March 5, 2008

Are You a Saver or a Spender?

By Dana Joseph

When you think of being budget-conscious what is the first thing that comes to mind? You probably imagine a life with little frills and no big purchases. After all, the secret to a successful financial life is spending less than you make. But what is money’s purpose if it isn’t being spent?

The problem with big purchases often isn’t the cost of the item; it’s the timing of the purchase. Too many times a consumer rushes into a large purchase, maybe a new refrigerator, without having the money to pay for it. So, the consumer will take out a loan, whether opening a line of credit at the store or using a major credit card, to pay for the refrigerator. Now, the consumer, whose finances may have already been stretched pretty thin, has to deal with the additional burden of a monthly credit payment. As if the situation weren’t bad enough, the consumer can also tack an extra 10% - 20% onto the purchase price for credit charges.

Now consider for a moment this same scenario if the consumer had planned for it. The consumer put a set amount of money into savings each week or month until he had saved the money for the refrigerator. He might even have been able to negotiate a discount because he is able to pay with cash. After his shopping is finished, he is able to enjoy his new refrigerator and give no more thought to the cost.

The important thing to learn from these scenarios is that focusing on your finances doesn’t require that you be a saver or a spender. It actually requires you to be both. Money is meant to be spent; it doesn’t do any good just sitting in the bank. However, planning your purchases before you make them and saving up the required cash for them, just makes financial sense. No other method of spending allows you to save on your purchases and to stay away from those worrisome monthly payments that so quickly eat up your income.

By saving and then making your purchases, you’re able to enjoy your hard-earned money in a responsible way. And isn’t that the best of both worlds?

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Topics: Personal Finance |



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