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Saving 101: Four Keys to Successful Spending

Four Keys to Successful Spending

  1. Live with your means. 3. Find the best value.
  2. Eliminate fat. 4. Avoid buying on credit.

Living within your means

Spending too much is a relative problem. Two people could each spend $30,000 (including taxes) per year yet be in drastically different financial circumstances. How? Suppose that one of them earns $40,000 annually, and the other makes just $25,000. The $40,000 income earner saves $10,000 each year. The $25,000 earner, who spends more than he or she earned during the year, accumulates $5,000 of new debt (or spends that amount from prior savings). Spend within your means.

As you overspend, not only do you accumulate more debt - you become spoiled by a certain lifestyle that you really can't afford. You get used to spending that extra money.

Finding the best Value

You can find high quality and low cost in the same product. Take the time to check around, look at flyers that are sent out. In the long run savings will really add up if you are frugal and wise with sales.

Eliminating fat

If you want to reduce your overall spending by, say, 10 percent, you could just cut all current expenditures by 10 percent. Or you can reach your 10 percent goal by cutting some categories a lot and others not at all. You need to set priorities and make choices about what you can and can't live without.

What you spend your money on is sometimes a matter of habit rather than what you really want or value. For example, some people shop at whatever store is closest because they know where the store is and never bother to look elsewhere.

Eliminating fat doesn't necessarily mean cutting back on your purchases. Buying in bulk is a good example. Some stores specialize in selling larger packages or quantities of a product at a lower price because they save money on packaging and handling. You save money by buying in bulk. A local example is Costco. If you do not have a membership there, maybe someone you know does and will purchase items for you.

Click here to see just how much you can trim.

Avoid buying on credit

Buy today only what you can afford today. If you'll be forced to carry a debt for months or years on end, then you can't really afford it today. Consumer credit is expensive and reinforces a bad habit: spending more than you can afford.

to see just how much you can trim.