Ask an advisor about some of the best financial habits, and one of the answers is going to be saving money. By setting your priorities straight and creating an emergency fund, you will not only be prepared for the ‘black days’ but also able to cover sudden expenses without going into debt.
One of the biggest benefits that are related to having some money set aside is reduced stress when it comes to finances. If you are not yet motivated to start saving money, we will do our best to explain the importance of it through this article. Let’s get started!
Financial Security
Practicing this habit will allow you to become financially secure both in the short and long term. None of us can foresee the future, which is why it is of the utmost importance that you have money saved (enough to cover at least a couple of months’ worth of expenses) to get through a financial crisis. The situation that the ongoing COVID-19 pandemic has shown us is that we should never rely on the stability of the world’s economy or our current job positions.
There is an old Roman proverb that talks about saving white money for black days, which is relevant in the times that we are living in, as well. Along with overcoming financial storms, by saving money, you will also have enough to cover annual and unavoidable expenses, such as paying off your credit card, fixing appliances, and covering the cost of medical care or funerals for your loved ones.
We aren’t saying that you should fear the future or become greedy and selfish, but you should be objective and prepared for any situation that may come your way.
Pursue Your Dreams
We are sure that you know at least a few people who aren’t happy with their current job position. On the other hand, they don’t have the freedom to quit and do what they love simply because they don’t have any money to invest in it. Thus, saving money over time can be life-changing in terms of building a hefty savings account. Saving and having cash invested in funds that yield interest are two of the best ways to become financially independent and able to do what you are interested in.
Even if it is not the job that you want to change, but rather you are dreaming about getting that car or house that you love, only by saving can you do it without becoming indebted. That way, you can avoid stress while still being able to accomplish your goal.
Give to Others
The importance of giving to others, no matter how much that may be, is mentioned in almost all pieces of literature that are related to personal finances. Also, religious books, including the Bible, mention multiple times to “give to others, and you’ll be given to”. Believe us, the feeling of helping someone in need is hard to compete with.
This is especially true if your idea is to make a change in your community, which you wouldn’t be able to do just from your monthly earnings. Never forget that money is a tool and not the goal, which is why you should see it as something that could make your path a lot easier.
Financing College
If you live in the USA, then you are probably familiar with the huge tuition fees of colleges and universities. According to multiple studies, more than 75% of students in the United States are indebted.
Whether you are the one going to college or your children, this aspect should motivate you even further when it comes to putting a little to the side on a monthly basis.
Staying out of Debt
As we have mentioned above, most Americans are in some kind of debt. If you are in debt also, that is absolutely fine. However, don’t think that there isn’t a way for you to get out of it or at least minimize it for now. Among the main mistakes that people make when it comes to sudden expenses is that they satisfy these through their credit cards. This does nothing but make even more debt.
Creating a reserve fund from which you will slowly gain interest is the best way to become financially independent and start living a stress-free life.
Financial Legacy
The idea of leaving a financial legacy is not to motivate your children into skipping education and doing nothing but spending your money. Rather, it is to give them a good start and allow them to figure out what they are actually interested in without having to think about paying off the debt that you have left behind. Money can be rationalized and used the right way, including for helping others, which is one of the main reasons why you should be saving it.
Tips on Saving Money
We did our best to cover the main aspects of why creating a savings account is essential for financial stability and freedom, but how can you be successful at it?
The first thing that you will want to do is to sit down and write down your expenses. We aren’t talking only about big purchases, but also everyday items, such as groceries and gas. Only when you are aware of how much you are actually spending will you be able to figure out the amount you can save on a regular basis.
Our personal recommendation is that you see aside somewhere between 10 and 15% of your income, which you can achieve by cutting some unneeded expenses, as well as prioritizing your goals!
Wrap Up
We did our best to explain to you the importance of saving money, and it is much more than being able to go on that dream vacation. With this in mind, we wish you all the best in planning out your budget and successfully creating a fund that will get you out of debt and allow you to achieve long-term financial security!