7 Reasons Why You Should Start Saving Today
4 minute read
The most valuable thing you have in this life is your time. When it comes to saving it is so crucial to start as soon as possible. The younger you are, the better because you have the time to witness your savings compound and grow. The most important thing you can do is to pay yourself first. I know saving may sound impossible when you’re paying back student loans, rent, and bills while trying to balance a new lifestyle with an entry-level pay. Although there are many challenges you face while “adulting”, saving your money each and every month will set you apart from the majority. According to a GoBankingRates survey in 2017, 57% of respondents said they have less than $1,000 in a savings account. This is an improvement from 69% the previous year, which is a great sign. What’s alarming is the consumer spending is also on the rise despite the lack of savings for a majority of Americans. The average consumer spent $60,060 according to the Bureau of Labor Statistics in 2017.
A substantial amount of this spending is on borrowed money like credit cards, student, personal and auto loans. With debt climbing and savings diminishing this is a recipe for disaster. Here are some reasons why you should start saving today.
1.) Teaches you Wealth building Habits
Paying yourself first will teach you the discipline and patience needed to build wealth. It forces you to live within your means because after you save a portion of your pay, you now only can spend what’s left of your income. These are the habits needed to build wealth over time and once you obtain the wealth you’ll already know how to maintain it because saving will feel like second nature to you.
2.) For Emergencies
Emergencies will always happen. Having an emergency fund will give you a peace of mind whenever something crazy randomly pops up. It’s like a little insurance for the minor things in life. You’ll sleep better at night knowing a flat tire won’t throw your monthly budget completely off.
3.) Paying for things in Cash
Paying for luxuries and necessities in cash teaches you not to rely on borrowed money. This simple principle will teach you how to avoid and stay out of debt, which is another key component when it comes to building wealth. Debt zaps away at your saving and investing potential. It traps you in a never-ending cycle of making payments. When you pay for things in cash you’re also paying for things you can actually afford.
4.) For Fun
Life is all about balance, it is meant to be lived. Don’t feel guilty for spending your hard earned money either. Save for your hobbies, vacations, shopping etc. Don’t finance your fun save for it!
5.) Down Payment
If you plan on purchasing a home a down payment is most likely required to qualify for a mortgage. Most mortgages require at least 3-5% of the home purchasing price unless there’s a specific 1st time home buyers program available. Additionally, if you wanted to purchase a new car and didn’t have enough to pay for it in cash having a sizable amount of savings will give you access to lower interest rates and better loans. Your loan to value ratio will be lower which makes you less risky to loan funds too according to lenders. If you’re already a homeowner, you can tap into your home equity and use some of your own savings to make a down payment on a rental property.
6.) Retirement and Investing
We cannot rely on the government to take care of us in retirement. Who knows how long social security or Medicare will last. What we can control is how much we’re contributing towards our own retirement. Investing now for your retirement is like planting a seed that will sprout in the future. The money that you invest now will grow and compound by the time you retire. Then those investments will start working for you! If your employer has a 401k/403b plan make sure you at least contribute up to the company’s match. The match is 100% return on the money you’re putting in. If your company doesn’t have this option open up a traditional IRA(Individual retirement account). Every popular brokerage has this option available like (Vanguard, Schwab, TD Ameritrade etc..). They even have investment options now like bettement.com and wealthfront.com that automates investing for you. If you want to learn more about investing, check out this guest post. (Investing for beginners)
7.) Start a Business
Bootstrapping a small start-up business or buying a franchise requires some capital. If you wanted to even launch a website for your ongoing business or side hustle you’ll need savings for that also. Borrowing money to start a business is risky because if that business fails, you’ll still have to pay back that business debt while also losing money on the actual business itself.
Don’t just read this blog and say “Yea this is a good post, but I can’t afford to save now” Yes you can!! Start with as little as $10. Open an online savings account or a savings account separate from your regular checking so you won’t get the urge to access the money instantly. Then as each month goes by or every paycheck put another $10 in. Once you get the hang of things start to increase your monthly contributions. Before you know it you’ll have hundreds of dollars and an emergency fund in no time.