What You Do With The Money You Save Is As Important As How Much You Save

What You Do With The Money You Save Is As Important As How Much You Save

Saving money is always good, right? If you can reduce your expenses or find a coupon for something you’re already buying, you’re coming out ahead. Unless you don’t have a plan for the money you save.

As personal finance site Massive Debt to Mogul points out, reducing your expenses is the part of the budget equation we like to focus on. If you skip eating out or cut the pay TV bill, you’re doing a good thing for your budget. However, we don’t talk as often about what to do with the money you save. And that matters just as much (if not more) than saving it in the first place:

You can cut your expenses all day long, but what do you do with the extra cash flow? That is the more important question. If you save on expenses but never invest that extra money, you have lost a great opportunity.

The obvious answer to this question is, “Well, you save it,” but even that deserves some thought. Are you saving it in an interest-bearing account? How much are you going to save in a bank account before you should start investing it?

Another aspect to consider is that if you simply “save” money by not spending it on one thing, but then you blow it on something else, you haven’t really done yourself any favours. Clipping coupons to reduce your expenses is great, but if you work five hours a week to save $10 on your grocery bill, then cap it off by blowing it at McDonald’s because you don’t have time to cook after all that couponing, you’ve spent a lot of time and effort to accomplish almost nothing.

Rethinking Frugal — When is it Too Extreme? [Massive Debt to Mobul via Rockstar Finance]

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