So you’re just days away from getting paid…
You check your bank balance and just sitting there – waiting to be enjoyed – is an extra $100 you weren’t expecting.
What to do?
If you’re like most people that $100 gets spent. You go out to dinner, buy those new shoes you’ve had your eye on or – worst case scenario – get that light fixed on your car.
What most people don’t do is carefully sock that money away in a savings account – ready for a rainy day.
Saving Is Tough
Saving is hard work. I get that.
Why should you deny yourself a few pleasures in life – which you’ve worked hard for, incidentally – in exchange for – well – nothing.
Putting $100 into your savings account seemingly has no real benefits. There’s nothing physical. No new cell phone. No sunny beach vacation. And certainly no shoes.
No wonder most people opt for the first option rather than the second.
But the fact is that there are benefits to saving money. Even better, the sooner you start saving, the bigger those benefits become.
If you’re wavering over starting a savings account, but you find its something you keep on putting off until “tomorrow” then let’s look at some of the awesome reasons why TODAY is the day you should get serious about saving money.
Albert Einstein called compound interest the “8th wonder of the world”. He allegedly stated “he who understands it, earns it … he who doesn’t … pays it.”
Now, I’ll grant you, that the interest rates currently being offered by banks and investment firms aren’t too exciting. Why save your money for a rainy day if you’ll only be earning two or three percent?
The answer is that even at these rates, your money can grow with surprising speed.
Here’s another way to look at things…
That $100 sitting in your account isn’t actually just $100. It’s $100 if you spend it right now. But if you put it into a savings account then pretty soon it’ll be worth quite a bit more than $100. Keep on doing that and you’ll rapidly start building wealth for your family.
The first benefit, therefore, of starting to save money now, is that the sooner you start, the more you’ll end up with thanks to the wonders of compound interest.
When opportunity knocks, you better be ready for it.
The problem is that these opportunities often come with a financial element. Maybe a business comes up for sale which you’d love to buy. Maybe your dream home suddenly goes up for sale. Perhaps you’re offered your dream job – but it’ll mean taking a small pay cut initially.
All of these could be fantastic opportunities for you – but each of them will require money.
Another way of thinking about your savings is therefore in terms of future opportunities. The sooner you can build up a bank of savings, the sooner you can begin to take these potentially life-changing opportunities as they arise.
So you’ve got a job right now that’s at least passable. But what happens if your job stops becoming passable and instead becomes downright terrible?
What if you get a new boss that stinks, or your job role changes, or your office is relocated. What then?
Most people are trapped in a cycle of earn and spend, earn and spend. Many such people are leveraged up to the hilt with debt and are maintaining a very fine balance with their finances.
That new boss that’s driving the life out of you? Too bad: you need the money.
And so you just carry on, getting ever more tired of your job. Of life.
I’ll leave you to guess quite what the “FU” stands for, but having savings allows you to say “FU” to situations that don’t suit you. Having the funds to be able to walk away from a situation that isn’t helping you can be a priceless reason to start saving today.
The benefits of financial security should not be understated. Whether it’s a surprise utility bill, a loved one needing expensive medical care or you getting too ill to work, having savings adds security to life.
Be honest: if you needed three months off work for an operation, do you think you’d recover quicker and enjoy yourself more if you didn’t have to worry about money during that time? I’m pretty sure you would.
Suddenly you’re no longer worried about a surprise hit to your budget.
The truth is that none of us really know what the future holds. I truly hope the news for you is all good, but we all know that life likes to throw us a curve ball from time to time. Savings hep you weather that storm and come out strongly the other side.
Possibly the most obvious factor of all, but when you stop spending money on pointless consumer goods and instead start building up your savings you’re opening the door to greater wealth.
The fact is that the interest you’re earning on your savings can be seen as passive income. Once you’ve put the effort into saving that money, the interest keeps on coming no matter what you do.
That means that every dollar you save will pay you back for as long as you leave it in the bank. More savings means more income over the long term. How wonderful to be able to save money now, and effectively increase your income later in life.
Possibly the Holy Grail of savings (and investments) is reaching a point where the interest your earn is equal to your living expenses.
At this point you no longer need to work for a living; you’re financially independent. You can simply live on the interest and leave your capital in the bank, accruing yet more money.
While there’s no denying that saving so much is tough without a high paying job, the truth is that the sooner you start, the more time compound interest has to work and the more likely you are to reach that goal.
Imagine giving up a few pairs of shoes and ending up being able to retire years earlier in exchange. Sounds like a pretty good deal to me…