The Importance of Saving Money
It may sound like an obvious question. However, there are several specific answers. Savings is one of the most important factors for a healthy financial situation. Savings provide extra protection in case the unthinkable and the unexpected occur. Savings also reduce your debt, which in turn raises your credit score. Here’s how having a significant amount of “liquid” cash can help you:
1. An Unexpected Layoff – With an unemployment rate at 10%, there is a high probability that you might experience a lay-off in the near future. It also could take as long as 6 months or more to find another job! Having enough money to cover your expenses while out of work will definitely mitigate the negative effect of a job loss.
2. An Unexpected Health Emergency – We all hope we will never ever have to experience the contraction of an illness. Despite an illness’ threat to our health, it can also be a threat to our wallets. The cost of healthcare is astronomical and medical insurance (for those lucky enough to have it) does not always cover 100% of the medical bill. A huge nest egg will be extremely beneficial should an unexpected and unthinkable illness come about.
3. An Unexpected Repair – You’re about to leave for work when you notice you have a flat tire! No! Another expense! But with enough savings the expense of unexpected car, appliance, home or electronic repairs do not break the bank!
4. Starting Your Own Business – When there is a lack of jobs and a high unemployment rate in the economy (like right now!), sometimes you have to create your own job by going the entrepreneurial route. With banks reluctant to lend out money, you’ll most likely have to finance your business yourself. Savings would absolutely help you start your own business. Remember, don’t just start any business. Do your homework. Make sure you know what you’re doing and have extensive experience in that field. Plus, it is likely for many businesses to fail and/or be unprofitable in their first few years. This means you’ll also need enough money to keep the business going for several years (working capital).
5. College Expenses – College tuition costs are enormous. Since the current credit crisis is making it extremely difficult to receive student loans, it is now more common for people to finance their children’s college education themselves. This will require some hefty savings, in addition to financial aid, scholarships and grants. Visit our Links page for websites that will help you save money for college.
6. Vacations – Maybe it has always been a dream of yours to participate on a hike in the Grand Canyon, or travel and see the Leaning Tower of Pisa in Italy. Savings would help make these dreams come true!
Remember, only travel if you have the cash—don’t get into credit card debt!!
7. Gifts – Your best friend’s birthday is coming up and you want to purchase them a gift in honor of the special occasion. Without savings, you cannot make this possible—unless you go into debt, which is not an option.
This is why saving money is important. But HOW can I save money when I’m living paycheck to paycheck?
To find out how, click here.
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