Why is saving important for financial wellness?
Saving is probably the most important habit a person can develop to achieve financial wellness. It is an indicator of positive money management skills and a positive money mindset. If you have money to save, it shows that you are spending within your means. As you save more, you will create a fund that you can use in case of emergencies.
Once you have this nest egg, it gives you a sense of security and reduces money related stress.
What are the different ways of saving money for the future?
Follow the 50-30-20 rule
Creating a budget and following it is a very important part of financial wellness. It teaches you about self-control and how to manage your money wisely. The 50-30-20 rule is the most basic budgeting rule available, where you spend 50% on expenses, 30% on wants, and 20% on your savings or investments.
Pay with cash, not credit
Self-control is a very useful life skill and plays an important role in financial wellness. One of the best ways to teach yourself financial self control is by using your debit card or cash for big purchases instead of your credit card.
Buy the best quality product
Spending more is the worst thing to do when you are trying to create the habit of saving. When you are buying things that you will use for a long time, it is better to spend more money and buy good quality items because you will use it for what it’s worth. For example, buy a good quality bed because you will use it every day for years and sleeping on a bad bed can cause back problems which will again cost you in the form of expensive medical bills.
Common reasons why we don’t save
1. We live beyond our means
It is difficult to save money when you spend more than you earn. This habit is especially true with young people as they don’t often take a very long-term approach to these things. Look at your expenses and cut out the unnecessary ones. Suddenly you will be saving more than you realise. Also, avoid using credit cards as people who use credit cards tend to spend more.
2. We do not save because it is not a priority
We are alway told to live in the present. This is great for our mental health but not our financial health. Because we choose to ignore the future, we don’t consider situations where we will need money like emergencies, retirement, etc.
3. We don’t have a plan and vision
To save consistently, it is important that you have a plan of action. Just saying you will put aside 10% of your income every month is not enough. You need to look at your monthly expenses, and be realistic about how much money you need for your expenses, how much you should invest, and how much you need to save. Setting some financial goals may be a good place to start.
4. We don’t know how to save
Another reason why we fail to save is because we just don’t have the habit of doing something like that. Consistently putting aside your savings takes a lot of discipline. But once you have the habit, you will consistently continue to save your money. If you don’t know how to start, hire a financial advisor to help you.
At SmartMoney Education, our goal is to motivate, inspire, and guide you in your journey towards financial well-being. To learn more, get in touch with us today and set up a one-on-one session.
Start saving today!