7 Reasons Spending Less Is Actually Your Best Investment

Are you looking for a guaranteed investment? One that will never lose value no matter how the markets fluctuate and produce a steady “dividend” each and every year of your life? Then look no further than the power of spending less.

Investing in stocks or real estate can feel like gambling with the money you’ve worked hard to earn. But every dollar you save is a sure thing. That’s money that can be put into a rainy day fund that will reduce your anxiety about the future. Better yet, it can be invested into any number of things that will make your life more enjoyable— without ever worrying about your investment getting wiped out.

Here are 7 reasons that spending less is the best investment you can make in yourself. Each reason points to a better use of your resources than spending more money on consumer goods that you don’t need in the first place.

But don’t stop there. Use this article as a jumping off point for your own brainstorming. I’m sure you can think of a dozen other ways to spend your savings on experiences and people that will make your life richer and more meaningful.

A guarantee that you’ll have more money

The best thing you can say about any investment is that it guarantees a positive return with little or no risk. And when it comes to financial returns, it’s hard to beat the simple act of spending less. For example, let’s imagine you are able to cut your current spending by $200 per month. That’s an extra $2,400 per year in your pocket, tax-free.

For comparison’s sake, if you invested in a broad-based stock index fund, you’d need to invest nearly $45,000 to expect that kind of return in a given year. And even then, the market is never guaranteed, and there might be years when you lose money or don’t make as much as you hope.

A direct path to a more sustainable lifestyle

At our family’s current pace, we use about one planet’s worth of resources in a single year if everyone lived like us. That’s because we live in an affluent, western country where we use up more than our fair share of the world’s goods and services compared to other regions.

This overconsumption manifests in a wide range of negative consequences from air and water pollution to deforestation and the overexploitation of natural resources. If we want to leave behind a planet that’s more sustainable for our children than the one we’re living in, it starts by spending less money on ourselves, and lowering our own consumption of resources.

A lower bar to leave your current job

Imagine you’re someone who spends 100% of their income each month on various expenses. That means you’ll be stuck at your job until the day you retire. But on the other hand, if you can cut your spending in half, not only could you leave your job for one that pays less but is more enjoyable, you could theoretically retire decades earlier than most people do. By putting aside your savings into an investment account, you’ll be able to open up new doors and create new opportunities for you and your family down the road.

A gift to your future self in the form of health

What if I told you there was a pill you could take that would lower your risk of cancer, heart disease, and other debilitating illnesses? Would you invest in a pill like that? I bet you would.

Well, it turns out that pill exists— it’s called exercise, and it has proven to be a more powerful predictor of long-term mortality than your blood pressure or cholesterol even are.

Exercise doesn’t have to cost money.

Depending on where you live, there are likely beautiful parks and trails you can explore for free. And if not, you can always invest the money you save by spending less into a gym membership and some nice workout clothes. Exercising is one of the best investments you can make in your health over the long-term and is certainly worth giving up some unnecessary spending in order to prioritize.

A fun way to spend more quality time with people you love

To put it simply, if you spend less money, you’ll have more money to do the things you actually enjoy. I don’t know you, but I know myself pretty well, and I know that my favorite things to do include spending time with my family and friends.

In fact, there are very few “things” I enjoy relative to all the activities I’ve grown to love. By spending less money on yourself and the lifestyle you currently maintain, you can invest even more money in new hobbies and fun activities that can be shared with others.

A quick and easy way to reduce your stress about finances

Every time I read a list of the top five or six stressors in people’s lives, one of those is related to finances. It makes sense. It’s hard to feel relaxed when you’re worried about where the money is going to come from to pay for an unexpected car repair or a health emergency or any of the other expenses that life can throw at you.

At the start of 2023, my wife and I decided to make a family budget for the first time in 10 years of marriage.

We’re both naturally frugal people, but something about putting it down on paper really made us accountable and mindful of how we spent every dollar. In just eight months, we’ve been able to pay off all our debt, increase our savings drastically, and feel much lighter emotionally. It’s been a huge win for our family, and it all started with the simple decision to spend less.

A smart way to make your household less dependent on luxuries

One thing I’ve noticed in my own life is that the more I spend on myself, the more I crave those comforts again and again. If you buy yourself that great meal out or that new pair of shoes or whatever it is that you enjoy spending on, next time it will feel like a little bit of a letdown to have to go without.

But by choosing to spend less, you can create a new baseline of expectations and reshape the perspective of what it means to enjoy a luxury. The less I spend, the more content and grateful I feel for the things I already have, and that has proven to be a significant investment in my mental health.