Posted by Tim Stobbs on November 16, 2007
I can’t recall where I read this, but I believe it is true. Generally speaking, success is invisible. We don’t pay attention to something when it works, so for all intensive purposes when things work well it becomes invisible. Only the failures stand out for all to see. I think that applies well to my savings rate, it works so I have a hard time telling you how exactly I can save that much since it is invisible to me. I’m so used to saving I can’t really see it.
Well last night when reading a book and making a cup of tea I managed to actually see a tiny part of my success to savings: only use what you need and no more. It’s not a trick or a one time thing, but rather an attitude that you have. When I make tea I only boil just enough water to make it. I know that only saves just a little bit of water, but it also then takes a little less power for my electrical kettle to boil it since it takes less energy to boil a smaller amount of water. In essence, but only using what you need you can often get a magnification of savings beyond the original event.
To give you another example, I recently found I was throwing out about a cup of coffee each day from my thermos at home. So I cut back the amount of coffee I make in the morning. So I’m now saving about a tablespoon of coffee, a cup of water and a small amount of power (since the coffee marker is done faster) each day when I make a pot of coffee. The savings on a daily basis are tiny, but over a year they magnify into something more significant.
When these savings are expanded in a lifestyle content, you can reduce your cost of living now and boost your savings rate. By also keeping your cost of living down your required nest egg in retirement can be smaller which allows you to get there faster with your improved savings. In a household context, if your entire household living this way the magnification becomes huge and your turn your tiny snowball of savings into an avalanche.
So if you want to boost your saving rate I suggest you start looking at everything you do. Are you using more shampoo than you need? If so try to reduce it. Then if you add the concept of only paying the least amount you have to get what you need, you can really magnify the effect. So if you can get your shampoo on sale and stock up so your only using ‘cheaper’ shampoo and less of it during a year, you will end up reducing your daily cost significantly.
So the next time you wonder why you are doing something daily to save 25 cents, remember the magnification of savings. It could let you retire a year sooner than you thought.
This post is now part of the 127th Carnival of Personal Finance.