Jun 292014

So you’ve got some money in your pocket. No more bills to meet or people to pay back. For most people, the two options that immediately come to mind are 1) save the money or 2) spend it.

In the long run, the money will be spent in some way or another. Saving money is just keeping it around so you can spend it another day, after all. How do you decide what to do, though? It’s not an easy decision but here are some of the more common reasons people do either:

Commons Reasons for Saving

Stockmonkey.com - Life Saver Made of Money

Courtesy of StockMonkey.com

For a rainy day or emergency fund – Most people know that an emergency fund is a great way to protect yourself. Things happen in life that we just can’t prepare for. Unfortunately, they tend to be costly and inconvenient: a car broke down, a family member in trouble, a trip to the emergency room. Having that emergency fund won’t keep those issues away but at least you won’t have to worry about you’re going to pay for it all. Most people don’t realize though that having some extra funds can also be for opportunities that may present themselves. Money saved up means a chance to pounce on a great deal.

Building towards a bigger purchase – maybe you’re dreaming big. Bigger than you can afford right now. It’s a better idea to save that money for something expensive that you really want than to settle for a cheaper version of it now.

Waiting for the right thing to spend it on – just like the above, it’s about not settling for something you only kind-of want just because there’s nothing better to get. Just like keeping money around for that good opportunity, it’s a great idea to save up for something you really want when it comes along.

Common Reasons for Spending

Courtesy of Sarah Ackerman on Flickr

Courtesy of Sarah Ackerman on Flickr

Enjoying the money – hey, you’ve earned that cash. Money was made to be spent. What other use for it is there? There are a lot of things you can spend money on that will really improve your quality of life. We’ve heard the phrase, “the best things in life are free.” While I find that true, many not-best-but-still-great things in life do cost money though. Going skiing or skydiving. Playing tennis or other sports where you need equipment. Traveling in any semi-comfortable way. Meeting friends at a restaurant or bar. These things are not terribly expensive but you will need some spending money in your pocket for when they arise.

You may not be around to spend it later – possibly the most important argument for me to spend my money. You never know what will happen in life. You could walk out of your door and drop dead from anything. I’ve even been in a situation where a car drove through a grocery store’s wall and almost killed a bunch of people shopping in the aisles. One of my worst fears is that I keep putting off enjoying my money until one day I’m rushed to the hospital and realize that I will never get a chance.

Not getting any younger – continuing from the previous point, you are usually most able to enjoy your money now. If you wait until later, your body will grow older and your senses won’t be as strong as before. This happens with age and nobody can stop it. The view on top of a mountain, a trail through the forest on a summer day, bar-hopping and clubbing, going out on crazy dates – these are all things that you enjoy best in your younger years.

Like many decisions in life, it is not all or nothing. You do not have to save every penny you earn if you decide to save. Likewise, you do not have to (and probably shouldn’t) spend everything if you decide you would rather enjoy the money now. Deciding to save some and spend some is the best of both worlds. You want to spend enough to enjoy life now but also save so you can enjoy life later as well. The hard part is determining how much to spend and how much to save.

In a future post I’ll explore the topic of finding the right amount of spend vs. save.

 Posted by at 4:07 AM

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