The Value of Cutting Expenses

Posted by: Sophie H. | Dec 11,2007


Newlyweds links to a good post outlining ways of how to live below your means.  If that sounds contrary to logic, it’s not.  Trying to live above your means is the first step towards a financial catastrophe.  Many of those who have significant credit card debt have tried to live above their means through credit.  Of course there are those who have fallen into credit difficulty due to medical expenses or other emergencies, but just as many people spend unwisely.  

There’s one fairly annoying truth I’ve learned throughout my life: you want something less when you can afford it.   I know that when income was low, I felt frustrated about what I could not afford.  When, later, I could afford whatever it was, buying it did not seem quite as urgent.  For many, like myself, saving money is easier to do when you have more money than when you have less – not for the obvious reason of having more to save, but because if you’ve got surplus cash in the bank, you will not overcompensate by making an unwise purchase.  

For retirees, this outlook is even more important, as your income is going to come to a screeching halt and you’re going to need to be self-sustaining.  There is so much emphasis put on making smart investments and maximizing your return on those investments that people do not concentrate on savings – or not spending at all.  Certainly, you can still have investments, but cutting your current expenses will both increase your current savings and make your current investments less risky, as you’ll have a backup plan if those investments don’t quickly flourish.  

It will also allow you to cut down on debts, which can be a major drain both on your rate of savings and your investment portfolio.  By and large, retirees do not live high on the hog and are pretty used to a spare lifestyle.  Sometimes this is due to financial necessity, while other times it’s due to energy level.  The sooner you cut expenses, the better you’ll be prepared for retirement, both economically and psychologically.  

Sponsored Resources Ads by Google