Why is it important to save even a little bit each year?
The importance of saving money cannot be understated. In fact, with so many proven benefits, saving money is one of the best financial habits you can adopt. But, if saving money doesn’t come easy to you, or you just don’t see the point, it’s natural to ask yourself, why is saving money important?
First, let’s define saving. Saving means spending less than you are earning over a defined period of time, whether that be a day, month, year, or lifetime. It’s just common sense to spend less than you earn so if you aren’t there, you need to get there quick. Saving allows you to have financial freedom, long-term security, less stress, the ability to help others, and the ability to leave a financial legacy to those you care about. These are just a few of the benefits of saving money. So, let’s jump into some of the basics.
You need to cover the basics first; food, shelter, and transportation. That doesn’t mean leasing a $60,000 car because you can afford the $500/month car payments or paying $2,000/month for rent. Allocate your income on a % basis. For example, if you can allocate 30% to shelter, 30% to food, and 20% to transportation that leaves you with 20% discretionary left over. From that, you should really be able to save 1% – 5% and perhaps more in some months.
The easiest way to save is to treat your savings like any other expense, one that must be paid each month. Set up an investment account and make monthly fixed payments to it. When you get a raise or bonus, allocate a certain % to the investment account.
Saving requires discipline and sacrifice. If you have not been a saver historically, you will need to change your mindset and live by the mantra that from here forward, you will spend less than you make. Saving money is important because it provides security, stress relief, and freedom. While there are countless reasons to save, you need to find a reason that resonates with you. Whether it’s helping others, reducing your stress levels, leaving a positive financial legacy, or just having a little more fun, you owe it to yourself to prioritize saving.
If you or someone you know would like to set up a time to talk about what we’ve discussed in this blog, please give us a call at (706) 364-4281. One of our financial advisors would be pleased to speak with you.
Tom O’Gorman, MBA
Financial Advisor, Partner