at moderately priced restaurant ($24.00/person) = $1,248/year

TOTAL TYPICAL YEARLY SPENDING on weekly coffee & 1 dinner out = $1,872.00/year

DELIBERATE SPENDING:

Weekly plain coffee (2 times at $1.75/cup) = $182.00/year

Weekly dinner out at economical restaurant most weeks and upscale once in a while ($12.00/person) = $624.00

TOTAL DELIBERATE SPENDING on weekly coffee & 1 dinner out= $806.00/year

ANNUAL SAVINGS: 

TOTAL TYPICAL SPENDING weekly coffee & 1 dinner out = $1,872.00

LESS

TOTAL DELIBERATE SPENDING weekly coffee & 1 dinner out= $806.00/year

DELIBERATE SPENDING BENEFIT = $1,066.00

Let’s take this activity one step further, and imagine you invested this $1,066.00 every year for 5 years at a 4% return.

After 5 years –  DELIBERATE SPENDING on DINNER & COFFEE OUT

would EARN you $6,004.75!

$6004.75 CASH saved at the end of 5 years!

Just imagine the savings if you took this DELIBERATE SPENDING attitude into every area of your life! I didn’t recommend skipping a coffee out, I suggested cutting back from 3 to 2 coffees out per week and buying the basic instead of the fancy coffee. I also didn’t suggest you eat dinner in every night, but rather be deliberate in your dining out and cut back on the extras; a drink with dinner, dessert, expensive entrée!

ACTION STEPS:

Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.

1. Jot down a couple of expenses you regularly buy and want to continue to purchase.

2. Now write down an upper limit on what you are willing to spend on these items. STICK TO YOUR LIMIT!

Write and share some of your deliberate spending caps.