It’s the showdown. Which will win? Saving or spending?
Every time we make a purchase, this decision-making process takes place. Should we save the money we have, or should we just go ahead and splurge? There are many variables that we have to take into account when analyzing how this decision is made. First, how much do we want the item? Second, how much do we value cash? Third, what is it that we are REALLY buying?
I’m convinced that sometimes what we are really trying to buy is happiness. Sure, short-term happiness can be bought, but lasting contentment is bought in a different way.
That’s where saving comes into play. Buying long-term contentment means saving up for those “rainy days” and times in our lives where cash flow is merely trickling. Ultimate contentment is only found in God, but God teaches us to be savers so that we don’t have to worry about money.
I think all would agree that it is easier to spend than it is to save. It requires an extra shot of maturity to say no to something we really want to have and save the money instead. Our credit culture has made it easy to accept payments and get what we want when we want it.
How much should I save?
That depends what you are saving for. An ideal situation is that you can save at least 30% of your income (15% for retirement in investments and at least 15% for building your emergency fund and paying off any debt you may have). For many American families, this can be strenuous goal. Try thinking of ways to raise your income and the 30% goal will soon be doable.
When should I spend?
When you’re first starting your financial makeover, it can be difficult to know when to spend. Some people save way too much and starve themselves, and others save way too little and don’t prepare for the future. Here are a few indicators of when it is time to spend:
- When the item is necessary.
- When the item is discretionary yet reasonable in relation to your income.
- When it is an emergency situation (Christmas is not an emergency).
- When it is a gift that comes after taking care of your household.
These are by no means specific, but they give you a good launching point for knowing when to spend.
The balance of it all.
Truly, it is all about balance. Don’t take saving or spending to the extreme. Instead, consider doing both in the right proportions. There are certain times in your life where you may need to spend more than save. However, when your income is overflowing, make sure you hold onto a good portion of your money. You’ll be glad you did.
A great place to save your money is an ING Direct Savings Account. You’ll get a competitive 1.1% interest rate and it’s a great place for an emergency fund – easy to pull funds out when you need them. Contact me and let me know you want to start up an account to get a great signup bonus . . . .
! John wrote two articles for the book: "Budgeting for Groceries" and "How Grocery Stores Work."
