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Saving more money is a common financial goal — but it can be a hard one to accomplish. If you have lots of things to buy now, transferring extra cash into a savings account may seem impossible to achieve.
To help you boost your savings rate, finance expert Dave Ramsey has suggested some steps to take — and some purchases to skip. But should you listen to his advice when it comes to the worst purchase you could make when attempting to increase your savings rate?
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Ramsey says avoid this when you’re trying to save
According to Ramsey, when you are trying to save money, you absolutely do not want to spend any of your cash on taking a trip.
“When your goal is to save money now, a vacation is the worst thing you could spend your money on,” Ramsey said. He suggested that you should take a staycation instead of heading off on an adventure when your goal is to set more money aside for your future.
“Not only will this save you hundreds (or potentially thousands) of dollars, but you can also explore your neighborhood with fresh eyes and have some fun while doing it,” Ramsey said of his alternative suggestion.
Is Dave Ramsey right?
While you do need to cut spending if you’re trying to save more money, Ramsey’s advice to give up travel may not be the best way to do that.
Studies have found that spending money on experiences tends to make people happier than spending money on buying things. When you plan a trip, you get to enjoy the experience of anticipating the vacation. You also get to enjoy going on the actual trip. And you end up with lasting memories created by the vacation, which can make you happy over the long term.
In contrast, if you spend money on buying things, your happiness often tends to fade rather quickly after the purchase. If you think about it, you can probably remember many details of the great family vacation you took a year, or two, or even 10 years ago — but how many items that you bought that long ago are still being used and making you happy to this day? How many items purchased that long ago can you even recall?
If you assume you have to give up vacations in order to save more money, this is going to make you a lot less likely to create and stick to a savings plan — especially if going on trips is something that’s important to you. When you strip the fun and enjoyment out of your life in order to put more money into a savings account, you’ll likely find these sacrifices harder to stick to over the long term.
Rather than denying yourself the experience of seeing the world, take a look at your budget and see if you can find one big expense to cut, such as:
- Selling your car if you can get around town just fine on public transportation
- Moving to a more affordable apartment or taking in a roommate to lower your housing costs
If you can make a one-time change that enables you to significantly increase your savings rate, you’re much more likely to stick to your new status quo — and you can retain the ability to enjoy life while socking away the extra cash you managed to free up. This is a far better approach than committing to stay close to home for good.
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