The reasons people need to save money are endless. It could be anything – the price of gasoline increases… you lose your job… your rent goes up. Whatever the reason, there are right ways and wrong ways to save.
What follows are the top 3 mistakes people often make when trying to save money. Knowing what they are can help you save “correctly” when and if the time comes.
- Completely Stop Spending Money
It makes sense, right? If you stop spending money, you’ll save money. It’s obvious and reasonable. However, this comes with a “but”: don’t stop spending money on things that can end up costing you more money down the line.
For instance, let’s say you want to save some money by canceling the maintenance visit for your air conditioning system. It sounds like a good idea… until your A/C starts having problems because the issue wasn’t previously caught. This could end up costing you hundreds or thousands of dollars more than if you had the maintenance done in the first place.
Sure, to save money you can stop spending on the non-essentials (impulse buys, too much dining out, etc.), but continue to spend money on the things that can save you more money down the road like auto checkups and dental cleanings. These are things that, if ignored, could create major expenses in the future.
- Buy Cheap: Cost First, Value Second.
Getting great bargains and good quality items at a low cost is a great thing. Unfortunately, many people think buying cheap will save them money. That’s true – in the short term. In the long term, purchasing low quality, cheap items can cost you more.
Think about it. You buy a cheap set of tee shirts that you hope will last for years. In just a few months you start to notice holes, or pilling, or tears along the neckline. The same goes for cheap tools, electronics, cleaners, even toothbrushes. They’ll all wear out in a short period of time and you’ll have to replace them. Buying cheap can sometimes end up costing you more in the long run. Shopping for price and value can save you a lot of money down the line.
- Depriving Yourself
Trying to save money by denying yourself is like people who don’t eat anything they enjoy when starting a diet. They deprive themselves of any pleasure when it comes to food. More often than not they fall off the wagon and go right back to the way they were eating before beginning their diet.
The same goes for trying to save money. There’s no need to deprive yourself of everything you enjoy. Check out your spending and then make some decisions. For instance, if you like watching TV, you don’t need to get rid of your cable service, but you can check to see if you really need all those channels you’re paying for. What about those dinners out three times a week? Can you make it twice a week? Once a week? Maybe invite friends over for a potluck dinner. (You can use this calculator to see how much you can afford to spend on a new vehicle.)
Cutting back can help save you money. On the other hand, denying yourself of fun can often make you angry and resentful. The result? More spending and less saving – exactly the opposite of what you wanted to do in the first place.
If you notice, these three mistakes have one thing in common: taking things to the extreme. When trying to save money, do it in moderation. Don’t completely stop spending money, be thoughtful about what you’re spending it on. Don’t buy cheap, keep an eye on quality, just buy less. Don’t deny yourself everything you enjoy, simply live your life in moderation.
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