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Cutting Expenses Doesn't Equal Saving Money

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  • pennywise
    replied
    Re: Cutting Expenses Doesn't Equal Saving Money

    Flash, thank you so much for your supportive comments. It is discouraging to work hard to save money to have someone else in the home decide to be frivolous. In addition, it is also difficult for people to understand their money. You were very wise. Happy Holidays to you and yours.

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  • flash
    replied
    Re: Cutting Expenses Doesn't Equal Saving Money

    Your situation is similar to my brother and ex-SIL, and is why they divorced. They "saved", but they spent to make themselves feel better, and when the crises came they had to turn to family to bail them out (ouch all around bad idea). Brother worked 3 jobs, but everytime they had "extra" it went to whatever caught their eye.

    They thought MD and I were crazy to say we could not afford things when we were working hard. But when we were both disabled six months after buying a house, it was our SAVINGS that pulled us out until we could get back on track.

    Savings is not SAVING unless you are NOT SPENDING it, and it is too easy to rationalize that you saved $1 on an item, so you afford a $10 meal. Or that the rebate site you shop through is giving 10% back, or the store is giving $10 off if you buy $100, so you spend more than intended or even more than you have, and yet feel good about it.

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  • pennywise
    replied
    Re: Cutting Expenses Doesn't Equal Saving Money

    This notation has come at a very good time. We saved some money on our Thanksgiving plan and guess what, the spouse went out and bought Taco Bell. One, I am only interested in organic foods and whole grains. Two, we still owe $47,000 on our home and this is debt! One major problem is I am a strong saver and my spouse is overconfident. I am a nurse and I am very aware of medical bills if you are not working. I see people go into bankruptcy and poverty over a disabling event. I can't get him to understand this. What should I do? We have a comfortable life, so the Taco Bell is not something we need. He states he does it for me. I say: you do it for yourself and how you feel and call it doing it for me, because I have to pay for it since his income is fixed and I can pick up the extra shifts. I am so very tired of this. I never worked two jobs until I met this man and have done so ever since I met him. He lost his job, as usual every downturn in the auto industry, and I finally had it. I told him I refuse to work since he is the man and it is his responsibility to support the home, not me fix it every time he messes up. I also have saved a lot on the gas bill this month. I was going to put it into the budget, but this note has told me whatever the savings - write the check to the mortgage company. Thank you. If you have any advice, I would like it, but I continue to say as I have this year, we will divorce. I am a good looking 50 year old blond, wise with money, has a good career, so I know I won't be single for long.

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  • tuscan minoque
    replied
    Re: Cutting Expenses Doesn't Equal Saving Money

    I agree with ya on that,because i made those same mistakes,the money I put a side to save, I take it and spend it on something I wanted (Quote)not needed,and then I wonder why my savings havent increased,I don't know, it same to be a human nature filter with want not need,I hate what I did.Now I want to change this habit,it's difficult though,I will figure it out.

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  • jeffrey
    started a topic Cutting Expenses Doesn't Equal Saving Money

    Cutting Expenses Doesn't Equal Saving Money

    There is a misconception that cutting ones expenses equates to saving money. While cutting expenses provides you with a great opportunity to save money, you need to take an additional step to actually make this work.

    Cutting expenses is the first step in a two step process. In addition to cutting your expenses, you actually have to place the difference between what you were paying and the new price after cutting the expenses into a savings account (toward debt reduction). While this may seem obvious as you read, many people fail to do just that and wonder why cutting their expenses hasn't resulted in more savings (or debt reduction).

    What happens many times is that a person cuts expenses, but then takes that money and places it somewhere other than their savings (or against debt). How many times have you gotten such a great deal on something that you felt it was okay to spend some money on something else as a reward? When you decide to spend extra money gained from cutting expenses to reward yourself, the savings never materialize.

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    This is a much more common practice than you may realize. In the fall of 2004 in New York, tests were conducted using new supermarket scanning device which showed that people who used coupons ended up spending on average 8% more than folks who didn't. A Washington University study conducted in 2002 found that for every $1.00 a person used in coupons, they ended up spending an extra $8.00 in unplanned luxury items. One of the studies authors, Ambar Rao, concluded the following:

    <blockquote><i>Steak, flowers, candy -- people were treating themselves because they felt good after using coupons, and of course they spent a lot more on the treats than they saved on the coupons</i></blockquote>

    The key to making your cost cutting effective is to make sure that the money realised after making the cost cuts goes to your savings (or to pay off debt). While small rewards can help motivate you when making the cost cuts, they should be well defined ahead of time (as well as their cost) and not spur of the moment rewards.

    Simply understanding that there is an unconscious tendency for many people to spend more when they think that they are cutting expenses can help you fight these urges of impulse rewards and guarantee that when you set out to save money by cutting costs, you succeed.
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