There is a lot of great financial advice about cutting costs and increasing your income. However, this won’t help you accumulate wealth, unless you save and invest part of what you earn. People who increase their income without saving anything for themselves wind up churning away on a bigger treadmill, trying to stay ahead of bigger bills. They never get ahead, even after a lifetime of hard work.
Here are three great reasons to save.
1. The Buffer
Let’s face it, life happens. People get sick, their cars break down and they get laid-off at work. In the old days, people saved up money for these types of events. Now, most people try to cover it with a credit card. The problem with this strategy is that credit cards will only get you so far. Sometimes, you need some cold-hard cash to pay the bills. Plus, people are often left with a mountain of debt to climb out of, after a small setback.
Savings are like a life boat on the deck of a cruise ship. Most of the time, you never give them a second thought. But, if you hit an iceberg, they become the most important thing in your life. Make sure you build your financial lifeboat, before you get tossed into the icy waters. Make sure you protect and maintain your savings, so it’s there for you when you need it the most. It brings peace of mind.
2. The Growth
If you tried to save up a million dollars by saving $5 per day, it would take you around 548 years. But, if you invested the $5 per day at 10% interest, it would take you only 42 years. So, it’s not only important to save part of your income, it’s important to invest it wisely. After a couple of years, the growth or return on your savings becomes higher than your future deposits. The initial investment starts doubling and quadrupling, until you have a substantial amount of money.
The sooner you start saving and investing, the more money you will accumulate in your lifetime. If you wait until you are in your 40s or 50s to begin saving, you won’t have enough time to fund your retirement. The higher the return you earn on your savings the faster it grows. That is why it is important to invest your money, instead of lending it to the bank for a pittance in interest. If you earn 1-2% on your money, it may take hundreds of years to save up a million dollars. And, it will be worth much less than when you earned it, because of inflation.
3. The Future
The problem with the future is that it comes whether you plan for it or not. Those who fail to plan for the future must accept whatever the future brings them. By having some savings put aside, you can choose your own future, instead of depending on the government to take care of you. Right now, governments are making promises they know they can’t afford to keep. Look at what is happening in Europe. Look at what has happened in Stockton and San Bernardino, CA. That could be the future for many retirees around the world.
I’m not sure what others have planned for their retirement years, but I don’t intend to be a greeter at Wal-Mart. I don’t intend to work until I drop. And, I don’t intend to eat dog food. I was poor when I was young and I don’t plan on being poor when I get old. I have worked way too hard during my lifetime and I deserve some time to relax and enjoy myself. That is why I have been saving for the past 27 years.
The Bottom Line
The bottom line is that part of everything you earn is yours to keep. If you give your entire paycheck away to others, without keeping some for yourself, you cheat yourself out of your wealth, your future and your peace of mind.
“The art is not in making money, but in keeping it.”
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