The difference between saving and not spending

I’m not sure if this qualifies as a joke or an anecdote, but a man and a woman are having a conversation.

The woman asks the man if he drinks every day, and the man admits that he does.

The woman asks how much each drink costs, and the man gives an estimate.

The woman asks how long the man has been drinking like this, and the man says about 30 years.

The woman then does a little math and figures out how much that adds up to. She says, “You know, if you had saved and invested that money, instead of buying all those drinks, you’d have enough money to buy a Ferrari.”

The man says, “I suppose so.” Then he asks if she drinks. She says that she doesn’t.

“So where’s your Ferrari?” asks the man.

It’s not much of a joke (or even much of an anecdote), and personally I’m concerned about the fictional man who drinks every day, but in its own way it makes an interesting point – namely, that not spending money isn’t the same thing as saving.

Here's a real life example of what I mean. I don’t smoke. I never have. Do you know how much money I’ve saved over the past 20 year by not smoking? Absolutely none. I have not saved any money by not smoking.

Also, I haven’t had cable television for at least five years. This has saved me exactly zero dollars over that time span.

My point is not that “cutting back” does nothing. It’s that cutting back, in and of itself, does not put money in your pocket or a savings account or a long-term investment plan. My point is that it’s not enough to change how you spend your money – you need to have a plan for where your money goes.

All too often we fall victim to the assumption that removing bad financial habits creates a sort of vacuum, into which good financial habits must inevitable appear. But while it’s certainly a good thing to put a halt to destructive or simply unnecessary habits (like the always popular Starbucks run every morning before work), unless you replace the bad habit with a good one, you haven’t really achieved anything. It’s great to not spend $4 every morning on coffee, but unless you’re putting $20 a week into a savings account (for example), that money will find another way to be spent.

Again, the idea isn't to skip cutting back. It's to make sure that you're taking the next step. When someone says, "I haven't gone out to eat in two months!" that's worthy of praise. But the follow-up question should be, "So what did you do with that money instead?" It isn't necessarily easy to deny yourself the things you like, but it is harder to take that sacrifice and pair it with a solid budget that pushes you towards a series of long-term goals.

Making positive changes and reducing spending are both great. Keep doing those. But, while you’re dropping unhealthy vices and cutting down on unnecessary spending, make sure you have a plan. Make sure you have goals that mean something to you. And, most importantly, make sure that the money you’ve “saved” is doing something better now. Otherwise, what have you really saved?

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.