Okay, this is a different type of post from the past several days, but it’s something on my mind because of a conversation over lunch the other day with regard to substituting a vacation due to leaner economic times. My friend’s plan for a cruise has given way instead to renting a condo in a popular beach town. They will also rent one a mile in from the beach because that will save them another 20%. As my friend explained, they were going to get a great price on the cruise, but when you add up all the other expenses that are involved – the drinks, excursions, etc., that put it out of reach of what they wanted to spend. And sure, you don’t have to buy extra stuff on the cruise, but that’s part of the fun and why put yourself in a position where you have to keep saying, “no”? The interesting part was that she acknowledged they technically could afford the cruise with the additional expenses, but since her husband’s job included compensation from commissions, they were trying to build a little more cushion into savings. While his overall commissions have been fairly steady, it is unpredictable and they will probably need to replace one of their cars within the next six months.

That put us into a discussion about spenders versus savers and how “hidden expenses” can easily trip people up. A number of magazine and on-line articles have hints for cutting expenses and most of them  start with that – the fact that we so often don’t really know what things costs. Brown bagging lunch is a great example that usually saves money and can also be healthier if you are in a situation where brown bagging is practical.

Then there is the refrain that many of us are familiar with of, “But I bought it on sale, so look how much money I saved.” While that is true, the “savings” is only true if it is something that you needed to buy to start with. And this is where the definition of “need” and “want” come into play. That dress/top/pair of shoes is something you can use, but do you need it? Well, who doesn’t? Except that maybe you don’t. I enjoy spending more than saving,and I am a big believer in supporting the economy, yet there are times when I decide that window shopping is a better idea. And one of the points about savings is if you have a specific goal like, “This is for the new car”, as opposed to, “I ought to save,” it can make it more emotionally palatable. Most of us know we ought to save more, but it does require a degree of discipline that we can have trouble exercising. That’s why using automatic deposits for 401K/IRA or even just a savings account can be a good approach. Again, I realize that a lot of people are in situations right now where they truly can’t save, but if you haven’t reviewed your financial plan lately, maybe it’s time to take a look.