Don't Spave Your Way to Save

They are virtually everywhere. Certain incentives and rewards programs that make it seem like they are designed to save you money. But the reality is, it actually causes many consumers to actually spend way more than they otherwise might, thinking there's an underlying benefit to doing so.

I am literally getting paid to spend, thinks certain consumers.

In some ways that's true. I am not one to simply ignore rewards programs, and I actually find them personally valuable. But like all things money related, you have to be responsible about how you use these programs, and you have to think about what the benefits really are. Or aren't.

For example, I use Upside. It's an app that offers cash back rewards on things like gas, groceries, and eating out. And it does pay to use it. In a relatively short period of time, I have been able to accumulate well over $200.

It may seem like small change, but pennies do add up, and with inflation still through the roof, any cost savings is well worth it.

But I don't use the app simply to use the app. In other words, I won't shop at a grocery store offering a reward just because they have an open offer. If there is something I need at that store and the price is right, I'll use the app. 

The same goes for fueling up. I won't get gas at one station that has an offer if I can find gas at another station cheaper.

When it comes to any rewards program, I am also not going to buy things just to stack up my rewards. To me, that's counterproductive. If it is something I would buy anyway, and there happens to be a reward attached to buying it, that's a good deal. But if I am buying something just for the reward, I'm shooting myself in the foot.

This is especially an issue when it comes to credit cards. There are all sorts of rewards offers, and all of them are designed to entice you to spend more money to get more rewards. I use Discover which pays me cash back rewards of 1% to 5%—each quarter there are specific offers that they'll give you 5% back on, such as home improvement stores or gas stations. Each quarter is different.

But in order for the rewards to actually be worth anything, I need to make sure I never carry a balance since any interest I pay will far outweigh any benefits I'd receive back on the reward.

From miles accumulated to get free flights to free cups of coffee or doughnuts at the gas station, or even points towards free groceries at grocery stores, none of these rewards are worth anything if we are spending to save. 

In fact, we're not saving any money at all.

Menards, which is a huge home improvement chain largely in the Midwest, based in Eau Claire, Wisconsin, is one that often offers a rebate program that gives consumers 11% back on their purchases. Since the pandemic, Menards almost always offers the incentive.

But like all the other reward programs, you have to know what your prices are. You don't buy something just because you declare, "Well, I'm getting 11% off." You still have to do your homework, and the deal is only valuable if you use it in a way that actually makes it valuable.

The bottom line is that spending money is never saving money. It is always spending money. Rewards programs can offer you an opportunity to save on things you need anyway and would buy anyway. But it can be a huge trap for consumers who think that these rewards programs offer "secret ways to stash some side cash."

If you are not careful, the real recipient of the "reward" goes to the one who offers it.

Like the way I write or the things I write about? Follow me on my Facebook page or on X to keep up with the latest writings wherever I may write them.

A Rebuttal to Comments Regarding Ways To Save A Ton of Money On Groceries And Household Items

After writing my commentary, "Ways To Save A Ton of Money On Groceries And Household Items," while I did not get many comments directly on my post, there were some "circles" of friends and family who wanted to provide a verbal rebuttal to my entire concept that time is money, and not taking the time to shop multiple stores, maintain an inventory, and forget convenience was simply wrong.

But you and your wife do not have kids. We do not have time to go to different stores. We cannot always shop price. We just need to get it done.

I can sympathize with that argument, and I can also appreciate it. But what does it really boil down to for me? And let's be clear that I am not trying to be argumentative or mean when I state this.

You are making this claim with very little true knowledge of the value of your money, and the value of your time.

I stated in my commentary that if the average person wasted an average of $1,000 every single year just to save time, and just for the sake of convenience, that if they made $15 an hour they would need to work an additional 67 hours each year to pay for the cost of just getting it done and saving time.

To that end I decided to break things down a bit more, simply because I was curious what the true cost of saving time happens to be. My numbers are slightly rough, but they also hold a lot of truth. My calculation here is as follows:

• What if I wasted just a mere $1,000 each and every year for the next 30 years? If I would have instead put my waste into the markets, for example, and earned compounded interest at 5% year (a conservative figure based on historical results), how much more money might I have had? Or conversely, how much money did I actually potentially lose just to save time?

In 30 years you have of course wasted, at the bare minimum, $30,000. A small number. And let's keep in mind that the total waste not adhering to some of the ideas I presented in my "Ways To Save A Ton of Money On Groceries And Household Items" is actually significantly more than that for a very large number of people. The real number is probably somewhere around $3,000 - $7,000 a year of wasteful spending depending on your income, and the size of your household. Even those figures may be substantially conservative based on your own lifestyle, the types of products you buy, and of course whether or not you are buying brand name items or no-name items.

If you would have followed the principles, and instead of wasting the money at the cash register, put the money into the stock market, or a simple mutual fund that earned a very conservative 5% annually, at the end of 30 years that money would have accumulated to a whopping $66,643.82. Not only would one have wasted $30,000 in 30 years, their wasted money would have lost the opportunity to gain $36,643.82 of accumulated interest.

Again, more people waste more than $1,000 annually, so this number actually doubles and triples and quadruples. If we were take into account the real numbers we'd be looking at figures more around $266,575.28. If at the same time you were still sticking to your retirement goals it is easy to see how after a mere 30 years of working, following sound money management principles, being disciplined about your spending habits, and following a few simple extra steps to ensure that your money is spent wisely, justly, and with a well mapped out plan for at least the everyday spending, you could be looking at assets that top $1 million or more. Perhaps not quite enough to retire after 30 years of gainful employment. But surely much closer to the prize than if you simply decided you'd rather save time in the short term than save a TON of time in the long term.

Why do people fall into these traps? Why do people easily accept these "justifications?" Because they think in terms of the here and now. Because they do not run the numbers. Because they do not understand the basic idea of the intrinisic value of money. It is the fault of no one. They don't teach this stuff in school and most people don't take the time to learn it on their own.

There are other ways to consider how this $1,000 a year could be "reinvested" as well. One could pay down debts. One could pay down mortgages. Both of these things are also very good uses of the "found" money, and would significantly reduce the actual number of years you are required to work, and save you a massive amount of time overall.

The bottom line? The time you are saving today to make your life easier is costing you tens of thousands of dollars of more time working to make up for it in the end. If you are okay with that, then maintaining the status quo is fine. But the finish line comes up much sooner if you understand how money works, how waste affects you, and how convenience actually costs you more in the end.

It is said than an apple a day keeps the doctor away. That is disputable. But an hour extra a week could actually put retirement in your grasp YEARS earlier. I think the numbers I have presented here speak for themselves. There is much more to be gained by saving money than by saving time. I think that speaks for itself and the numbers make that all too clear. In my life saving time is worthless if in the end it costs me money...

And increases my working life.

What The Heck Is A Daily Consumption Rate?

When you think of how money is spent, there are two ways of looking at it. The obvious way is thinking of it in terms of how much money you spend directly when you pay for something. The other way is thinking of it in terms of how the the things you spend money on are consumed. The rate of consumption ultimately determines how much something actually costs.

Think of your consumption rate as an electric meter. Each and every second an amount of power is being consumed, and as a result the meter is turning and accounting for the consumption. In a given year you may pay an ultimate amount for the energy you use. But the cost is not in the total. The cost is in the rate of consumption. Paying attention to the rate of consumption is the key to understanding how far the money you ultimately spend will go. It is also the key to determining how you can slow down the rate of consumption. In other words, if you don't understand why something is costing more, you will never understand how to make something cost less.

The daily consumption rate is nothing more than a system of cost averaging. The trick is in keeping the average as low as possible. How do you that? If you take advantage of short term savings on the buying side, and pay attention to how you consume things, you will ultimately save money on the consumption side.

In the simplest of terms let's take a pound of pork to provide an example of what I am driving at. You can buy a pound of pork for $3.00 when you need it for a pork dinner. Or you can wait until a pound of pork is on sale for $2, and buy five pounds of it instead of just one, and freeze what you will not immediately consume. Your average cost of a pound of pork has been reduced by $1 per pound, and while the direct cost was more because you bought more, the actual cost considering time depreciation has reduced significantly the actual average cost you will pay for your pork over time.


How long you can make something you buy last, of course, also greatly impacts how much you ultimately spend on something. Let's take my 2001 Ford Explorer Sport Trac as an example. In 2003 I bought my truck for roughly $20,000 if you take into account the interest I paid for the loan I took out. If I would have kept my truck for just five years, my daily consumption rate would have been $10.96 per day. Because I have kept my truck for 12 years, my daily consumption rate for a vehicle has been reduced to $4.57 per day.

Granted, there are other costs associated with owning a vehicle to account for such as gas, insurance, and maintenance. But the simple concept behind the math remains the same. The overall cost of something is determined not just by how much you paid for it ultimately, but by how long you have made it last, or ultimately how you have consumed it over a specific time period.

Let's go back to that pork example for a moment, shall we? There is total consumption and partial consumption to account for.

If I buy a pound of pork for $2, and I eat only 3/4 of a pound of it, and throw away the other 1/4 pound, I have effectively increased the cost of my pork by 25%. My $2 pound of pork has now cost me, in effect, $2.50 per pound because throwing something away and not using it is the same as consuming it even if I did not eat it entirely, or use the leftover pork to incorporate it into another meal. I will have to buy more pork to make up the difference. Using the electric meter example, whether or not I am in a room to see the light, the meter will turn regardless and the cost of my lighting in a room I am occupying will cost me more. My daily consumption rate is being increased by how I am consuming my energy.

When you begin to think of money spent in terms of consumption rather than in terms of what you spend at the register, suddenly you find that money becomes more and more plentiful. And for those who like to make the argument that they cannot afford to save, perhaps what they are failing to pay attention to is their daily consumption rate. If you ate a pound of pork a day on sale, there alone you'd find you'd have saved $365 on pork in a year. Apply the daily consumption rate concept to everything you buy and consume, and the total savings become enormous.

Playing Broke To Save Money

There are a ton of tips and tricks on how to stretch your dollars and of course, save money. And believe me, I employ a number of them. I am as miserly as they come, and quite frugal as well to boot. Of course some have another name for me.

Cheap.

Go ahead and have your fun, I say. I am laughing all the way to the bank, and when I really want to have a little extra money for something, I can have it.

So what's one little trick to saving money and having money? It's time to return to the days of make believe like when you were a kid. Only for this play, instead of pretending like you are Warren Buffet or Bill Gates, or perhaps the man who trumps all of their massive wad of cash, you play broke. That is, you severely limit what you have on hand for money, and make it damn difficult to get money in a pinch.

When I was in the Navy one of the things I did, and I'll admit that back then I was still not as good with my money as I am now, but I did still think about. It was a work in progress, shall we say? I made my money hard to get. I left very little funds right up front and accessible, and made sure that the rest was socked away into a savings account at a bank that was 30 miles from where I lived, and that I had no ATM access whatsoever to.

This meant that in order to get access to any of that money I had to physically get into the car during bank hours, and drive 30 miles to make a withdrawal.

That took a little bit of thought. It required a little bit of planning. And that meant that 90% of the time the money stayed at the bank just because it was too much of a pain in the ass to get at. I found other ways to get what I wanted. Or I simply went without.

These days I don't resort to bank accounts miles away. In lieu of that I keep most of my money in my brokerage accounts, and most of that is tied to a stock. It's still accessible. But again, far less accessible than if I could just walk up to an ATM machine and draw it out.

I have to think about a tax implication of selling shares of stock, or have to wait a couple of business days for funds to be transferred to my checking account from my cash account. Especially if I sell shares I have to wait a couple of days for the transaction settlement, and then have to wait a couple more days to transfer the funds. Often times I don't even resort to doing that.

Again, just like before, I find other ways to get what I want. Or I simply go without.

The one thing I have learned over the years is that if you make money too easily accessible it gives you far too much freedom to simply give in, and take it. And 90% of the time it is simply something squandered on, on an impulse. Like New Year's resolutions are rarely followed through on, saying in the moment "I will deal with it later" is a sure way to ensure that it never gets dealt with. And time and time again you will simply find yourself going through more and more cash.

Playing broke is sometimes painful and frustrating, I will admit. But at the end of the day it just seems to make sense to me. When I really want the money for something I know it is there. I can enjoy skipping a fish fry today, for example, to better be able to afford a fishing trip I'd rather do tomorrow.

At the end of the day it is about having security and freedom. But not the freedom to frivolously spend. Rather, the freedom to spend wisely.

Besides, the best part is that when you get tired of playing broke and need a break back to the wondrous reality that you actually have money, it's right there, and you can go wild if you want and still not break the bank.

Joyous really. And perhaps, in some ways, quite brilliant, however conceited that may sound.