Cutting expenses increases long-term savings. It is a simple trade-off: decreasing one increases the other. This is a simple equation that anyone wanting to financially healthy must learn and use on a daily basis. Reducing your outgoing flow of money in the long run is of course going to be beneficial – but when have you taken it too far?
I have known people that don’t really think through what they are doing. One of my friends will drive around for 20 minutes looking for a gas station that’s 2 cents cheaper than all the rest – but he’s wasted more than the difference in the time he spent driving around. There’s no point in going an hour out of your way to save a few dollars.
The cost-benefit analysis is an integral part of finance, economics, business… If you haven’t run across at least the idea by now I am surprised! The principle is simple and most of us do it without even thinking. However, by putting a little bit of conscious effort into our thought processes surrounding this simple idea we can all save ourselves a lot of hassle and expense.
The principle is simple, but the implications are profound: if you get less benefit from doing something than the cost to do it, you don’t do it. This may sound like common sense, but I have found that it is easy to get so wrapped up in one concept or idea that one loses sight of the bigger picture; I’m just as guilty of this as everyone else.
Don’t spend hours of your time trying to spend minuscule amounts of money. My general rule is that if it saves me (or earns me!) less than I could be making at minimum wage, I don’t do it. That’s why nobody spends an hour a day scrounging for dropped change in the parking lot – yes, you could find a few cents, but in the same time you could have done something far more productive.
If you go to the point where the effort and time it takes isn’t worth the amount you are saving, stop! The same goes if you cut your food budget so far that you’re eating cardboard (or ramen, rice and beans, for those who haven’t done it!). Do enough to give yourself a cushion and some breathing room, but don’t make yourself miserable. Being miserable really means that you are going to be less effective, so you lose out overall. Cost-benefit equation!
Now, remember that this doesn’t mean you shouldn’t pick up change if you happen to find it. Or turn out the lights when you leave a room, use coupons, and other easy money saving and financially savvy ideas. Some people take this too far and their life suffers because of it; if you don’t have to, don’t! Just remember not to go nuts and to keep everything reasonable; think about what you can realistically expect to be able to do in the time you have and the effort you can expend. Pick up a few new habits that will save you a lot of money over a lifetime and use them. Think about what you are doing, use what you know and learn, and do your financial workout to maintain good health, but enjoy life while you do it!
Tags: budget activities, Budgeting, cost benefit, finances, happiness, health, life, money, savings, waste
