Saving Money While in Debit
- April 4th 2008
- Saving for your trip
Once again, I remind you that anything here are my own opinions and experiences, not professional financial advice. That said, I want to say a few words about the importance of saving money even when you’re in debit. Every financial website, book, talk show, planner and smart person will tell you to pay off your debit then start saving money. Most of them are smart people who have good money sense and were never in debit themselves. Even if you’re in debit, I think that you should save some money every month.
I recommend this because of the psychological impact that saving money has upon someone who has accrued debit in the past. As anyone who reads ReallyBigGoals knows, I’m pretty far in debit myself from past school loans and in general living above my means. It wasn’t until I started saving a little bit of money every month that I was able to learn the skills that have taught me to finally live below my means.
Saving a little bit of money, even when you owe large sums of money, teaches you three things. First of all, it teaches you how to live on a budget that is below your income level, not at it. By putting away even $5 a month (although I always try for $100) you force yourself to downsize your budget which teaches you how to live not just within but below your means. This is the key to ceasing increasing your debit and the key to getting out of it.
Secondly, it creates a small fund of money that provides a sense of security. If you’re always living in debit and never having any emergency money, when something happens unexpectedly (like our move across country) you can end up in more debit and more depression/frustration which can then trigger unreasonable spending. Call it ’shopping therapy’ or whatever you want, but a Santa Barbara shopping trip because you’re anxious or stressed or depressed because of your debit will only make it worse. If you have a tiny bit of savings this isn’t so strong of an impulse. To my great surprise and pleasure!
Finally, by saving for things and rewards that you want you appreciate them more and learn to postpone your gratification until you can truly afford it. How much more fun will your trip be if you come back and haven’t racked up any credit card debit? How much easier will paying off your debit be if you know that you’re still going to get to go on a trip, even if it might take you a tad longer to save for it?
The down side- it’s not the best way to get the most from your money. You’ll be paying a higher interest rate (in most situations) than you will be getting in interest from your savings. If your debit can easily be paid down in a few months, do that first. If, however, you’re working with a larger amount that will take years to pay down consider saving some money as well for that trip and/or rainy day so that you can continue to live while you pay off your debit. You can always dip into that savings later and pay off chunks of your debit if you want to.
Ok… now your turn to sound off. Don’t worry if you disagree with me, share your reasoning here!
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