SAVING money is not really a difficult task, but while doing so many of us make mistakes which work against the fundamentals of savings. These mistakes actually hurt your finances instead of helping them. Here are some of the common mistakes that majority of us make when trying to save money.
Do not stop spending
One major mistake that many people make is that they stop spending, assuming that this is the best way to save money. Not spending money can mean additional expenses down the road. One may stop spending on non-essentials, but not on preventive maintenance and basic upkeep. So, continue to get your regular medical check-ups and go for repairs in a timely manner, even if this means spending a little bit of money. It is not worth pushing your luck to save less money today on things that are preventable, and risk having to make a major payout later.
Buy value and not cheap
Another most common mistake is that we think the best way to save is to go with the lowest price. Though this will work in the short term, the real key to saving money is learning to buy whatever offers the best value. Price is just one factor that you need to consider when making a purchase. Other factors include how long the item will last, what type of warranties it comes with and how often it will be used. Learning to shop for value rather than price will save you a lot of money in the long run.
There exists no quick fix
Generally, people like to do something that will immediately solve the problem. So they begin cutting expenses and thereby saving more money. When it does not work, they cut some more hoping it will resolve the issue, which also does not work. It is important to understand that the process of saving money is not going to instantly resolve itself, but will take time and effort to succeed.
Do not deny yourself
Many feel that saving money requires denying yourself the things that you have enjoyed earlier which makes the entire process painful. Saving money is not a painful process; rather, you need to make lifestyle changes in terms of how you purchase goods and services. You are probably paying more than you need to for a lot of services and items you buy.
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Learning how to reduce the additional expenses associated with them without giving them up is the best way to start saving money.
SAVE, NOT SCRIMP
Not stop spending on essentials
Don’t get swayed by cheap stuff. Go for value for money
There are no quick fixes to saving money; it takes time and effort
Do not deny yourself the things that you enjoy
Learning how to reduce additional expenses without giving them up is the best way to start saving money
The writer is associate professor of finance & accounting, IIM Shillong