More often than I would care to admit, I hear people brag about how much they have saved. Often I will hear people say that they saved $50 on their groceries or they saved fifty percent on some purchase. Some people may even talk about saving for a vacation or some luxury item. I will suggest that such saving may not be truly saving at all, but rather spending in different areas. This is not to say that I am not guilty myself of saying I saved money when I felt as if I got a good deal or that I never put aside money for a large purchase.
I would argue that such savings is not really savings, though I may be able to purchase nicer stuff or nicer experiences. All of the above really translate into spending. At the end of the month if you do not have any extra to show for the money you saved while shopping, it really isn’t savings now is it? At least it is not the savings that will matter on a rainy day when you find that you need the money because of an accident or you were laid off of work, etc.
What then would I truly consider to be savings? Money that is not spent for over a year and is not designated for a specific purchase I would qualify as savings. Some of these savings may be invested, while others may be held in cash.
Spending less on items may lead to savings, but only if one has the discipline to actually put aside the amount spent rather than purchase another desired item or experience. It is an important mindset to maintain if one wants to build wealth.
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