What is money?
Money can be defined as a current medium of exchange in the form of coins and banknotes and essentially is what keeps individuals like us alive in some sort of way. The reason as to why money is seen as so important in today's society is because it allows us to meet our basic needs such as food, shelter and healthcare without having access to these necessities our well-being and the well-being of the community and the whole globe would suffer greatly. In short, these funds buy us security and safety.
Spend or Save
This brings us to the main topic of our discussion whether is it better to spend or save the money we earn. Spending is a cash outflow for an individual while earning represents a cash inflow. That's what reason and real-world experience have taught us to do. Spending is, in fact, the exact opposite of earning for an individual. The simple, yet profound, concept of spending and earning is the core of the
“Paradox of Thrift”. This term simply refers to an economic theory that argues that personal savings can be detrimental to overall economic growth.
First, let's take a look at spending money. To let others know they have riches, people spend money on items that are prominent or highly apparent to others. When observing someone's expenditures, we can infer some information about their financial situation. Looking at their bank activities, 2000 UK customers were asked how much they agreed with the statement, "I think people who spend more are wealthier than persons who spend less." We discovered that people who believed that spending indicates wealth spent more money on items that observers perceived as less frugal, such as luxury clothing, jewellery, travel, and antiques. Compared to persons with comparable incomes who disagreed that spending implies prosperity, they had less money in savings and investments. These results imply that using expenditure to infer wealth may cause people to overspend, making them more susceptible to financial hardships.
On the contrary, people who associate with the FIRE (Financial Independence, Retire Early) movement may exhibit behaviour that is the opposite of conspicuous consumption. These people are renowned for their severe spending restraint, savings, and early retirement plans. Earning and saving provides many advantages such as; saving enhancing emotions of stability and peace of mind and offering a financial "backstop" for life's uncertainties. Savings can serve as the seed money for higher-yielding assets like stocks, bonds, and mutual funds if the emergency fund has been developed. Furthermore, savings are associated with more pleasure, according to a recent study by the insurance company Northwestern Mutual. According to the study, those who "plan" and take future-oriented actions, such as setting goals and taking action (for example, saving money) to attain those goals, feel happier and more satisfied with their life than those who don't.
Finding a balance
In addition, a variety of current events have changed how much money people are spending and conserving. Social media is a significant example. These days, social media is extremely strong. It plays a significant role in millennials' daily lives. There are constantly people publicising their latest purchases, which the impressionable younger generation tries to live up to, from perfect holidays to perfect clothing. According to Australian data from the previous year, over a third of students mentioned FOMO (fear of missing out) and peer pressure from social media as spending triggers. 88% of students said social media has some influence on their spending habits. As a result, various generations of society may be affected differently by money, which helps to explain why young adults have a tougher difficulty saving.
In summary, financial experts, accountants, and relatives would advise achieving a good balance between the two hobbies. Despite the perception that spending huge sums of money is reckless, it is just as important to the economy as saving. because these purchases benefit society and the economy in a variety of ways, such as by paying wages to workers who pay taxes that fund healthcare and then spending the same money on their purchases. For example, a founder of Cambridge money coaching suggests a good guide is to allocate 50% to needs, 30% to wants and 20% to saving. Automate the savings process and only spend what’s left over. If you want to control your spending, set a weekly allowance, take it out in cash and leave the cards at home.”