The Importance of Saving Money

The Importance of Saving Money

We save, basically, because we can't predict the future. Saving money can help you become financially secure and provide a safety net in case of an emergency.

Here are a few reasons why we save:

• Emergency cushion - This could be any number of things: a new roof for your house, out-of-pocket medical expenses, or sudden loss of income. You will need money set aside for these emergencies to avoid going into debt to pay for your necessities.
• Retirement – If you intend to retire someday, you will probably need savings and/or investments to take the place of the income you'll no longer get from your job.
• Average Life Expectancy – With more advances in medicine and public health, people are now living longer and needing more money to get by.
• Volatility of Social Security – Social Security was never intended to be the primary source of income and should be treated as a supplement to income.
• Education - The costs for private and public education are rising every year and it's getting tougher to meet these demands.
• Without money put away in savings and/or investments, you open yourself up to other risks as well. For example, not having enough money to pay for emergency dental care may force you into taking a loan that your savings might otherwise have covered.

How much can you potentially save?
It’s important that you develop a budget using your net income as it reflects your take home pay after taxes and dedications. A common mistake people make is developing a budget off of their gross income. It’s a mistake because you're budgeting money you never possessed. Remember your potential savings is the difference between your net income and your expenses.

When developing a saving plan ask yourself these questions:

1. Are there any variable expenses that you can reduce or eliminate?
2. Is there anything you spend money on that you could eliminate and apply towards saving?

Tips for saving money:

• Save windfall income – Any unexpected money such as income tax return money.
• Collect loose change and deposit it in the bank – Use a piggy bank and deposit its contents when its full.
• Try frugality – Purchase cheaper off brand items and save money.
• Break a habit – Try doing one less thing you expensive venture a week and apply that money to your savings.
• Have a “buy nothing week”.
• Compare costs of major items before purchasing anything – Do your due diligence, shop around before making major purchases.