They say you shouldn’t sweat the small stuff, and I’m inclined to believe them. Unfortunately, a lot of the focus on saving money goes toward the small stuff. While I don’t have anything against pinching pennies, I definitely think that there are other ways to go about saving more money.
One of those ways is to sweat the big stuff.
Go Bigger than the Latte
While it’s true that small savings can add up, especially if you put the amount you save in a high-yield bank account and consistently watch it add up over the years, the reality is that you can be even more effective if you concentrate on the big stuff.
Earlier this year, I refinanced my mortgage. That has resulted in a savings of $300 a month. That’s something I can pocket and watch grow. If I spent $5 on a latte every weekday for a month, that’s $100. I still come out $200 ahead if I focus on something bigger, and still have the latte (although you might argue that I save money in both ways for maximum effect).
You might also be able to save big by cutting the cable or satellite. Rather than paying $150 a month, cut it and get stream services. Even if you get Amazon Prime, Netflix, and Hulu Plus all at once, you are still paying, on average, less than $25 a month. That’s a big savings that you can put away.
From shopping around for insurance to looking for a better cell phone plan, there are lots of ways to sweat the big stuff and save more per month. And, in a lot of ways, it’s far more satisfying than cutting out the small pleasures.
Investing, Rather than Using a Savings Account
If you really want to make your savings go further, think bigger than the high-yield savings account. While a high-yield account can provide you with a way to keep your assets liquid in case of an emergency, it’s not a good idea to rely on a savings account for long-term wealth building.
Figure out what your goal is when you are making these cuts in your budget. Why are you saving the money? If it’s to pay down debt, where you keep the money is pretty much a moot point; you want to use it to reduce your debt as fast as possible.
If you plan to use your savings to create an emergency fund, a high-yield account is probably a good choice. On the other hand, if you want to sweat the big stuff, save the money, and grow your wealth, investing is probably the ideal choice. Choose assets like index fund that are likely to gain over time. If you want to build wealth over the long haul, it makes sense to invest in something simple and sensible.
When you have those big savings, direct them automatically to your investment account. Don’t give yourself time to acclimate to your higher spending power. Instead, set up an automatic withdrawal. If you are saving $50 a month on insurance, and $200 a month after your refinance, set up an automatic investment of $250 a month so that you can put those savings to work for you.
In the long run, thinking a little bigger, from the types of things you cut from your budget to the way you put your money to work for you, can mean more wealth.