Saving money is always a good idea, especially in these uncertain economic times. Of course, you’ll always hear people tell you that money that sits in a bank account is “money that sleeps”. That it’s useless and should be put to use in mutual funds, real estate, the stock market…

The truth is, in times of crisis, cash is king, specifically because a lot of people are bleeding money. Cash might fluctuate in value, it might not make you more money when it’s just sitting there, but whether you’re an entrepreneur, a small business owner, or the CEO of an S&P500 company, having cash at hand is always better than having no cash at all.

As an individual, you need cash to invest. If you want to buy a house, for instance, the bank will not only look at your credit score but also your liquidity (which are correlated). The same goes for consumer loans around buying a car, a motorbike… The more money you can put up front, the more you can borrow and own.

When you’re a business, most investors won’t care much about your cash reserves, they want to see a profit. And you know what profit is? It’s cash, customers send money to your bank account. And if you spend that money faster than you earn it, your creditors are not going to be happy. Cash is also useful as a business when you want to expand and buy competitors, or upgrade your equipment…

In this article, we’ll go over 5 ways you can save money by avoiding spending it needlessly, and therefore stack up more cash. For each key point, we’ll look at it through the solo entrepreneur lens (individual) and the business lens (company).

If you can’t buy it twice don’t buy it

As an individual

People spend $4,000 on TV screens without thinking twice about the dent this kind of purchase is going to put in their savings. When you start to imagine buying 2 of those TVs, it helps put things in perspective. $8,000 for 2 TV screens is a ginormous amount, it’s ridiculous to spend that kind of money. Plus, could you afford to spend $8,000 on 2 TVs? Except when it comes to big “useful” purchases (like a house or a car), always apply this rule: if you can’t buy it twice, you probably can’t afford it in the first place.

As a business

The company I worked for was acquired for $30 million over a year ago. The company that bought us had over $100 million in cash reserves, which means they could have bought our company three times over and have more than $10 million left. That’s not a risky investment and it puts them in a pole position to buy more competition because they increase their bottom line with such an acquisition.

Treat yourself, don’t trick yourself

As an individual

When you work hard and make money you deserve to reward yourself once in a while. The thing is, it’s very easy to justify any “stupid purchase” by saying this type of stuff. It’s good to treat yourself, but you also have to think of the value you’re going to get. Going back to the TV example, ask yourself a very simple question: do you need a $4,000 TV screen?

“Well, I like watching nice nature documentaries and it’s amazing to have a very sharp picture for this kind of stuff. Also the sound system on this is…”

No, but really. I didn’t ask you to argue whether or not this TV is a nice piece of technology, I’m sure it is for that price tag. I’m asking you: Do you actually need this in your life?

Don’t trick yourself into thinking you need expensive stuff when your life would be no different without those things. If you want to see nature, reward yourself with a trip out of town. Every time you want to treat yourself, ask yourself “Am I treating myself or tricking myself?”

As a business

One day the topic of exercise at work came up at the office, and I ended up going on amazon to show my colleague that they had those nice treadmills you could use at the office, to slowly walk while standing at your desk.

My CEO (the guy that ended up selling his company for $30 million) happened to walk past my screen at this moment, and he saw the item we were looking at. He said: “Wow, that looks really cool, what is this?” I answered it was an office treadmill to exercise while working. He said: “That’s amazing, get one of those.” And he handed me his company card right away. My colleague and I looked at each other, bewildered. We hadn’t even asked for this or implied we wanted it. Within 5 minutes, the order was placed.

A week later the treadmill got delivered to the office. We used it for a week or two, then it ended up in a storage unit in the basement. I believe it’s still there to this day.

My CEO wanted to treat us to an office treadmill, but it turned out this was more of a tricky trick trap. It was a $600 purchase that we rarely used and/or needed. In the grand scheme of things, this purchase doesn’t even matter, especially when you consider he ended up selling his company for $30 million. But you get the gist of it: don’t spend money needlessly as a business. You’ll lose money, and storage space.

Do you need top-of-the-line?

As an individual

Again, let’s look at the TV example. You know what, maybe you do need that TV. Maybe you’re not tricking yourself but treating yourself. And that’s fine. But it doesn’t take away the fact that $4,000 is way too much money for a TV, right? Maybe you can get a cheaper model? Even if you split your budget in half, I’m sure they make amazing TVs for $2,000.

I recently had to invest in a new computer because my Macbook Pro was getting too slow and laggy for the video editing required to work on my Youtube channel. At first, I thought of replacing it with the same but more recent model, with all the top-of-the-line specs. After all, I was going to need a lot of power for video editing so it’s not like it wasn’t justified. But then I saw that my desired specs cost $3,700.

That wasn’t going to happen. I could afford that, but I’d be a hypocrite to spend that much money on a computer and then write this kind of article. Then I asked myself: “Do I need top-of-the-line equipment?” I reconsidered my investment.

As much as I use my Macbook Pro to work anywhere, I only do video editing at my desk, at home, with 2 extra screens, essentially using it as a desk computer. I figured that if I was going to use my new computer for video editing, I could get something that didn’t have to be carried around easily. I could always keep my Macbook for other stuff, like writing, blogging, and my 9–5 job. I did some research, and I found the Mac Mini had almost the same specs as what I wanted in a Macbook Pro, for literally a third of the price:

Plus, it’s compact enough to fit in a suitcase for extended getaways.

As a business

It’s so easy to say “Of course, we need top-of-the-line equipment” when you’re a company, because it’s company money, so you don’t have to worry about your personal bank account taking the hit. Plus, you can deduct the costs from your profit and pay fewer taxes at the end of the year, so it feels like a win-win.

This may be true for large corporations, but if you’re a small business (like me), trust me, you’ll want to ask yourself whether or not you need top-of-the-line stuff. Often times you don’t, all you need is to be able to work efficiently. Especially when you’re in the self-improvement and productivity content niche like me, it’s so tempting to look at Youtubers like Ali Abdal or Marques Brownlee flaunt their collection of all the latest iPads, iMacs, or what have you, and to want to spend money the same way.

The truth is, these guys buy those items for their content because they review them. At the end of the day, they don’t have 8 arms, so they only use one iPad, one laptop, and one desk computer. Apple is very good at coercing people into getting upgrades they don’t need. That’s how you end up buying the iPad Pro when you were only going to get the Mini. They get you to spend more with pricing ladders, and Apple is one of the brands that has mastered this marketing approach the most:

Is it an asset or a liability?

In purely economic terms, an asset is a resource with economic value that an individual or corporation owns or controls with the expectation that it will provide a future benefit. A liability is something a person or company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services.

As an individual

For the purpose of this article, we’ll consider an asset something you purchase that will give you a great return on investment, but not necessarily in the form of money. It can be something that will make you more productive, that will save you time, or make your life easier… In the same way, we’ll consider a liability not something you necessarily owe someone, but rather something you bought that adds no value to your life and/or your finances whatsoever.

Most people fill their lives with liabilities. A $4,000 TV screen, a bigger car than they need, a toy collection… They spend money on these things and will never, ever see a return on their “investment”, for 2 simple reasons:

1. The item purchased starts decreasing in value the moment they buy it, and they will never sell it for more than they bought it (except in very rare cases like with collectible cars, watches, and such).
2. It may give them a sense of “emotional reward” for some time after the purchase, but that feeling will usually wear out quickly. That’s why we end up buying more.

Few people fill their lives with assets. Investing in better work equipment, an at-home gym, educational apps, courses on topics that interest them, books… It’s a shame because these have more advantages:

1. The item purchased doesn’t necessarily decrease in value right away, and even if it does it keeps yielding a return in your life for as long as you use it. An at-home gym will make you fitter as long as you use it. A book will bring you knowledge as long as you read it. Usually, you can also sell those items back if you need cash, and your financial loss (price you sold it for minus price you bought it for) will be much smaller than when trying to sell your liabilities (like a car, or a TV).
2. The sense of reward you get from the item is sustained in the long term. You feel great every time you work out, and you learn more every time you read, whether you do it 1 week or 1 year after you purchased the item.

As a business

Businesses look at assets and liabilities in purely economic terms, but again when you’re a smaller company the line between business investments and personal purchases is sometimes a bit blurry. Going back to the Mac Mini example, I buy it for myself but I purchase it through my business. It’s a liability to my business, because I’ll never sell that computer for more than I bought it for, and it shows as a direct loss in my accounting books. This is money I’ll never see again. But it’s an asset for me because I can use it to get more work done and it’s a lot more efficient than my previous old Macbook Pro. Plus, it enables me to create content that will make me money in the future, which I will be able to spend on more equipment to increase the quality of my work. I like to think of this concept as a “virtuous asset circle”.

For bigger corporations, it gets a lot more complex than that, because they can deffer costs, outweigh losses with capital expenditures, and readjust cashflows and balances… It’s a whole accounting mess, and I’m not into accounting. Regardless, since the point of this article is to help you save money, it’s always good to understand the difference between an asset and a liability and to know when to look at a purchase with your business glasses on, or your personal, individual glasses on.

A new laptop for an employee is an economic liability but a personal asset because your new recruit wouldn’t be able to work without it. A new coffee machine for your office is an economic liability too, but it could become a personal asset if you ask yourself the right questions mentioned in this article:

• Can you buy it twice? Is it a $200 coffee machine or a $2,000 one?
• Are you treating yourself or tricking yourself? Do you actually need this?
• Do you need top-of-the-line? Does it have the 5 options you need or 20 extra options you won’t use?

At the end of the day, you just have to be honest with yourself. It’s very easy to justify dumb purchases, but it’s much harder to come up with valid reasons to buy stuff.

And if all this was easy, everyone would be good with their money.

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