Reasons to Spend Less and Save More

Cheap home living becomes more rewarding when the savings obtained from watching our expenses adds up to money in the bank.  There are a number of reasons why starting early with cheap living and a frugal lifestyle will pay greater rewards over time.

Conspicuous consumption and spending today generally doesn’t buy long term contentment.  Before anyone spends money or borrows money, they should spend some time contemplating the cost and rewards and whether the money spent will provide commensurate pleasure.

Saving regularly can give us peace of mind.  If we knew were living within our means, we are more likely to feel financially content even when it means we are not eating out once a week.

The earlier we start saving, the easier the savings is and the greater the benefits of compound returns.  Even for small sums of money compound returns add up significantly given enough time.

By starting saving sooner, there is a greater probability that the money saved will get a larger boost in return from the financial markets.  Market average returns are higher when measured over long time periods unless, of course, specific short term high return periods are used. 

Saving is a bargain compared with spending, especially if the savings is placed in a 401K or IRA.  Every dollar we earn and spend will be taxed so we may end up with 60 or 70 cents worth of merchandise that eventually depreciates to nothing or close to it.  Every dollar that is saved and invested in a 401 k plan or retirement plan grows tax differed.  Any matching contribution a saver may get from their employer just increases the return substantially.

The tax code is definitely stacked in favor of savers.  A slew of tax favored accounts exist 401k plans, Roth IRAs, 529 college savings plans, and more.  Investors that invest through a regular taxable account can also take advantage of the low federal tax rate on qualified dividends and long term capital gains.

Becoming a big saver doesn’t take huge sacrifices.  Often increasing savings requires a little attention to where the money goes and attention to where the best purchases for products and services can be made.  Less waste can often be the simplest path to quick and easy savings. 

In the long run, diligent savers will need smaller retirement nest eggs.  A good life of maximizing resources while avoiding waste will help build a bigger savings portfolio and generally need less money to retire because they are accustomed to living less expensively.