Top 3 Things Saving Money Will Do For You

September 21, 2018 Stu Q

Understanding where your money is going every month and having a budget is the first step towards financial freedom. Once you reach this point of managing your money, it is time to take it one step further. This step is saving. Within your budget, you should have already established an emergency fund of approximately $1,000. The savings we will discuss takes this further.

1) Being Prepared For The Unexpected

Saving money is simply a means to accumulate funds for some event or item in the future. In the case of an emergency fund, you are saving $1,000 for random emergencies you are not planning for. In addition to this, it would be prudent to have saved at minimum 6-months worth of expenses. This can take quite a while depending on your circumstances, however, it will provide a great deal of security. These funds are similar to the emergency fund. However, these should never be touched unless you are in dire need such as the sudden loss of a job. The 6-months of expenses should prevent you from losing everything and will provide a nest egg while you find a replacement job. If you end up using the funds due to a loss of employment, be sure to replenish this account once you have a new job.

2) Doing The Things You Have Only Dreamed Of

If you are proactive in saving money, there is really no limit to what you can do. If you are dreaming of one day traveling the world, then you will need to save for it. Perhaps you are wanting to put money down for a home. The power of saving money will provide you a means to accomplish this. This is also true if you are wanting to get a new car in a few years. You can begin saving money now to be able to pay cash for a car in the future. Regardless of what it is you are desiring, your only limitations will be from your own saving abilities.

3) What About Getting Old?

You should have some kind of a 401k or IRA at this point. If you don’t, you need to get one setup as soon as possible. Assuming you have one and or both of these accounts, you can certainly provide a larger impact with more savings. Contributing more money every month towards your overall retirement goals will provide a greater benefit when you are older. However, you will want to make sure you are earning a reasonable interest on the accounts as well. Consider two alternatives for saving. In each scenario you are saving $30,000. One scenario you have an interest rate of 0.8% and the other you have approximately 3.2%. If you were to compare the two over five years, the 0.8% would make about $1,200 and the 3.2% would make about $5,100. Which scenario would you want? It matters how you are saving your money.

Saving money is a great tool and activity. If you are mindful enough, your savings potentials are unlimited. However, you have to first take action to begin saving and managing your money. Without this, you are never going to achieve such amazing results.