Kip Tips


When Spending Can Be Worth More
Than Saving

A penny saved is a penny earned, but in these cases, a penny spent is a whole lot earned.


By Justine Rivero, credit advisor, CreditKarma.com



[Editor's note: Our regular KipTips columnist Cameron Huddleston is taking a deserved vacation, but has solicited the help of her favorite personal-finance bloggers to guide KipTip readers in her absence.]

How can you spend $1 to get $2 back? Investors, venture capitalists, and magicians know, and you too can spend in practical ways to earn more back (without resorting to the stock market or a magic wand).

I picked up investing at 8 years old. I gave the cafeteria lunch lady my extra 50 cents change after buying my usual pizza and chocolate milk, and she always gave me an extra large piece of chocolate cake in return. Maybe it was just good karma, but I like to think I was a savvy second grader who knew to give a little extra to get a lot more in return.

If you have extra money, consider taking a detour from your savings account and spending it on a great investment, and I’m not talking stocks. Here are three worthwhile ways that spending can be worth more than saving:

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Spend on career-advancing moves. While a master's degree can earn you $200,000 more over the course of your work life than having a bachelor's degree alone, not everyone can afford the $150,000 grad school price tag. Instead, level up your earning power by spending on smaller career-related expenses, such as buying a new suit for meetings, taking seminars in related skills, attending career-related events and conferences, or simply subscribing to an industry magazine. You may even get some of these expenses subsidized by your company. Spending on career-advancing moves will deepen your job skills and widen your industry knowledge and network, which is as valuable as a higher degree. Demonstrate your increased value to the boss and boost your overall job performance, and your salary will follow.

Spend on your highest APR debt. More often than not, the money you are paying in interest charges on your highest interest debt will outpace what you earn on your highest-yield savings account. Meaning, you are losing more on your debt than you stand to gain in your savings. For example, let's say you have $1,000 to either pay down your $10,000 credit card debt with an 18% APR, or stash it in your $10,000 savings account earning the national average of 0.69% APY. If you put your money in savings, you'd earn about $76 in interest over the year. If you put it toward debt instead, you'd save yourself almost $170 in interest charges. Your money will go farther if you spend to pay off your debts first before saving.

Spend on your quality of life. The biggest commodity you have is time, not money. It’s the currency we use to earn our paychecks, and we have very finite amounts of it. Spending your hard-earned money to gain fulfilling experiences can be far more worthwhile than your money sitting in a savings account. In fact, recent reports show that spending for experiences makes you happier. So go ahead, go on vacation. Cross things off your bucket list. Splurge on once-in-a-lifetime experiences. You spend 40 hours a week to earn your salary, so spend money responsibly to make what free time you have more satisfying -- it's the ultimate return on investment.

Going back to high school physics, money is like energy: It is never created or destroyed; it’s merely converted from one form to another. Spending can be worth more than saving when you measure it in value and not just dollar signs, whether that means the chance to climb your company ladder, finally be debt-free or hop a cruise to the Caribbean.

Justine Rivero is the credit advisor and resident credit rockstar for Credit Karma, the pro-consumer credit advocate that helps more than 2.6 million consumers realize the everyday cost savings of having great credit health. Check out Credit Karma on Facebook or Twitter.



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