I read a really interesting article that puts into perspective the difference between these two concepts. It may seem like a joke in the beginning but there’s a really important message that is being portrayed here.
A woman asks her man if he drinks every day and how much he spends on this habit. The man admits that he does and tells her how much he spends.
The woman then does a little maths and figures out how his habit has added up over the last 30 years. She says, “You know, if you had saved and invested that money, instead of buying all those drinks, you’d have enough money to buy a Ferrari.”
The man says, “I suppose so.” Then he asks if she drinks. She says that she doesn’t. “So where’s your Ferrari?” asks the man.
The important point to remember is even though the women doesn’t drink, or if you don’t smoke, or you have given up Foxtel or you haven’t eaten out in the past 3 months, you haven’t actually saved this money if you haven’t put it into a savings account or towards an investment. The theory proves you would have found another way to spend this money. You need to replace a bad habit with a good habit.
This can be achieved through a money mentoring plan, someone there to hold you accountable for your actions.
You need to have a customised plan to know where your money is going every month to ensure you are maximising on every dollar.