We all know its a good idea to save money, but do we? We sometimes may ask ourselves if its really all that necessary if we have enough to pay for everything we need. Here are seven practical reasons to save money:
1.Emergency Funds - It is important to have an emergency liquid fund set aside to cover unexpected expenses. This could cover an unexpected car repair, your emergency appendectomy or a sudden job loss. Ideally your emergency fund should be three to six months of your expenses, but if you're just starting to save put aside at least $1,000.
2. Retirement - The earlier you start saving for retirement, the less you will have to put aside each month to reach your retirement savings goals. You can also put your money to work for you. Money you save now, even if only a small amount, has the most time to benefit from the principles of time, compounding, and tax-deferred growth.
3. Down Payment for a House - Your negotiating power goes a lot further when you have a significant down payment towards your home. You may be able to avoid paying mortgage insurance, get a better interest rate on your mortgage, or be able to afford a bigger home. Even if you have no short-term plans for purchasing a home, starting now to save for a future down payment will allow you to be more prepared when the time comes.
4.Vacations and More - Save money to have fun! You can save up for your tour of Europe or that Caribbean cruise. Additionally you can be saving for fun large-ticket items such as a Playstation 3 or a new boat. Your negotiating power is stronger if you have cash in hand on bigger purchases, and buying with cash is always less expensive than paying with credit.
5. Buying a Car - At some point, we all have to think about our next vehicle. Whether it is for a new or used car, paying with cash is a great way to keep your monthly expenses to a minimum. You may also be able to negotiate the price of the car lower if you are willing to pay cash at the dealership.
6. Answering Opportunity's Knock - We all envy those who are in the right place at the right time. If you build up your savings, you will be in the "right place" just waiting for that knock on your door. Whether its investing in a promising business venture, or getting in when that stock bottoms out, these opportunities often arise suddenly. Being a saver will allow you the freedom to capitalize.
7. Getting Smart - With the cost of education skyrocketing (even a public institution's costs are expected to reach six figures by 2020!) saving for you or your child's education can be vital to attaining your life goals.
Be sure to consult with your own financial planner before making any large financial decisions. These tips are good guidelines, but a professional can help you develop a model for saving that works best for you. If you have any questions for me, give me a call!
Eli Johnson (651) 357-2536
eli.johnson@results.net