When your budget is particularly tight, it can be hard to build up savings. I know, I've been there! But I'd have to say that, right after paying off debts, building savings is the second most important thing you can do to gain more control of your finances. Having extra money in the bank will not only let you sleep better at night, it can actually help you to save even more money, thus allowing you to contribute even more to your savings account. Even if you have to start by saving a very small amount each week, it's worth it to make it a habit, and it will always pay off in the long term.
Here are five ways having extra money will help you save even more:
1. Paying in full for large purchases upfront can result in substantial discounts:
As I've alluded to previously, my husband has been in the process of getting a dental bridge made at a nearby university's dental school. Getting the work done at the dental school rather than at a dentist's has already saved us a HUGE amount of money (in the thousands) but we had an opportunity to save even more when we paid for the lab fees in full immediately, rather than putting them on a payment plan. We were offered a 20% discount, which on the $1600 bill amounted to a savings of $320. In the past, other businesses have offered us discounts for paying in cash. It can't hurt to ask, and you may save yourself a large chunk of change!
2. You can take advantage of great deals and buy things BEFORE you need themThe worst time to shop for something is when you needed it yesterday! By having extra cash on hand, you can more easily plan for your needs in advance, and purchase items when you find a terrific sale. You can also afford to buy items in bulk, which often results in a large savings. Having the ability to buy in large quantities when staple items like food, personal care and cleaning products are at their rock-bottom price means you can avoid having to pay full price for household necessities.
3. You can take care of little problems before they become big problemsGetting repairs done as soon as you notice they're needed will usually stop them from becoming much bigger, more expensive problems. Ignoring that funny noise your car's making because you don't have the money to pay the mechanic will usually end up costing you much more in the long run.
4. You can more easily cope with unexpected expensesLife happens, and even those of us who try our best to plan ahead will likely be hit with some type of unexpected expense at one time or another. Appliances sometimes die without much warning, and a sudden death or illness in the family might require a flight across the country. Having a cash reserve to draw from when these type of expenses crop up means that you can avoid putting them on credit cards and accruing huge interest fees.
5. You can buy larger-ticket items secondhandIf you want to buy things secondhand from private sellers, you usually need to have cash on hand to do it (unless you're buying online on a site like eBay). Shopping locally for larger ticket items like appliances and cars will require the ability to pay in cash. When our washing machine died this summer, we were able to replace it within a couple of days by making a cash purchase of a 2 yr old machine in pristine condition, from a private seller we'd located on Kijiji. If we didn't have the cash on hand, we'd have had to buy retail *and* slap it on a credit card, both of which would have meant we'd have paid a lot more to replace our washing machine.
Can you think of any more ways having money helps you save even more?