FINANCIAL THOUGHTS
Why Were You Told To Save Money?
SAVE, SAVE, SAVE.
Those are the words our parents would say to us when we’re younger. And up until now, it is an act that you are still practicing. But have you ever wondered, why must you save?
It is sometimes vague on what we are saving for. Yes, we are saving for future use but for what occasion? What is the money used for?
No one really taught us and even our parents might not have an answer that we wanted to hear. Thus this article will inform you of the reasons why you are putting money aside.
Save for a “Rainy Day”
When our parents talk about “Rainy Days”, what they meant was a day when you are no longer getting income or struggling to bring food to the table. The shortage of inflow but continuing outflow.
One way that will happen is that you are no longer able to work. There are only 2 reasons when you are not able to work. First, you get retrenched from your job.
There is not much you can do prevent from being retrenched. Even if you are the best employee this month, you can still be sacked in the next month. Thus the importance of an emergency fund.
The second reason will be that you are not able to work due to an illness. Same as the first reason, you can save up to be prepared for a period of struggles.
But there is also a thing called insurance, where it is useful in a situation when you are diagnosed with an illness or perhaps being totally disabled.
Therefore, saving for a “Rainy Day” is basically using that money you save up when you are not able to generate an income.
Saving for long-term goals
This may vary with people but one thing for sure, the amount you are saving for, is certainly not a small amount.
Most people would put long-term savings and retirement in the same column. And for retirement, you do need your current annual income to multiply the number of years you do not want to work and add in some inflation into that calculation. The end result is at least a 6-digit figure.
Saving long-term is crucial and it is almost impossible to achieve the expected amount. Hence, it is normal for anyone to use a financial instrument to help in achieving the goal.
Just be careful on which one you decide to choose. You have to match it with your own risk profile and time horizon.
Save for short-term goals
Your wedding, long Europe trips or even buying a car. Those are some examples of short-term goals.
Most of you might be familiar with those above. And by fulfilling these short-term goals, you manage to satisfy yourself for the next few months.
Your wedding, engagement or even downpayment for your first home might certain things that you classify as a need. But the other short-term savings could be considered just a want.
We are sometimes guilty of having too many short-term goals to a point that we neglect our long-term goals and needs. Thus you should ask yourself whether are you saving for the right things.
Save just for the sake of saving
This would be one that does not make sense but it is somewhat true to certain people. Everyone knows they need to save but what are you saving for?
If you have an amount of money lying in your bank account, you should ask yourself what would that money eventually be used for?
When you finally arrive at an answer, you just need to check if you have the amount needed.
If you are on track, good for you. But if you have not reached that amount, you should find ways on how to reach the intended goal. Do not hope and dwell around the status quo. Situations change only when you do change therefore do not procrastinate.
Start saving or regret later
Everyone has different goals and need thus there is no one way to save. But even at the end of this article, you still need to come to a realization that saving is a must and not an option.
Do not live from paycheck to paycheck as that is one sign that you do not save. You know who you are. Alter the way you spend and start thinking about your future.
Well, that’s the end of this article. Do share it if you think this is beneficial to your friends and family.
Disclaimer:
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
