Posted by Lending Club :: April 4, 2009 @ 6:21 am

It may sound obvious that when you save money by shopping sales, buying generic, clipping coupons, etc., you are saving money, but that doesn’t necessarily mean you actually end up any better off. By actually saving or investing the money you save, you can ensure that your efforts have the desired impact.

The problem is that many of our saving efforts get wasted because we just use the money saved for more spending. Saving money doesn’t do much good if that money is used to buy more things that you don’t really need. If you truly want to see your finances improve, you need to save, not spend, the money you save.

This trick is especially useful when you make a conscious change in a spending habit. If you were trying to cut your grocery spending, for example, you could transfer the difference between what you normally spend and what you did spend into a savings account. Your cash flow would seem to remain the same, but your savings account balance would steadily increase. So if you typically spend $125 a week and decided to try to cut that spending to $100, you would transfer the $25 saved each week over to another account. This could be a traditional savings account, or an investment account such as your Lending Club account. Allowing your saved money to work for you by earning interest, you accelerate the positive effects of your efforts.

Saving money is a great first step, but unless you actually do something with those savings, the benefits are diminished. Only by saving the money you save will the true potential of your actions be realized.

Do you save or spend the difference when you pay lower prices?