Saving Money: Why a Financial Crash Diet Could Be Bad for Your Wallet

Note: This is a guest post from John Suter of Money Saving Challenge
Every now and again the media goes crazy when a new fad diet arrives onto the scene and regardless of whether it is the Atkins Diet, the Scarsdale Diet or the South Beach Diet, each one seems to represent a desperate attempt to very quickly lose weight and obtain the ideal body.
Unfortunately the effects of these diets are often very negative and fad dieters tend to lose enthusiasm as the initial weight loss caused by the extreme diet begins to level out and the cravings for decent food settle in.
Disappointed with the results, most fad dieters return to their old eating habits and often end up putting on more weight than when they started.
Now I am sure you are asking what all this has to do with personal finance? Well, in the same way that extreme dieting can hurt your health, extreme saving can have an equally negative impact on the health of your finances.

Extreme Saving

To me, extreme saving is the financial equivalent of a crash diet and extreme savers will do anything they can to cut out every non-essential cost from their monthly spending, even if it means living a miserly existence.
This means eating the cheapest of cheap foods, not socialising with their friends, wearing their clothes until they are threadbare and giving up on any other little luxuries or hobbies.
The main problem with extreme saving is that it is very difficult to sustain this way of life over a long period of time. Monotony and boredom can easily niggle away at the best intentions of any extreme saver and drive them back to their old spending habits, in the same way that a fad dieter will go back to eating their favourite treats with a vengeance.

Create a Healthy, Balanced Savings Diet

Rather than following fad diets, most health experts advocate that the best approach to weight loss is a healthy and balanced diet, combined with plenty of exercise, and those same principles apply to successful saving.
Let’s face it, eating beans on toast for dinner every day may be cheap, but it is going to make you miserable. So too will staying in all month whilst your friends are out partying and having a good time.
The best approach then is to create a healthy, balanced savings diet where you review your spending, identify areas of high expenditure and find ways to make savings, without necessarily having to cut back completely on everything. This might mean just going out with your friends twice a month, rather than every week or supplementing some expensive dinners with cheaper dinners in your weekly shopping.
By balancing your savings against your spending, you do not then deprive yourself completely, making it much easier to continue saving in the long-term.

Creating a Sustainable Savings Plan That Will Grow Your Wealth

Whilst the secret to weight loss is to consume less calories than you burn, the secret to wealth building is to spend less money than you earn. You can maximise the amount you save by following these three steps:

  • Decide on your savings objectives – For example are you saving to get out of debt, to buy a new home, to go on holiday, to pay for a wedding or to pay for your children’s education?
  • Understand your current situation – Create a budget to show how much money you earn, how much you have in savings, how much you owe, how much you spend and where you spend it.
  • Identify savings – Review your spending and earnings to see where you can make cut backs and try to identify any opportunities to increase your income.

If your objective is to save £10,000 for a deposit on a new home, you can begin to break that down to identify a monthly savings target. So £10,000 divided by 36 months will give you a monthly savings target of £277.
By finding cheaper alternatives for essential spending and reducing your non-essential spending, you can ensure that you are able to pay £277 into your savings account each month. And because you are not completely cutting out all fun spending items and know that you will be able to meet your goal of buying a house in three years time, it makes saving much less painful.

Monitor Your Progress

One of the biggest problems that dieters have is staying on track, so many people weigh themselves on a regular basis to monitor their progress. If they have slipped, then they can increase the amount of exercise or decrease the size of their food portions to try and get back on track.
The same approach needs to be taken with your spending to ensure you are not over-spending and missing your monthly savings target. Ideally you should review your bank balance and spending at least twice a month, if not more, and if it looks like you have overspent in one area then you will see that you need to cut back in other areas.

Sustainable Vs Fad

So whether you are slimming or saving (or maybe both!), selecting a sustainable and balanced approach should help you become much more successful in meeting your goal.
John Suter writes for moneysavingchallenge.com and challenges his readers to save up to £250 a month without compromising their current standard of living. Visit www.moneysavingchallenge.com for money saving ideas and advice on clearing your debts and growing your wealth.
Photo by annia316

6 Comments

  1. I was recently forced to go on this type of financial crash-diet. It was no fun, I can assure you. I didn’t do it to save money, I did it to get to my next paycheck without falling into debt. A long term balanced approach is something everybody should create right now if they don’t have one already.

  2. I lived this way for a long time until one of my friends pointed out that…
    It’s my money i worked for it and should enjoy and have fun with it.

  3. You are very right with this diet comparison. Nice article. Thanks for sharing!

  4. I love the idea here, John. There is importance in saving but it’s all about saving in moderation. There has to be a healthy way about saving. I’m glad I read your post, many people need to see this.
    Thanks for sharing!!

  5. Thanks for your financial diet article. would like to take your ideas into implementation process

  6. I think most people would agree that saving money is something “easier said than done”. Personally, I believe it’s a mind-set that needs to be developed by creating good money-saving habits.
    Here are some things I’ve done to help change my spending habits:
    – Cook more at home ( Eating out is very expensive especially
    if you do it a couple times a week
    – Try shopping online ( You can find better deals than in the
    store and you save on gas (I recommend  HYPERLINK
    “http://www.shoptivity.com” http://www.shoptivity.com)
    – Pay the full balance on credit cards each month ( Interest
    charge is like giving away free money
    – Don’t forget to pay yourself ( Set up an online savings
    account (they pay higher interest than a normal savings
    account)
    – Set a budget and goals ( It’s good to have your goals
    written down so you see them everyday and don’t lose focus
    on your ultimate objectives
    Again, saving money requires a lot of patience and hard work. However, you’ll thank yourself later on in life. Good luck everyone!! =)

Comments are closed.

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close