The economic climate post-recession has made saving more important today than in many decades past. Although there are many ways to save, below are five persistent misconceptions than can hinder you from creating the financial savings you want.
Misconception #1: Higher earnings mean greater wealth. It seems like common sense that if you increase your salary, your savings will increase proportionally. However, research has indicated that the more money we earn, the more we spend. Having more money actually increases our likelihood of making expensive impulse purchases. Instead of trying to increase your revenue, you are better off trying to find ways to save the money you already make.
Misconception #2: Running the air conditioning in your car uses more gas. Many people believe that using the air conditioning in your car will increase your fuel consumption. This is not true. It can put more strain on your engine, but it does not use a greater amount of gas.
Misconception #3: Buying in bulk saves money. We have all been taught that the more we buy at one time, the more money we save in the long run. Be especially careful when applying this idea to groceries. The savings per unit will often only be minimal and the idea of getting a “good deal” can sometimes supersede our rational mind and we end up with far too much of something we do not really need. This can be problematic, especially with perishables. If you do not use what you buy, you can end up throwing away half of your purchases.
Misconception #4: Zero percent currency exchange commission. If you try to make a little money trading foreign currency, you have probably seen advertisements for services that offer zero percent commission on your exchange. Although tempting, research has shown that companies offering this sales gimmick often add a margin, in other words, a mark-up, to their exchange rates. So while you may not have a commission fee in the traditional sense, you still pay extra money due to the high exchange margin. The official exchange rate is really the only indicator of which currency trades will make you money.
Misconception #5: Shopping during sales will help you save. Similar to the myth about buying in bulk, shopping at sales does not necessarily save money. Being around supposedly good deals will actually increase your chances of making an impulse buy and spending money on something you do not actually need, simply because it was a “bargain.” Decide exactly what you need before you go shopping and be disciplined about purchasing only those items you truly need.
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