Saving money is crucial. This is not an earth-shattering revelation. Everybody knows it. The more money you have in the bank, the better it is for you. Why? It’s because emergencies come up all the time; you might lose your job, you might experience natural disasters, somebody in the family might get sick. Anything and everything can go wrong, and having a little bit of money saved away makes dealing with rainy days much easier. Emergencies come and go. You just dont know whats around the corner. And having a little cash saved up can really save your family and yourself a lot of headaches and hassles down the road.
Another crucial reason why you should save money is that you should have the foundations for building wealth. If you dont know how to save, you cant build wealth. Its just that simple. Unless youre a massive corporation and you can borrow your way into riches, most normal human beings need to build wealth by saving money.
Finally, another reason why you should put away some cash is that you should enjoy the fruits of your hard work. Your money should not just go towards keeping you alive and paying expenses, but also should act as a reward for all the hard work and sacrifice that you put in. That is why when you save a little money and then later buy a little something nice for yourself or your family, it feels good because you are rewarding yourself. Unfortunately, most people have tough time saving money. According to a recent study in the United States, a vast majority of Americans are actually in debt. Instead of having money saved up, they are in the red.
Here are the top five reasons why people fail to save:
1. No discipline and self-control
Self-discipline is really summed up in one sentence: Doing the hard and necessary stuff now so you can enjoy benefits in the future. Unfortunately, most people no longer want to wait to eat their cake. They want to get dessert now, enjoy themselves now, and worry about paying for it later. Unfortunately, modern advertising doesn’t help things because all the ads that you see focus on instant gratification and buying stuff now. This can have serious effects on your personal finances if you dont exercise self-discipline.
2. Mistaken ideas regarding inflation
While inflation is not that big of a deal recently, it has historically been a major headache for most consumers. Historically, inflation has been around three to twelve percent. Inflation rots your money. The stuff that you can buy with ten dollars last year, you cant buy with ten dollars this year. Every year that passes, you are able to buy less and less goods. That’s the power of inflation.
When people have a mistaken idea about inflation, they think that they just need to consume everything they earn now because inflation will eat it up. This is mistaken thinking. While it is true that inflation will reduce the value of your earnings, it is also true that if you just waste your money, then you would have nothing to show for all your hard work. Its a better idea to save your money and invest it in investment vehicles that yield a higher rate of return than inflation. This is the best way to preserve your money. Investing in real estate or stocks are usually good options for beating inflation over the long term.
3. Paying everyone else except yourself
One of the most basic saving techniques you can teach your child or your family member is to always remember to pay themselves first. When you pay everybody else except yourself, you are basically just wasting all your money on expenses. You might think to yourself, Well, I dont really have anything left over. Its all in your head because if you get into the habit of paying yourself first, you will then make a habit of reducing your expenses so you have money left over to take care of expenses. You may look to cut corners in terms of food costs, in terms of electricity costs; there are a lot of things that you can cut back on as long as you remember to pay yourself first.
4. Buying trinkets is not investing
Many people think that buying jewelry or even a car is a form of investing. Sorry to break it to you, but no, those items do not appreciate in value. Cars prices drop immediately after you drive the car off the lot. The same goes with jewelry; unless youre dealing with a very renowned jeweler, the value of the jewelry that you bought is really tied into the precious metals that the jewelry is made of. Its much better to just buy the precious metals outright instead of buying it in the form of jewelry. Dont buy trinkets. Youre not saving when you do that and youre not investing as well.
5. Buying liabilities is not saving
Many people think that buying a home is a form of saving. Others think that buying a business is a form of saving. No, theyre not. You have to look at how the sale is structured. In most cases, youre buying a liability and not an asset. An asset puts money in your pocket; a liability pulls it out every month. Know the difference. You might be tempted to buy stuff because they are marketed as assets. But at the end of the day, theyre not. You have to look at your bottom line and really focus on saving money so you can grow wealth later on.