Understanding Why Financial Planners Emphasize the Importance of Saving Moneyby Silvia W. blogger
of you must be wondering why financial planners and financial media keep emphasizing
on the importance of saving money. Financial experts may seem to be
pressurizing you to save money for a few good reasons. Sometimes, you may think
that when you are having sufficient money to pay all your current bills and
debts then why you must focus on putting aside an amount every month. There are
a plethora of reasons for getting into the habit of saving money as a robust
personal finance strategy. Saving money could become a lot easier if you have a
specific purpose or goal in mind for doing so. Here are some reasons that
should motivate you to increase your savings.
For Building Your Emergency Fund
It is of pivotal importance to build an emergency fund for covering unanticipated expenses that may crop up any time. As per the findings of a Bankrate survey, it has been revealed that nearly two-thirds of the adults in the United States admitted that they do not have enough savings for covering expenses for six months. Moreover, we come to know that 40 percent of the adult Americans do not seem to have even $400 extra for meeting emergency expenses as per CNN Money.
Emergencies could be in the shape of a sudden loss of job, unexpected car repair expenses, emergency surgery, etc. Moreover, if the economy slows down, you may be at the risk of losing your job. During these financial crisis situations, an emergency fund could prove to be of great help. You could overcome the financial challenge with your savings until you get a good job offer.
Financial experts recommend keeping aside at least, 3-6 months of your usual expenses. As per the statistics provided by the Bureau of Labor and Statistics, the average household monthly expenses amount to about $4,776 that implies an emergency fund should hold approximately $28,650 for six months. Financial consultants are constantly urging people to boost their emergency funds to meet the rising medical costs. You may be having Medicare or medical insurance, but in case of some illnesses, the insurance coverage is not adequate to fully cover the expenses. However, it is of vital importance to opt for good insurance along with a robust emergency fund to financially survive the unanticipated turn of events.
For Becoming Financially Independent
As per https://www.mymoneycoach.ca, “The measuring stick for being rich is different depending on who you talk to. However, the one thing that the notion of “being rich or wealthy” means to most people is having financial independence and savings to depend on. Calling your own shots, financially speaking, means having the freedom to make choices in your life separate from earning a paycheck.”
This may imply having the financial liberty and hence, the ability to quit your current job to be able to go back to school for switching careers, to go for a vacation wherever and whenever you wish to, help your friends and relatives, invest in somebody else’s business, go for your own startup, etc. You must aim to save as much as possible every month so that you could achieve financially freedom to retire whenever you wish to instead of going on working hard because you need to. Financial freedom may not mean you are rich but it simply means that you feel exhilarated when you no longer need to rely on a specific paycheck every month.
For Eliminating Your Debt
You may be reeling under ever-mounting debts and you wish to come out of these overpowering debts. You necessarily require having a substantial amount of savings to pay off all your outstanding debts. Remember you cannot get rid of credit card debts if you go on using them for meeting all your emergency expenses. No matter how great a financial planner you are, you would be encountering at least, a completely unanticipated expense every year, as per stats.
It is, therefore, mandatory for you to save at least, 500 USD to 1000 USD as your reserve fund. So that when unanticipated expenses come up, you could use your reserve funds for paying them off instead of using your expensive credit cards. You may visit reputed sites such as https://www.nationaldebtreliefprograms.com/ for professional assistance and perfect debt and other financial solutions.
For Enjoying a Comfortable Retirement
You need to save consistently for building your retirement money. You must start keeping some of your savings aside as the retirement fund so that you could enjoy a smooth and comfortable life even after retirement. You could take advantage of compounding interest when you save money in your bank account. For instance, if you just put $1 in your bank account and keep depositing $100 each month for the next ten years at 6.5% rate of interest or return, you would end up having $16,842. If you go on depositing consistently in this manner for another ten years, you would end up doubling your money to exactly $49,045. Once it is 30 years post your 100 USD deposit in the bank, you would now be having as much as $110,624 with compounded interest from just your $36,000 investment.
You must try and match your contribution with your employer’s and ultimately, you could consider contributing 10%-15% of the gross income. You must consider making contributions to an IRA and 401(k).
Buying a Home
You need to consider saving money consistently for meeting expenses toward your house’s down payment. If you have a substantial amount of savings in your account, it gives you solid negotiating power. You would be getting better interest rates. Moreover, you could afford a much bigger or more expensive home if you have substantial savings stashed in your bank account.
In this context, you must know that the bank would not be giving you a loan for buying a house unless they are convinced that you have enough money for the down payment. Also, you need to remember that you do not have permission for borrowing the down payment. Your down payment must be a minimum of 5 percent of the house’s purchase price. Only then the bank would be ready to pay you the rest 95 percent. Buying your own home would no longer be a distant dream if you save substantially. If you are able to save wisely and consistently, you would be able to boast of a remarkably larger down payment for buying a larger house or a dream house in a relatively better neighborhood.
We have discussed some of the top reasons for you to save money every month. Financial experts firmly believe that saving some money every month would make your life easier and you could take care of a number of things without feeling financially stressed. There are numerous other valid reasons for you to get into the habit of saving money consistently. You could save money so that you could enjoy a vacation wherever and whenever you feel like. Moreover, you could invest in your new car or splurge on certain luxury items if you are having substantial savings. You must focus on saving every month if you have any dreams of furthering your career goals and aspirations by opting for expensive higher education like earning your doctorate or masters degree in the future. Moreover, saving for your little one’s future education could be another major incentive to save every month.
Created on May 20th 2019 02:28. Viewed 444 times.