Many of us wonder why we should save money. Saving money is a goal most people set out for themselves. However, since credit cards and lines of credit are fairly easy to get, many of us rely on that on a daily basis. So if the credit is there, why shouldn’t I use it? It’s free money and as long as I make the monthly payments, it is good to go, right? WRONG!….
Using credit only to make your purchases cost you more in the long run and give you a false sense of financial security. So read my list of 10 reasons why we should save money and avoid credit.
#1. Gain Financial Independence
Living paycheque to paycheque is no one’s idea of freedom. When you learn to save money, you are afforded so many more choices and can have that emergency savings to depend on in unforeseen circumstances.
You may not own your own personal jet but at least when your car breaks down, your entire life will not crumble.
Being financially independent means that you are not relying on anyone else to make things happen in your life. You are able to live comfortably, take a vacation, or perhaps even invest a little. There is a freedom in not having to wait anxiously for payday to do what you want.
#2. Avoid Paying Double for Everything
I will admit I personally use my credit card for all of my purchases. However, as soon as I get home I transfer the money from my account to the credit card. I am never paying any interest to the credit card companies.
Unfortunately, most people who use their credit cards for their purchases rarely pay off the bill entirely each month. Therefore, because of the additional interest charges, you may be paying almost double for everything you purchase. So that “great deal” you thought you had has now cost you more than if it had been a regular price!
When you pay with cash/debit, you are paying the price you see. So waiting until things are on sale allows you to save even more! This is something I do when it comes to reducing cost on my groceries – I plan my meals based on what is on sale or what I find on the Flashfood App.
#3. The Ability to Purchase a Home
Unless you are changing locations every year, renting a home is money down the drain. Unfortunately, most of us must get a mortgage from the bank to actually purchase a home. The bank will not lend any money without a down payment (usually a minimum of 5 – 10% of the asking price).
The more money you are able to out down the better so that you have to borrow less. As a result, you may be able to reduce your amortization period significantly, saving you tens of thousands of dollars. That, in itself, is why we should save money.
#4. Buying a Vehicle
Just like buying a home, you are required to put some money down when you get a new or used vehicle. There are some exceptions where it is not required but that is reserved for those with perfect credit scores. (By the way, keeping a good credit score is completely possible!)
Again, the more you can put down, the less you will have to borrow which saves you a lot of interest. If your credit is poor, some loans can be upwards of 20+%! So a $20 000 loan will cost $24 000! That is $4000 in interest!
Then there is the decision about new vs used. A new car is lovely to have but as soon as you drive it off the lot, it loses almost 20% of its value. Try looking for a slightly used vehicle and save yourself thousands.
#5. Getting Out of Debt
If you are reading this article, you are probably experiencing at least a bit of debt. And obviously you want to be free from debt but you must have some money saved. Awwww, the endless cycle!
Many people are using their credit cards to pay off other debt but then that means you are still paying interest to the credit card companies and you are still in debt. Just another form.
Start saving $500 – $1000 in a reserve fund. Then when those unexpected expenses pop up, you can handle it more easily.
#6. Unforeseen Expenses
The brakes on my car suddenly needed replacing and luckily, I had some money put away that I could get them fixed right away. Unforeseen expenses happen quickly and without warning. It is much easier to deal with if you have some money put away. For these instances, it is wise to have at least $1000 saved.
#7. Prepared for Annual Expenses
Annual expenses – those that come once a year – are often overlooked. However, these expenses can add up to some significant amounts and if you are not prepared for them, you can end up in more financial trouble.
When you save a certain amount on a regular basis (consider putting away some from every paycheque), that hot holiday you wanted to take next winter isn’t out of the question. Property taxes, insurance costs, gifts, vehicle maintenance or even home repairs need to be accounted for.
This way, you will avoid having to use your credit cards (and accumulating more debt). Not only are you paying less overall because of no interest but you also will be less stressed.
#8. Handle Emergencies
No one likes an emergency. However, they are inevitable. Will you be prepared:
- if a family member passes away and you need to travel immediately?
- if someone runs a red light and smashes into your car?
- if Mother Nature decides she wants to bring rain for 4 days straight and your basement floods?
All of these emergencies are expensive and can occur. Instead of crossing your fingers and toes hoping they won’t happen (BTW, that doesn’t work), be equipped to handle the situation.
#9. Job Loss or Injury
The economy is volatile right now and no one’s job is secure. So many companies and businesses are restructuring and thus eliminating jobs. Yours could be next and this can come without warning. Would you be ready?
Perhaps you or your partner are injured or become ill and cannot return to work for a significant amount of time. When you suddenly remove that source of income, how will you pay your bills? Feed yourself?
These are the type of situations that force many people to turn to credit cards and make them realize after the fact why we should save money. This only makes a situation go from bad to even worse in a matter of a couple of months. Even if you are fortunate to get another job quickly or receive some sort of compensation, you may have incurred more debt. Debt that needs to be paid off.
Be aware that these types of things can happen and by saving a little each pay period, much of the turmoil can be avoided.
#10. Truly Enjoy Life
The old saying, “Money can’t buy you happiness” may be partially true but oh my, life is much easier when you have it. The majority of us have experienced tough financial times at one point or another. It is incredibly stressful and can take a toll on us emotionally, psychologically, and physically.
The cycle of crisis after crisis begins when we are struggling with money. Often depression sets in and we are continually struggling to find ways to manage it naturally so that we can truly enjoy life!
Be organized and prepared for what life may throw you financially. Put aside money on a regular basis so that you can begin to take control of your monetary affairs. Saving money is essential if you want to manage your finances in a responsible manner. As soon as you finish reading this article, put aside a bit.
Begin by setting up an automatic withdrawal from your account on payday. Put it aside into a separate account. If you come into some unexpected money, don’t spend it all immediately on frivolous items.
When I get my tax refund each year, I put it aside into savings and then I know I am able to handle the next unexpected expense or maybe I can go to Mexico next year. When we find those reasons why we should save money, we often can find the motivation to do so.