“Spaving”–the idea that we can spend our way to savings–is having a moment on social media. This concept is a familiar one to retailers and advertisers, who intentionally create marketing campaigns that appeal to shoppers eager to save. However, most of the time “spaving” is simply a way to justify your spending choices, and is actually costing you money.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
There is a very clear trade-off between spending and saving. The reason is straightforward: the money we spend is no longer available to save (or invest). “Spaving” can give us the false sense that we can do both simultaneously. Being smart with your personal finances requires understanding that there is a balance to strike between the two.
What Is “Spaving?”
“Spaving” is the belief that by taking advantage of deals and discounts, we can save money. Though the term might be new, the concept has been around for ages.
“Spaving” is ever-present in our lives as consumers. At the supermarket, online, and at the coffee shop we are constantly bombarded with deals that require us to spend a bit more to save more, and often just a tad bit over the amount that we had initially intended.
For instance, earning a discount if we spend a certain amount of money, free shipping on purchases higher than a specific dollar amount, or even a “free” cookie if we buy a specialty drink are all examples of “spaving.” In other words, “spaving” takes advantage of the belief that by spending just a little more, we will save money as part of a package deal.
These marketing techniques are designed to ease the psychological burden of parting with our money by helping us to justify these purchases by the putative savings they offer. However, unless you were planning on making these spending decisions in the first place, you might be parting with more money than you had planned.
How Does “Spaving” Harm Your Finances?
“Spaving” is another way to refer to spending. Of course, spending within your budgetary plans is natural and healthy. The danger arises when you start to overspend, especially if you do not have the means to pay for this extra consumption.
There are instances when “spaving” could be beneficial. For instance, spending more money to purchase quality goods that will last longer or need fewer repairs can certainly contribute to long-term savings. The same goes for spending more on a yearly membership or subscription, which is usually more cost effective than the month-to-month option.
The big caveat is to make sure that these goods or services are choices that you were planning to make, regardless of the discounts being offered. Buying more of something that you did not need or were not planning on purchasing will not save you money, even if the marginal cost of each individual unit decreases.
For example, getting 50% off on a $40 shirt that you did not need will still make you $20 poorer. Though you have saved on the initial sticker price, your bank account has decreased. Especially for those on tight budgets, “spaving” can be a dangerous trap.
How to Avoid the “Spaving” Trap
Like every personal finance decision, avoiding the temptation of “spaving” relies upon being intentional with your choices. There are a number of tricks you can use to help you remain on the straight and narrow.
(1) Create roadblocks for impulse buys: Avoiding stores that you know present a particular temptation, removing your credit card information from websites, and instituting a waiting period before purchasing non-essential items can all help you cut down on spending more money that you intended.
(2) Use cash: Paying with a credit card makes it much easier to purchase items, both psychologically and via the mechanical act itself. Physically parting with cash adds another layer of difficulty to these purchases, and can help you avoid unnecessary spending.
(3) Be prepared: If you come prepared to your shopping outings–with a predefined list of what you are planning to purchase–you will be less likely to fall into the “spaving” trap.
Of course, the best way to be intentional with your overall budgeting decisions is to institute a budget. Crafting a budget is an integral part of good financial hygiene, and it is also a useful tool to avoid “spaving.” There are numerous types of budgetary frameworks to pick from, depending on your desired level of monitoring and the effort you want to expend. For those looking to keep a very tight grasp on their spending, instituting an envelope-based system (whereby all your purchases are conducted via cash) can be particularly effective.
Conclusion: Being Smart with Your Money
Those on the selling side of the transaction have an interest in persuading their customers to spend their money. Offering discounts and other inducements is one method they use to attract business.
There is nothing inherently wrong with this approach, and it can even help you to save money if the deals align with your spending needs. The problem arises when these bargains convince you to exceed your allotted spending amounts.
“Spaving” takes advantage of our desire to find bargains. Being smart with our finances requires us to distinguish between those deals which are truly helping to save money, and those which are leading us towards unnecessary spending.
Learn money management, and use data-driven stock insights with TipRanks.
