what is net worth (2)

My most effective savings strategy is the monthly automatic withdrawals of a consistent percentage of my paychecks into my savings account. As the year goes on, I know that my account will continue to accumulate, barring any unforeseen natural disaster, lay-off or the like. Another great savings strategy that complements this principle is stockpiling products that I buy on sale and with coupons, allowing me to remain within my budget each month. Not only does that decrease the overall cost to me for products throughout the year, but the next time I need something like deodorant, olive oil or pajamas, I can just visit my supply closet and not run to the store.

All around my apartment is evidence of the stockpiling principle; I seem to be knee high in products. What has me questioning my strategies is the fact that I only seem to be ankle high in money. Why is it that I am buying everything at a discount, yet still stockpiling the same boring amount of money each month?

Then it occurred to me while window shopping the other day. “Savings” in the retail sense does not equal savings in the sense of stockpiling money and setting it aside in my bank account. As I passed an electronics store, a silver gleam on a new digital camera caught my eye. Then I saw red. Its price was slashed from its original, with the camera regularly costing $250 and now on sale for $100. That’s a “savings” of $150, I thought to myself. So I did the math, and figured out that yes, I can afford the $100 sale price, but that I didn’t have that extra $150 lying around to pay the regular price. The “savings” was merely a number on a sign for me; without it, I couldn’t afford the camera at all. With it, I still would never be able to bank that $150 because it simply does not exist. This deal, like so many others before, holds no tangible savings for me.

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Then I started thinking about all of the “savings” posted on the bottom of my grocery, drugstore, and online shopping receipts, and how each month, without fail, I have still put away the same amount of money into my savings account. Wow. I feel quite gypped.

It’s great that I am able to stretch my dollar beyond recognition of George Washington’s face in order to buy a plethora of extremely discounted products. But if this never equals an increase in my savings account above what I contribute anyway, then what is the point? Maybe the reality is that without these extreme discounts I am always hunting for, I simply couldn’t afford my lifestyle? Doesn’t that make me just like all of the other people who live beyond their means?

Time to experiment.

I’ve made a list of all of the things I want to purchase in the month of June, or that I need to purchase, and then budgeted a certain amount of money for each item. In the next column I am going to subtract the product’s actual purchase amount from the amount budgeted, and this will be my “actual savings” column. Then, at the end of this month I will add up the actual savings column and bank the surplus money from all of the great discounts I find. This, ofcourse, will be above and beyond the normal amount I contribute anyway.

I know this will take some considerable adjusting on my part, as I can no longer stretch my budget into its no-fly zone in order to squeeze out an extra move ticket or steak. On the other hand, the thought of squeezing out extra money is very exciting, so I am sure the small sacrifices will be worth their weight in gold.

Join me, and watch your savings stockpile!

Update on How That Went

As I approach these last few days in June I feel heavy and limp with the task ahead of me. It is time for me to tally up my receipts and savings from the month to see how much I owe myself, and I know it’s not going to be good. How can saving money ever not be a good thing? When you know you are going to owe yourself more than you actually have. That’s right; I have managed to save beyond my means this month, meaning I am going to be in debt…to myself.

Things seemed to be going smoothly until about three quarters of the way into the month when I realized just how much “savings” I had accumulated. In fact saving money became my worst nightmare. A sort of mini-panic set in while I was at stores, wetting my hands with clammy perspiration and increasing my heart palpitations. It seemed like every store was out to get me with their flashy sales flyers, cornering me into “saving” more and more money that I just didn’t have. When I had to turn down good deals because I knew I would not have sufficient funds to pay myself the savings at the end of the month, I grew indignant, and then reserved. I broke a few times and bought some of those deals. Only it led to me being unable to spend any money for a period of about two weeks because I knew that would eat away at the stockpile of money waiting for me at the end of the month. I had to break the news to my boyfriend.

“Just so you know, I can’t buy anything again until July 3rd”. The room gets quiet. My fiancee is sitting across the room in his chair, playfully throwing his football up in the air at odd intervals. Except now he places the football snugly under his right arm and holds it there.

“What?” I’ve gotten his attention; it is only June 22.

“You know that experiment I am doing for my column? Well, I have maxed out my savings for the month, so I can’t spend another dime until July 3rd.” Silence again.

“It’s only 12 days away.” I add in a tone that suggests he’s the one being completely ridiculous and inflexible.

Sitting here tallying all of these savings up, I keep twiddling my thumbs like my grandfather taught me to do while waiting in nervous anticipation. I’ve gone over my limit, though I knew that awhile ago. I’ve saved more money than I even have in this pool of money, and so I can’t pay myself off. So this is how it feels to owe a creditor when you know you’ve got nothing.

Out of a possible $500 pool of money to be spent on groceries, entertainment, cell phone bill, gas, etc., I have saved (through discounts) $353, and spent $272. I am officially in the red $125. Whew. There, I said it out loud. That’s not so bad, right? But where does it end? Is $200 not so bad? Then $350? Then $400? I have to stop beating myself up over this. On the bright side, that does leave me with an extra $228 to stash away into savings this month above what I normally contribute each month.

Doing this experiment has led me to several conclusions. First of all, I am now a true believer in something I was only suspicious of earlier: retailers sometimes claim to discount a product, but it’s not actually discounted. Also, I’ve proven that it’s possible for me to be even more disciplined and to squeeze even more out of my money each month. Finally, while I never bought the pair of sneakers, I do now have an extra $40 sitting in my savings, and that extra cushion feels much more heavenly than any new pair of Nikes could.