‘Save money and money will save you’
Even though you might find it hard to believe, saving money actually does feel great. It gives you a sense of responsibility and that you are doing something important for you and your family. Whether you are saving for a house, a car or the education of your children, every time you manage to save some money for that cause should be very rewarding and there will be a smile on your face. Every time you save some money you will realise that you are one step closer to getting what you want.
When you save enough money and you are able to buy what you want we can assure you that it will feel amazing. You will appreciate what you bought more because you know how hard you worked to buy it.
Saving money for the future is one of the great habits of wealthy people. Rich people are getting richer because they have successful habits of controlling their expenses and being careful in the way they spend their money to grow their expenses. Saving money does not mean that you have to be thrifty. People who set the goal to save must learn to save first and spend afterwards. If you want to achieve your financial goal the most important step is to save first.
But what are the benefits of saving apart from being able to buy what you want?
- It is less stressful: Knowing that you are always trying to make ends meet and one paycheck away from a financial crisis is extremely stressful. Over time, this takes its toll and can lead to a number of serious health conditions such as anxiety, depression, insomnia and even heart problems.
- Improve your financial being: Developing a saving habit will improve your life. It stops you from overspending, debts and feeling stressful. Saving shows that you are committing to yourself to improve your financial status.
- Comes handy when stuff happens: You will feel prepared for the unexpected if you have some savings. You never know what catastrophic events are about to occur, so it’s better to have some saving to save yourself from a lot of stress, anxiety, heartburn and misery during time of emergency.
- Retire early: People who save money when they’re young can retire early. Saving for retirement funds is a good investment. The make some sacrifices and buy things that are not too expensive and stop buying things that they can do without. If you want to retire early, you have to start saving early.
These are some tips to save money:
- Never buy expensive things on impulse
- Use debit and credit cards prudently
- Take advantage of discounts or incentive programs provided by the employer.
- Save money by buying items online in bulk
- Substitute coffee for expensive coffee drinks
- Bring lunch to work
- Eat out less every month
- Shop for food with a list and stick to it
- Take fewer cab rides and use public transport more
- Compare airlines for cheap fares
- Assess clothing in terms of quality as well as price
- Communicate by email rather than by phone
- Borrow books rather than purchasing them
Saving money has both physical and psychological benefits. Start saving now! The sooner you start the better, you will even earn some more by saving.
If you don’t earn much and you can barely pay your bills, the idea of saving money might seem laughable. When you only have $5 left at the end of the month, why even bother to try saving? Because everyone has to start somewhere, and if you work at it, your financial situation is likely to improve over time. Saving money is worth the effort. It gives you peace of mind, it gives you options, and the more you save, the easier it becomes to accumulate additional savings.
Peace of Mind
Who hasn’t lain awake at 3:00 a.m. wondering how they were going to afford something they needed? If money is really tight, you might be wondering how you’re going to pay the rent next week. If you’re a little further up the financial ladder, you might be worried about how many months you could pay the bills for if you lost your job. Later in life, the money thoughts that keep you up at night might center around paying for your kids to go to college or having enough money to retire. (Get help with college savings by reading Stop Procrastinating! Enroll In A College Savings Plan.)
As you accumulate savings, your financial worries should diminish, as long as you’re living within your means and not always looking for new things to worry about. If you already have next month’s rent taken care of by the first week of the current month, if you know you can get by without work for three to six months, if you have savings accounts for your children’s education and your own retirement that you’re regularly funding, you’ll sleep better at night. The reduced stress from having money in the bank frees up your energy for more enjoyable thoughts and activities. (Learn more in Banking: Savings Accounts 101 and Find The Best Savings Account Rates.)
The more money you have saved, the more you control your own destiny. If your job has you on the verge of a nervous breakdown, you can quit even if you don’t have a new job lined up yet and take time off to restore your sanity before you look for new employment. If you’re tired of living in an unsafe neighborhood, you can move to a safer area because you’ll have enough for a deposit on a better apartment or a down payment on a nicer home. (Is buying a home in your future plans? Read How To Buy Your First Home: A Step-By-Step Tutorial.)
If you get sick and need expensive healthcare that your insurance doesn’t cover, you’ll have a way to pay for it even though you can’t work while you’re getting treatment. And knowing that you have options because of the money you’ve socked away can give you even more peace of mind.
No, money doesn’t solve every problem. It you are laid off, it might take as long as two years to find a new job. Some illnesses won’t go away no matter how many procedures you can afford, and random crime can happen even in a supposedly secure gated community. But with more money in the bank to deal with issues like these, you give yourself better odds of coming out on top.
Money Working for You
Most of us put in hundreds of hours of work each year to earn most of our money. But when you have savings and stash your funds in the right places, your money starts to work for you. Over time, you’ll need to work less and less as your money works more and more, and eventually, you might be able to stop working altogether.
What does it mean to have your money working for you? When you’re first starting to save, you’ll want to put your money somewhere safe, where you can access it right away for unforeseen expenses. That means an online savings account, where you might earn 1% interest annually and not even keep up with inflation, which tends to run around 2% to 3% per year. You’ll even have to pay taxes on your meager 1% earnings. Anything is better than earning 0%, though, or not having savings and going into credit card debt, which will cost you 10% to 30% in interest per year. (For related reading, see Why You Absolutely Need An Emergency Fund and How To Use Your Roth IRA As An Emergency Fund.)
Once you’ve saved three to six months’ worth of expenses in your emergency fund, you can start saving money in a tax-advantaged retirement account. That’s where the magic starts to happen. These accounts, such as a Roth IRA or 401(k), allow you to invest in the stock market. If you do it right, you’ll earn about 8% per year on average over the long run. You won’t pay any taxes on those investment gains along the way, which will help your money grow even faster. With a Roth IRA, you contribute after-tax dollars, and everything that’s in the account after that is yours to keep. With a 401(k), you get to contribute before-tax dollars, giving you more money to invest up front; you’ll pay taxes when you withdraw the money in retirement. (If you’re not sure whether it’s better to pay taxes now or later, you can hedge your bets and contribute to both your employer-sponsored retirement plan and a Roth IRA.) The third choice, a traditional IRA, allows you to contribute before-tax dollars as you do with a 401(k).
If you have a high income and low expenses, you might accumulate enough to retire in 10 years. For most people, it takes closer to 40 years. But at some point, if you save and invest regularly, you should be able to live off the income generated by your investments – the saved money that’s working for you. The earlier you start, the more time a small amount of money has to grow large through the miracle of compounding. (Feel like you don’t make enough to save anything meaningful? Read Why Small Retirement Savings Count.)
The Bottom Line
Saving money is incredibly important. It gives you peace of mind, expands your options for decisions that have a major effect on your quality of life and eventually gives you the option to retire. Most people who are wealthy got there through a combination of their own hard work and smart savings and investment decisions. You can become one of those people, too. (Ready to start saving? Read our Budgeting Basics tutorial.)