Attitude towards saving money is not the same for everyone. Some people are extremely cautious and feel better with some cash at the bank while others don’t mind living from paycheck to paycheck. You can spot differences between countries, types of education or just personalities. This being said there is no good reason to justify NOT saving money. Life is beautiful but also unpredictable and whatever you decide to do, you will have to open your wallet at some point.
Saving money is good, knowing why is better
Saving money is not a goal in itself. You should know WHY you do it in order to stay motivated. If you have a saving goal then you won’t feel that bad when you sacrifice your morning coffee. Being frugal should lead to a better tomorrow and not mean living miserably everyday. So now how do you decide what you’re saving for? This depends ENTIRELY on you and your life goals. We can only recommend to put some money aside for future peace of mind. Better safe than sorry.
Know your priorities to build a money saving strategy
If you’re a student, you may want to pay off your student loan debt or buy a car. If you just got your first job, you may aspire to save for a deposit to buy a house. If you have small children, you are maybe thinking about building a money pot for their future studies. You still have the option not to save anything and to rely on borrowing. The problem is you never know how much it will cost you while you know how much your savings are worth.
It may be hard but there are a few things you should save for…
If you want to have some peace of mind, you should build an emergency fund to cover any unexpected life event or expense. Ideally, you should keep at least between 3 and 6 months of expenses to cover for any job loss or unseen spending. Of course, you may not spend as much if you lose your job and you may do some lifestyle adjustments but that’s a good guideline. You can also mitigate the risk by considering taking a medical insurance so you don’t get in debt if you get sick. The second thing yo should save for is retirement. It may be the least of your concerns if you’re a student but time goes fast. The general guideline is to save between 12 and 15% of your income each month when you start in your 20’s. You may not be able to save as much each month but the important thing is to spread the saving in the long term. Retirement money is also better invested in order to beat inflation.
The how much shall I save equation
Now there are other things in life you want to save for. Take a piece of paper and write down what you would like to achieve every ten year of your life. Do you want to buy a house or would you rather keep renting and use your savings to travel the world? Do you want to buy a car or are you satisfied with taking the bus or bicycle to work? You should also include your personal big dreams such as traveling or buy a vintage car. Now, give an estimate to how much your goals are worth and how long it is likely to take you to achieve them. For example, I want to travel to Thailand next year which is likely to cost $1000. I am planning to go in 9 months so I need to save around $115 each month. Saving is like drawing a budget it needs planning and the earlier you start, the easier it is!