Sunday, June 1, 2008

Why Save?

For many people, saving is something that you do at the end of the month with whatever money is left over. Some people can still save like that, but for most, this line of thinking leads to living month-to-month without a back-up plan. It is imperative that you pay yourself first. Saving is not optional. If you struggle to see the merits of saving, or struggle just to get that money into the bank and keep it there, you are not alone. But through good monetary strategies, you can overcome those obstacles. First, we are going to go over some reasons to save.

Save for emergencies. Life happens. Someone in your family may need medical attention. Your car could break down. Your home could be robbed. There is no guaruntee in life that bad things won't happen. If anything, there is a guarantee that bad things will happen. It is your responsibility to your family to be prepared for these things. Unexpectedly having to buy a new car should not mean that you suddenly can't pay your house payments. You should have three to six months worth the expenses saved up in an emergency fund at all times. At the very least, you would be able to buy an ugly car that gets you from point A to point B without missing a beat. When you use money from your emergency fund, you are, of course, responsible for saving to put it back.

Save for retirement. For some of us, this can be difficult to think about now. When we are in our twenties and thirties, we don't think about preparing for life after 55. But the reality is that as soon as we start working, we should be socking money away, preparing for the big day. I haven't even started what I would consider my career yet. I am twenty-three years old. My income is considered under the poverty line. I have a retirement account that I put $25 into every month. You can do this!

Save for all of your wants. Your "wants" may include a newer car, college educations for your children, a family pet, new clothes, or a bigger house. These are all things that you need to set aside money for. They are certainly not impulsive buys. If it is a purchase that requires thought and shopping around, then it is something you should set aside money for. Decide how much you want to spend on it, and start setting aside a certain amount every month.

The best way to start saving more money is to start to track your spending. You will be surprised at what you are spending your money on. When I started doing this, I thought that I was spending $150 per month on groceries. I soon found out that it was more like $250 or $300. Eating out is a big expense that creeps up on us. By the time we get our food and drinks and tip the server, you can spend $20 per person in a reasonably priced restaurant. Once you know what you are spending your money on, you can better control it.

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