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Top 5 Mistakes You May Be Making While You Save Your Hard Earned Money!

June 26th, 2008 by Wai Loong (Add Your Comment)

Recently, I shared a “Get Rich Slow Secret Formula”, also known as pay yourself first, save and plough them back into investments that fits your long term and short term investment objectives.

It’s really a simple formula, yet to the undisciplined and untrained mind, the journey is to be fill will bobby traps!

The recent rise in both both crude oil and food prices has already been taking a toll on everyone’s budget.  As the global consumption for energy continue to stay strong and the uncertain fate of the weakening dollar, things will most likely get worse.

Higher prices are now forcing many people to look for ways to save money (defensive), or to make more money (offensive), or both (you have a winner here!).  Saving money looks pretty easy to most folks.

Unfortunately, tons of people are making certain fundamental mistakes when they try to save money, mistakes that actually hurt their finances rather than helping them.

Here, I’ll attempt to list the most common money saving mistakes:

Top Mistake #1: Quit Expenditure

While this looks to be the obvious way to save money, action without foresight can mean additional expenditure down the road!

You don’t have to be a rocket scientist to understand the basics of cutting down on luxury items.  What I’m mean is you may be starting to to cut down on their “you-will-not-die-but-painfully-limp-on” essential expenses.

Confused?  Let me draw a few examples for illustrations.

For example, you may be thinking into cutting down on your health insurance premiums, your timely dental/body checkups, your health supplements, your Qi Gong/Yoga exercises – whatever maintains your physical health.

Listen, cutting down expenses to any one of those systems that are already in place is a surefire recipe for your financial disaster!  Trying to squeeze out that extra dollar thinking you are a smart piggy bank saver will cost you a bomb when your favorite hospital send you your bill.  Medical related cost is a silent expense time-bomb you will be paying for in the years to come without you knowing.

In fact, I have actually stepped up on expenditure in high quality health supplements, knowing outright that money can be made back in time.  No amount of money can buy back a deteriorated body… and only if you’re lucky having survive over a hefty medical bill.

Mistake #2: Go For Cheaps, Not Value

Lowest price doesn’t necessary means value.

This may work sometimes but If you’re thinking to save money on the long haul, buying what you want have to follow the principle of “best value for money”.

Products selling cheaply on retail shelves may not necessary yield the quality you want – hence saving money.  Replacing quality products with inferior ones may save you a buck or more, but will cost you more having to replace them often.

For example, buying gardening or home fixing tools that can last you a lifetime rather than a year or two.

This is especially true for electronics gadgets!  Recognizing that technology improvement often outpaced the life of the device itself, it makes no sense at all to buy the latest gadgets to showoff.  Money is still money, irregardless of those you earn or that you save (or have not spend).  It may be a lot wiser to purchase second-hand gadgets on auctions like eBay.

If you insist on brand new ones, do keep yourself peeled for bargains offered by sellers who are getting rid of old stocks to make way for new ones.  These sellers are usually willing forgo the lucrative markups for older models from their whole sellers – with full warranty of course whenever possible!

The key to saving money on a consistent basis is to learn how to buy for value at discounts.  Price is just one factor that you will have to consider before making a purchase.  Just mastering this tactic alone will save you a ton of money in the long run!

Mistake #3: Assuming Saving Some Money Is a Quick Fix For a Hefty Expense

Trying to cut down expenses after having regretted on spending a bomb on any luxury item is a common self deluding problem.

Cutting down on normal life supporting expenditure does not solve your problem!

In fact, it’s human nature why you may desire a luxury product, is because you’re trying to fuel your own ego.  You want recognition and respect from your peers, your friends or even your family member!

Trying to save a bit here and there on basic expenditures like meals or drinks will not patch the big hole in your pocket until you curb your urge to spend on big ticket items.

It’s not going to be easy, but here’s a little tip; question yourself every time when you see an item on display, if it’s really a necessity to own it.  Most of the time, you probably don’t need it to keep yourself alive.  🙂

Ability to distinguish between need and want is the basic ingredient to your better financial future.

Repeat that every time for at least 10 times until you’ve exhausted every excuses.  Until then, you’ve probably find the obvious answer to justify your purchase!

Mistake #4: Associating Savings As A Means To Deny Yourself

You may feel that saving money means denying yourself the things that you really enjoyed, which makes the entire process painful and intolerable.  To avoid this pain, you may endure and wait as long as possible to take the steps you will need to lower your expenses and save money.  The longer you wait, the worse your problem may get, meaning it will be harder to improve your finances.

Truly, saving money don’t have to be painful.  With a little change in your lifestyle, a little change on how you purchase goods and services, you will probably find a lot of reasons why you may be paying more than you need to for a lot of the services and items you currently expense.

For example, you may consider buying second hand items, or hunt for affordable and value for money deals on auction sites like eBay.  Personally, I’ve found a lot of good deals on eBay that easily strike me dumb why anyone, with a little patience and practice, can save a ton of money off retail prices!

Learn how to reduce the costs associated with each product and service you consume without giving them up is the best way to start saving money from your current budget!

Mistake #5: Believing There Is No Need to Make Fundamental Changes

Savings is very much akin to dieting.  It’s a lot more than knowing what you need to do.

If you think that you can learn to how to save money without making a fundamental switch in the way you currently do, you are really approaching the concept of savings as a short-term problem.  With a set-mind like this, reducing costs and saving money will never become your long-term priority.  As such your results will be mediocre.

You’ll need, not just wishful thinking, to make fundamental changes by incorporating the money saving methods that you learn into your lifestyle.

Understanding that the changes are a necessity part of how you will deal with money from now on, rather than a stop-gap for a current problem, will make the likelihood of success with much greater confidence. These changes usually includes changes on how you spend your money and changes to reduce your current ongoing expenses.

Are you making some, or all of the above mistakes?  Let me hear your comments!

Stay hungry, stay foolish and live a life with passion!

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Posted in Investment, Life

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About Insights, Inspirations, Tranquility, Peace and Harmony

Ng Wai Loong

Wai Loong is an electronics engineer by profession. He currently resides in Singapore, a thriving hub at the heart of South-East Asia. When he is not so stress out on the computers or laboratory, he enjoys value reading, jogging at his own pace and blogging in his spare time. Other times, he likes to catch up with some close friends over a cup of latte or teh tarik. As a gift from this friend, you are invited to interact freely with him on his personal blog.

PS: May the person reading this blog transforms his/her businesses, finances, relationships and life for ALL to WIN!