Denying yourself the small things in life can be misery.
In the last few years of so, if you've been reading most of theinformation about personal finance that's been flowing from countlesssources you'll have heard about how it's the little things that addup to big dollars. An example they give would be 'give up your $3gourmet coffee every morning, or stop drinking 5 cans of soda a day,and by the time you turn 65 you'll have an additional $100,000 in theretirement fund'.
I'm not here to defend or attack the source of this information. Noram I going to say you shouldn't cut back on the caffeine, everyonehas to make a health choice about their life. What I am saying isthat by cutting out the little sources of pleasure in life, you maybe setting yourself up for suffering and unexpected misery.
The math behind the long-term projections by others who callthemselves "financial experts" is probably very sound. Over manyyears, a few dollars every day will add up to a large chunk of changejust as their multi-year projections show. Everyone who has boughtanything on payments knows how a small payment each month adds up toserious money after 30 years.
Being realistic is one of the keys to saving money. Is denyingyourself a couple bucks a day practical or even the best way toaccumulate future wealth? Is this the most fundamental and bestmethod you can use to be able to afford retirement?I say the answer is no and no. While it is a very good idea to befinancially frugal, as in smart, it is irresponsible to think thatone strategy, one little adjustment in the day will improve anybody'sfinancial situation.
Why it doesn't work like they say
? What money? - In theory, by not spending $3 a day on your morninggourmet coffee you will be saving $15 a week. In reality, that $3 aday probably rides around in your pocket until it becomes an extracandy bar for the kids, or another slice of pizza at the conveniencestore. You might as well admit it; $3 lacks sufficient size to benoticeable by itself, and if you don't notice it being spent, thanyou won't notice it being saved either.
? What bank? - How do you put $3 a day into savings? Do you stop bythe ATM on the way to work and make a deposit? No, in fact, mostpeople stopping by the ATM are withdrawing a $20 or larger bill. Ifyou do drop $3 a day into your home piggy bank, how long will it sitthere? You have to have real discipline to leave the money there thenext time you have a 'small emergency' and need $10 for the paperboy.Again, accumulating the $3 a day and making a trip to the bank once amonth sounds good, but in reality most Americans lack the disciplineto make it work. In fact, that is why the American savings rate is atits lowest level in years - the average man on the street will notdiscipline himself to put money away for the future.
? It is denial. - Day-in and Day-out denying yourself of one oflife's little pleasures can be terribly annoying when you havenothing to show for it at the end. If the only change in yourfinances you make is to cut out a cup of coffee, you will be horriblydisappointed when you have no more savings after a year than you hadbefore your money diet. Just like a food diet where you cut out onetype of food and the scale doesn't back down, when you cut out aspending choice and your savings doesn't grow, you will be moreliable to throw your hands in the air and declare it to be animpossible "Who cares".
What I say will work
Allow me to reiterate that simply stopping yourself from drinkingcoffee on the way to work will not produce noticeable changes in yoursavings account. Instead, consider implementing lifestyle-basedsavings strategies you will see your piggy bank over flowing. I don'thave time to go into detail in this article, but when you overhaulyour lifestyle you might be able to have your coffee and save themoney too.
? Are you buying a mansion? - Americans as a whole have been on ahousing frenzy for a while and you have to make sure you don't getcaught up in the maelstrom. The best thing you can do your lifestyleand of course your finances, is to do yourself right when you buy ahouse. You don't need a mansion just because it seems everyone elsedoes. Buy a house that you can afford early in your working careerand then stay there. Imagine how much of your income you can save asit increases over the years while your housing costs remain the same.Again, the key again is lifestyle and discipline. Keep your lifestylesimple, and have the discipline to put the unused money into asavings plan.
? Family Matters. - The size of your family is a highly personaleconomic decision, rightly guided by spiritual and emotionalreflections. With that said, however, you have to be aware that thecost of raising a family is increasing at a rate faster than mostincomes. Consider the cost of child care, education, and spoilingthat child because both parents are at work.
? Driven by Expenses - Americans have loved cars ever since theyfirst came on the market. Unfortunately, the trend over the past fewyears has been towards bigger, fancier, and costlier. Why spend extramoney on a new car, with the latest gadgets? Just like buying ahouse, decide how large and what style of car you need, buy the bestone you can afford, and drive it into the ground. Many vehicles willdrive just as well after they are paid for as they did before. Stayin the driver's seat on insurance costs as well, and you can rack upserious money over the vehicles 10 - 20 year lifetime.
I don't want anyone to misunderstand me; you can save money bycutting out the little things in life. The problem is that usuallythe money not spent on the little things goes into buying somethingelse. Overhauling your lifestyle can make the little things count andgive you the discipline necessary to hang onto the money.
Even better, overhauling your lifestyle can result in real money foryour savings plan. Go ahead and drink a cup of coffee on your way towork, and enjoy peace of mind knowing that you can enjoy one oflife's little pleasures after making changes in your lifestyle thattruly will provide for long term financial security.
Roger Sorensen
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