When you attempt to save money by eating out less, bringing your own coffee to work, etc. make sure that you are putting that money you are savings towards something that will accomplish long term results for you. For example, if you cut out your daily Starbucks run and end up saving $120 per month, direct that $120 each month into your retirement savings account or pop it onto your mortgage payment. By doing so you will be enjoying the effects of compound interest in your retirement account or you will be greatly reducing your interest costs on your mortgage resulting in paying off your house much more quickly. By making your savings work harder for you, you will greatly impact your financial future.
By contrast, if you don’t earmark that money you saved, what will end up happening is you will spend it on something else and skipping out on your Starbucks will be for naught. Sure, you may no longer be buying that early morning coffee, but you will likely just spend that extra cash on a concert or sports event. By tucking it away right away into a retirement account or your mortgage, you will ensure that you are not cutting out your Starbucks spending in vain.
There’s no point in cutting back on something without making that savings count for something. Make your money work hard for you now and you will reap the rewards later on. If you decide to put your money where it’s really going to count, you will be much more motivated to cut back on a few extras, knowing that these small sacrifices really will pay off in the long run, literally.
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