Top 3 Principles Regarding Spending and Saving

Top 3 Principles Regarding Spending and Saving
Written by Irina Vasilescu

How well or poorly do you perform when it comes to managing your finances? There are those who religiously create a monthly budget that they stick to, making adjustments along the way, in order to make ends meet. On the other hand, there are people who poorly manage their funds, spending impulsively and only making adjustments once they are out of cash.

Worse, some find themselves neck-deep in debt due to mismanagement of personal funds. If you would not like to fall under the latter category, it is a must to learn how to spend within your means, and save money no matter how little you have left after paying all the bills.

In the following sections, we will take a look at the top three principles regarding spending and saving. There’s such a thing as spending in order to save – but how exactly can this be done? If you would like to spend on something luxurious, how can you save enough money for the purchase? Also, how do some people save in order to survive? That is what we will find more about here.

What are the 3 Principles Regarding Spending and Saving?

If you are looking for ways to manage your finances better, here are the top three principles that you should learn about:

1. Know how to spend to save

There is such a thing as spending in order to save. The most basic example is buying a $5 coupon in order to get 50% off a specific purchase. By spending a mere five dollars, you can take half the price off an item so you spent money in order to save money.

This principle in spending comes from the paradox of thrift, as popularized by John Maynard Keynes. In the book “Treatise on Money”, Keynes warned against excessive personal saving, which can result to economic paralysis.

Having a personal savings may sound like a good thing, but too much of it is actually counterintuitive for the economy. Having too much money kept on a low-interest savings account will prevent currency from being rotated around different merchants and buyers. If this is the case, businesses will stagnate that is why there is a negative effect to too much saving.

The theory of excessive personal saving came from the Great Depression where the British economy suffered due to not having enough currency rotating to make the economy healthy.

Having a big savings account may bode well for the individual, but not so for the economy. This means that if you are contemplating storing all your money in a vault or under your bedroom pillow, you are not helping the economy at all. This will result to a downturn in the economy, which may put your job or business at risk.

Another example of too much personal saving is during the 9/11 attacks in the United States. Back then, people were scared to go out and spend their money due to terrorist threats. However, the leaders in the country encouraged people to actually go out and spend in order for the event not to have a negative impact in the US economy. American presidents even extended generous tax rebates to stimulate the economy.

2. Learn about saving to spend

Next, what is the principle behind saving to spend? This all boils down to setting aside money for future expenses – be it a luxury or a necessity. For luxuries, you might be saving up for vacation somewhere exotic, a bigger house or a more luxurious car. For the necessities, you can save up money for emergency expenses, medical emergencies, possible job loss and other uncertainties in life.

When you’re saving money for future necessities, that’s actually an excellent part of personal financial planning because you would know where to get funds from in case something unfortunate happens. Meanwhile, for the luxuries, it also good to have funds set aside for it so that you would not have to take away money from your monthly budget that’s spent for the more important expenses.

In the next section, we will be dishing out specific tips on how you can save to spend.

3. Understand the prospect of saving to survive

Unfortunately, there are people who are required to save in order to survive. There are some American families who do not have any choice between spending or saving, because there’s not enough money to spend or save in the first place. The only way for them to survive is to save, otherwise they cannot get by on a month-to-month basis.

This happens to families who are hit by one or both parents losing their job, or having to file for bankruptcy due to bad financial decisions. Piled up debts and other unfortunate circumstances require some families to save in order to survive, simply because they have no choice.

Since you do not have enough funds to spend for your needs in the first place, you might resort to borrowing and there is no way for you to invest or spend in order to save. The only option is for you to find ways to save every penny that you can, and to create a budget in such a way that the available funds will suit your day-to-day needs.

Financial experts advise investing in goods and services now that will save you money later on. This is applicable for those who do not have enough funds to survive, but are fortunately not neck-deep in debt. Those who do have debts should look for ways to get out of the financial bind that they’re in – and live below their means while they are still getting back on their feet financially.

Saving to survive may be easier said than done, but it is completely doable. You should live within or below your means, look for as many ways to save as much money as you can, and not take on new lines of credit or borrow even more money than what you can afford to pay back.

Another challenge here is to not go back to your old spending habits once you have managed to get yourself out of a financial bind. Financial experts say that 76% of people who tried saving money during tough times like recessions go back to their old spending habits once the recession is over. In order for you not to being the same financial situation again, make sure to adjust your spending habits accordingly.

Specific Ways to Spend-and-Save or Save-and-Spend

Now that you already have an idea about the top three principles that you can follow when it comes to spending and saving, what are the specific ways that you can apply these money management techniques? Take a look at the following list:

  • In order to save money on utility bills, invest on energy efficient appliances at home. When replacing big ticket items, look for ones with a high Energy Star rating. To better manage the temperature inside your house during winter, improve the insulation by weatherizing windows and adjusting the temperature on the thermostat.
  • Instead of spending money on getting the services of a mechanic, do preventive maintenance on your vehicle. Learn how to change oils, properly inflate tires and tune up the car prior to long drives. Do these especially before the summer and winter seasons, when cars are most likely to break down.
  • Instead of buying bottled water all the time, invest in a nice water filter for your kitchen faucet. Buy a refillable water container and stick it in the fridge so you can use the water when going out.
  • Spend money on insurance premiums in order to save money in case something unfortunate happens. Let’s take your car insurance plan as an example. If your car breaks down and you do not have an auto insurance plan, you would be spending practically a fortune to have it fixed. If you have car insurance, you would not have to spend as much especially if the repairs are covered by your insurance provider.
  • By spending money on coupons for items that you are actually buying, you will save on every purchase. Make sure that you are not buying coupons for things that you would not naturally be buying, however, because this will simply defeat the purpose of saving. This is especially true if you find later on that you do not like the product at all.
  • Invest on appliances, gadgets and other items for your house or the workplace that will make your life easier. By spending money on things that save you time and effort, you are also saving money in the process.

As you can see, there are plenty of ways for you to save money in order to spend; or spend money in order to save. If you belong to the group of people who save in order to survive, it might be time to change your spending and saving habits to gain better control of your finances and your life in general. Spending and saving is something that you need to learn how to do properly in order to manage your finances better.

About the author

Irina Vasilescu

Irina Vasilescu is our crafty designer. She joined the team three years ago and is also involved in the writing process.


  • Leaning the basics about your can mechanics is a must. Garages charge a high hourly rate just to look at your car. There are a lot of basics that anyone can do themselves, like checking oil, topping up water, replacing window wipers …

  • I am a big fan of saving-to-spend. I keep separate savings accounts at a high yield online bank for big ticket items. One account, which I have been filling for over two years, is about to be emptied so I can buy a car. This is actually also an example of spending-to-save. You car loan rates are partially determined by how much you are borrowing and for how long. Since I have a very large down payment (>50%), I am not borrowing as much and can also afford to take a shorter loan term than average. By spending money up front on the down payment, I am getting a lower interest rate and will spend less on my car by the time it is paid off.

  • Sadly in a lot of cases — the major problem people have with saving money is not the putting away money part– it’s keeping it in savings. A lot of people are able to stockpile a menial amount of savings but will likely break into it with the thought that they can eventually replace it — and are forced to start over from scratch.

Leave a Reply