How to save money and why do you need it?
There are many reasons as to why you should save money. Different people save for different reasons, but it’s easier to save if you have a clear goal or purpose for the money you are saving.
Below is a list of reasons that explains why you should save:
1. Become financially independent
Being financially independent is not the same as being wealthy, but knowing that you will be okay even if you don’t receive your monthly paycheck can give you a piece of mind. Someone who is financially independent has assets that would generate income. In order to achieve financial independence, you need to save money and make good investments.
2. For education
It is always a good idea to invest for a better future, and the best to obtain that is by getting a solid education. Each year the cost of education keeps getting higher. If you have goals of studying at a college or university, you will need lots of funds.
3. Own a house
Just like education, real-estate prices are also going up. If you are planning on buying or building a house, it’s a good idea to start saving now itself. When you have more funds you have to make a down payment, you’ll have more power to negotiate the terms of your loan. As a result, you may be able to get a better interest rate, or even buy a bigger house that’s more expensive.
4. For emergencies
As much as we hope that predicaments won’t happen, we all know that they do. A family member could get terminally ill, you might need to make an emergency trip, you may have a car accident or a breakdown, bad weather could flood your basement or crack your pipes, and the list goes on. Most of these unexpected emergencies can be quite expensive. Therefore, you have to be prepared rather than becoming another victim.
How to save money?
Follow the 60-40 rule. 60% of your gross income should go to fixed and overhead expenses. The remaining 40% should get divided into four chunks of 10% each for retirement savings, emergencies, long-term savings, and travel or entertainment.