The Power of Money Unspent
When people think of money, they most often think of spending it. I don’t have any statistics to back this up other than the current savings rate for Americans which is around 6% and years of observation. Money is thought of in terms of what it can buy. At any one time, most people have a long list of things they need or want to purchase as soon as there is money with which to pay for them. They equate money with spending power. More money equals more power to spend.
When was the last time you heard someone say, “He makes a six-figure income; he must be able to save a lot of money”?
Money is meant to be spent. I won’t argue with that. However, have you considered the power of money that isn’t spent? Here are some ways unspent money has power:
- Unspent money can earn money in the form of interest. When we don’t spend money and save it, the labor and time it took to earn the money in the first place is multiplied as our savings earns interest.
- Unspent money allows us to take advantage of compounding. When we don’t spend the interest earned on our savings, it will earn interest, as well. This interest earning interest is called compounding. Compounding dramatically increases the power of our unspent money over time.
- Unspent money can provide financial security. With enough money in savings, we are insulated from financial hardship due to job loss, reduction in hours, medical emergencies, etc.
- Unspent money gives us leverage in financial disputes. When we have a dispute with a vendor, bank, insurance company, or credit card processor, we are not intimidated. We have the time and confidence to exercise our rights, because we have savings to back us up.
- Unspent money gives us more choices. The more savings we accumulate, the more choices we have. We don’t have to stay in a job we don’t like. We don’t have to settle for the first job offer. We don’t have to restrict ourselves to fully-financed purchases or accept loan interest rates that exceed market levels. We may choose not to finance our purchases. We can start our own businesses. We can improve our existing job skills or acquire new ones. We can move to another city or state. We can retire. You get the idea.
- Unspent money gives us financial flexibility. When we have unspent money at the end of each month, we are living on less than we make. This gives us the flexibility to adjust to changes in our financial lives. We can absorb cost increases. We can absorb a reduction in income. We can adjust for emergencies.
The power of unspent money isn’t evident at first, because a little unspent money doesn’t have much power. In addition, for most people, unspent money is really just money waiting to be spent: They are saving for a particular purchase. There is nothing wrong with that. In the process, they may experience the power of unspent money but not realize it. They may have to use part of their savings to pay for an unexpected expense or to supplement income due to a reduction in hours. They will think of this as a setback in their quest to purchase that item for which they are saving. They don’t recognize the power of unspent money.
But we do. Add to your savings anytime you can. Feel the power.
K.C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages.
I agree with it all. Well written. Thank You.
[...] not in the things we possess or wish to acquire. Our low expectations made it easy for us to live far beneath our means. This gave us the savings with which to accumulate the financial assets that allowed us to [...]