Understanding the difference between spending money and saving money

The qualities which distinguish spending habits and saving habits are more nuanced than they may initially seem when it comes to personal finance.

The qualities which distinguish spending habits and saving habits are more nuanced than they may initially seem when it comes to personal finance. Pinching pennies does not necessarily nourish a flush retirement account. Nor does scrupulous monetary stashing automatically mean a healthier relationship with your bank account during the day-to-day. As with most things in life, cultivating financial wellness – both in the long and short term – is all about balance.

Many of us believe that it’s always an either:or thing when it comes to spending and saving. If you’re saving you’re not spending, and if you’re saving you’re not spending. Truly, however, the two practices can help to support each other if you know how to use them to your advantage

So let’s talk about what really differentiates spending money and saving money, as well as a few key habits you can develop that will help you do both better than you ever have before.

Spending vs. saving

Here are the basics.

Spending money means exchanging the currency or credit of which you are currently in possession for goods and services. 

Often when we talk generally about spending money, or people who are “spenders,” we are talking about purchases and expenses which are subjectively unnecessary. However, we are more often obliged to spend money on things we need, including car repairs, rent, food, and so on. 

Saving money means taking a portion of the currency of which you are currently in possession and depositing that portion into an account of one designated purpose or other to be used in the future. In other words, not spending the money you have.

This definition is a little more restrictive and may become confused by other money-related language that exists out in the world. For example, when we “save” on a discounted item at the store, we are not actually saving money, but spending less. For our purposes, saving money is a deliberate and intentional activity which furthers the saver’s long or mid-term financial goals.

Striking a balance: best practices for saving AND spending

Saving money is a critical practice to undertake in order to build a more secure financial future for yourself and your family. But this doesn’t mean that you should avoid spending at all costs – in fact, thoughtful use of the money you have when you have it can help you to mitigate other potential money-related risks including the build-up of credit card debt. Careful planning and a better understanding of your own financial reality will help you to both save and spend with intelligence and purpose.

Here are a few specific practices to cultivate for better spending, and better saving.

  1. Create a budget and stick to it. This starts by getting a handle on your income each month and understanding what you can spare beyond your obligatory expenses. These are most typically rent, food, utilities, car expenses, and insurance. If you’re living within your means, you should have a little left over each month to put away, or to play with. If you like, you can factor fun expenses into your budget each month – which may help eliminate some of the gravitas from the practice of serious saving.

  2. Commit to saving. But saving should still be at the top of your priorities list. Don’t worry about saving the same amount each month, especially if you have a variable income. Sometimes an unexpected expense may mean a smaller contribution – if you can swing it, this is better than taking on more credit card debt or extracting from your retirement account. Try setting a percentage of your leftovers each month as a savings deposit goal.

  3. Shop around for obligatory expenses. Spending less doesn’t automatically equal saving, but less spent on daily expenses does mean more for your long-term accounts. So find ways in which you can spend less in the day-to-day. This might mean buying less expensive groceries, but also seeking out more affordable insurance plans, streaming services, etc.

  4. Use cash when possible. If you err on the side of spending your liquid assets rather than putting it all on your credit card, this can help you to remain within your budget and to avoid routing future income towards paying off debt which otherwise could have been avoided. Of course, some expenses will necessitate the use of credit. But when you can, use cash instead.

  5. Know what you’re saving for. Arbitrary saving can cause you to lose focus and skip your monthly deposit. Setting a purpose for each saving account you open can help you to stay excited and on-task with your savings before it’s time to withdraw. In addition to your emergency savings and your retirement account, consider putting together sinking funds for shorter-term expenses to help keep you engaged and on track.

Origin can help

Origin is a comprehensive financial wellness platform for employees that takes a holistic perspective on personal finance to cultivate greater financial intelligence and future security. With Origin, learners are empowered to take greater control of their saving and spending habits with a critical eye on the relationship between their current income, future spending needs, and day-to-day obligations.

Sign up for a free demo today to see what Origin can do for you.


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