How to save money to have a real impact?
There are two parts of saving money, how much money you actually make and how much money you spend. Both of them are important.
It does not matter if you make a 1 million dollars or 20K, if you spend all you make you will not save money. However if can save, let’s say 20% of your salary, then how much you make is very important.
This is the reason you should always aim to save a percentage of your salary. That way if you income goes up (and hopefully it will) your saving will go up.
While Americans are very good at working hard and more hours to bring more money we are also good at finding more ways to spend it. The more we make the more we spend. That is why if you are working too hard or too long just to spend more, you need to have a serious look at what your priorities in life are.
Usually I get tired reading books on how to save money or pay credit card debt, because they give people little bits to save little bits. However important these bits are it is more important to see the big picture and find the larger expenses and find ways to cut them or lower them.
I know people who have sold houses and moved to smaller ones to save money, people who have relocated in order to lower costs. Remember commuting expenses and time also have a value; while you are commuting you can spend time doing things you love or getting more education to make more money.
We have bought into the idea that a larger home is better for the family. Better than more quality time together instead of cutting the grass and cleaning it. Better than a more relaxed environment (if there is less money, stress typically goes up). Now we know a larger home is not better for the family, not even for the ego. Same thing goes with a bigger, more expensive car.
When considering the larger expenses it is necessary many times to make hard decisions, but these pay off in the long run. No mater how many lattes you stop drinking if the mortgage is killing you the lattes will have little impact. Take a hard look at the bigger expenses first, then look at the smaller expenses.
I do not believe in the “latte effect;” when we group expenses all of them add up. We all need to allow ourselves pocket money that we can use the way we want, if we want lattes let it be lattes, if we want to save it to buy a bigger TV, let it be. We need to allow money for clothing etc. Once you have allocated money and it includes paying debt, if you have it, and saving how you spend the money in the allocated categories will not produce stress.
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