Beating Broke

Personal Finance from the Broke Perspective

Is Saving Money a Waste of Money

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Save! Be Frugal! A penny saved is a penny earned. There’s a plethora of maxims meant to encourage us all to save our money for a rainy day. To hoard our excess funds so that we can spend them at a later date and enjoy their usage. But, is saving our money a waste of our money?

The most obvious way that saving money could be a waste of money is in lost opportunity cost.  If your money is tied up in some CD or savings account that you don’t have ready access to, what opportunity are you going to miss out on that could make you even more money.  If you can’t take advantage of an opportunity to make money, your savings is wasting those potential profits.

But, that isn’t the real issue.  Potential profits don’t necessarily mean lost profits.  Maybe that opportunity doesn’t perform as expected and you earn less than you would have in the CD or savings accounts?  No, I don’t think that theory holds up.  Sure, you might miss out on a potential profit boon, but I wouldn’t encourage not saving for that purpose.  In fact, having a readily accessible savings could make it easier to take advantage of an opportunity like that.

But, let’s think for a moment about what we do to save money.  The easiest way to do that is to just have it taken directly from your paycheck and into a 401(k) or to set up an automatic transfer from your paycheck to a savings account.  Easy.  A little bit of set up involved, but very little effort thereafter.  That’s hardly a waste of money!  But, let’s look at the opposite side of the spectrum.  You’re pinching your pennies, saving as much as you possibly can and then some.  You don’t want to miss out on an opportunity, or you want to pay your debt off super fast!  You go so far as to start collecting pop cans.  (assuming you live in a state that has a deposit.)  You walk down the street and throw the cans you find into a bag.  Maybe you even hit the parks and poke through the trash cans there.  Every week, you spend several hours looking for cans.

How much is your time worth?  If you’re spending several hours a week for a few bucks worth of cans, are you making a good use of your time?  Isn’t your effort to save a few bucks a waste of potential money doing something else?  Heck, you could deliver pizzas for a few hours a week and make much more than that.  Not to mention the other ways to make extra money.  You can make money selling ebooks, or working some overtime, or consulting, or just about any second job, or make money on twitter, or even *ahem* blogging.  Sure, the cans are an extreme example.  But, one used to put a spotlight on my point.  What saving practices are you employing that are a waste of money?  Which of them are worth your time, effort, and resources?  And which aren’t?

If we are going to attempt to create a super financial situation, we have to make our saving machine as efficient as possible. It doesn’t hurt to question your tactics.  Find the ones that are causing you to waste your money and find a better use of your time.  Not only will it make your money saving efforts more efficient, but I think it will free up some time to do things that you want to do.  Like spend time with your kids, or walk through the park and not look for cans!

You Are Your Own Worst Enemy

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When it comes down to setting your budget, saving your money, spending your money, and acting responsibly with money overall, you are your own worst enemy.  You and only you are responsible for keeping your self-made goals.  There are tools that you can use to help yourself, but the only enemy that you need to worry about is yourself.

Your spouse is not responsible.  Let’s assume for a minute that you don’t have a spouse that is running around buying up all the $700 pairs of shoes in town.  Stop blaming your spouse.  He/She is not responsible for the debt that your in, your blown budget, and your lack of an emergency fund.  Your spouse, however, is an excellent tool to use to overcome all of those problems.  Get on the same team as your spouse.  Your spouse can keep you accountable better than anyone else.  Discussing the finances with your spouse is a good thing.  Get them on your side.

The Credit Card companies are not responsible for your debt and the lack of paying it off.  They may hold the note on that debt and encourage you to use your “credit”, but ultimately, it is you that uses it.  And it’s you that chooses to sign the receipt.  And it’s you who chooses to continue to carry that plastic in your wallet. If  you can’t use credit cards responsibly as a tool, get rid of them.  No Excuses.  Everytime you sign the slip, you accept responsibility for the damage you’re doing.

You have taken responsibility for so many of the things in your life from feeding yourself (I assume) to cleaning yourself (assuming again) and even to dressing yourself (yep, assuming.).  Why, then, do you blame everyone else for your financial woes?  Would you blame them if you fed yourself cardboard?  If you tried to bathe with sewer water?  Or if you forgot to put your shoes on and walked on sharp stones?  No, you wouldn’t.  Stop trying to pass the blame for your monetary faults to someone/something else.  Your actions are directly responsible for where you are.  The moment you take responsibility for those actions and their results is the moment you are free of their bindings.  It’s the moment you can begin to feel free of them and can begin to correct them.  And once they are corrected and you have broken those old habits, you will be free to develop new habits that will set you free from that old life.

Take responsibility.  Change yourself for the better.

Ethics and Morality in Personal Finance

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Personal finance isn’t all just about the best ways to save money and live frugally.  There are other things to consider; other rules that should be followed.  Some have absolutely nothing to do with saving money.Many of the posts here at Beating Broke deal with saving money, budgeting, and living frugally.  On many occasions I have drummed on the amount of debt that we all take on and the ways that we can go about budgeting to make that debt go away.  Deep in the root of that is a moral standard.  I believe we have a moral responsibility to not spend more than we earn.  And, because each dollar of debt, holds some risk of default, I believe we also have an ethical responsibility to budget so that we don’t default on our debt.

In the process of paying off our debt and saving money, many of us will be faced with a moral or ethical dilemma.  Perhaps you bought a bunch of things at a department store and the teller didn’t notice that one of the items rang up for less than it was supposed to be.  Or maybe the teller only rang up one item when there were really two.  Many of us have been faced with just such a situation.  And many of us, in our struggle to reduce our spending and debt, probably didn’t say a thing.  I know I have.  And I felt guilty about it.  Morally, and ethically, we have a responsibility to pay the correct price for an item, and to pay for the correct amount of items.  Even though I admit to not doing anything, I do try to keep myself honest.  Ill gotten gains are gains you’re likely to lose.  Call it karma, or whatever you like, you’ll feel the reverberations of your acts.

Perhaps more-so than in paying off debt and saving money, ethical and moral dilemmas can arise after we’ve paid it all off.  Suddenly, we find ourselves with an abundance of spendable money that we can save or do what we want with.  It’s not earmarked for any debt, and we’ve already paid ourselves.  The situation has changed, but we still have a moral and ethical obligation to do what is right.  If you’re investing your money, do you invest in so-called “sin stocks”?  The stocks of cigarette and alcohol and other indiscretions.  Again, I know I have.  I am still a shareholder in the parent companies of both Marlboro and Camel.  I’ve owned others in the past.  Depending on how you feel about those companies, a ethical dilemma could come up.  As a generality, those companies have rather solid stock and usually pay dividends.  If you feel that those companies are responsible for cancer and death, can you ethically allow yourself to support them by becoming a share owner of that company?

As debtors, we all despise the credit card companies who charge double digit interest rates and hide fees around every corner.  Banks too.  As someone who can now invest money rather than paying those credit card companies and banks, deciding how we feel about those rates and fees can be another dilemma.  If you’re one of the lucky ones  whose state has allowed access to the peer-to-peer lending companies, you have the ability to invest in loans that carry rates that are very much the same as what a credit card company or bank would charge.  The table has turned.  If you were against it when you were paying the rates and fees, can you ethically charge them?  Morally, should you?

I think that many of us look too closely at the technical aspects of personal finance.  We study amortizations schedules and debt snowballs.  We talk endlessly about our retirement funds and the ways that we are going to build them up.  And, while it is there as an undercurrent, we sometimes fail to see the moral and ethical currents that run in the background.  And sometimes, we allow our technical expertise and know-how overcome our moral and ethical compasses in order to make our debt snowball roll a bit faster.

If you truly want to win at personal finance, you have to find your moral and ethical limits and remain steadfast in their direction.  We all fail to do that occasionally, but, as the old saying goes, you’ve got to get back up and try again.