At Truewealth Publishing, we talk more about investing than we do saving. But if you don’t
save, you don’t have anything to invest. So what follows are eight excuses that people often make for not saving money… and how to not fall victim to them.
1. I don’t earn enough to save
Deciding the time that’s “just right” to save is pretty much impossible. Chances are, you’ll never feel like you’re earning enough to save – so “never” becomes the best time to start. Someone who thinks he can’t save $50 when he’s making $500, he’s probably not going to think he can save $1,000 when he’s earning $3,000?
If you’re not a good saver, now’s the time to start. No matter how small the sum, set aside a small portion of your income to cultivate the habit of saving.
2. It’s my/his/your birthday/wedding/vacation…
Whether it’s a family trip, a birthday, a holiday, a wedding, there’s always something to take a serious bite out of your budget. These are “one-off” expenses that are anything but just-this-one-time.
Of course, unless you live in a cave, you can’t avoid these kinds of expenses. But you can control them, by seting a budget… and sticking to it. And to play it safe, leave your credit cards at home and just go with a reasonable amount of cash – when it’s gone, it’s time to go home.
3. Why save when interest rates are so low?
Low interest rates can kill the motivation to save. It hurts when your money is earning 0.01 percent (if that) in the bank.
But remember, you don’t grow wealth through keeping money in a bank. And those kinds of savings are meant to be for emergencies – not to grow rich. If you’re looking for interest, the magic of compounding works much better with stocks that pay a healthy dividend.
4. I have other liquid assets to sell when I need to
Buying low and selling high is great when you can do it. But sometimes an unexpected large expense can force you to sell to raise cash at just the wrong time – when a price is lower rather than higher, for example.
What’s more, there’s no shame to having cash. Its value won’t fall much, it’s there when you need it, and it’s there when you spot money lying on the floor. What’s more, it’s a great hedge against falling markets.
5. I don’t have to save – I make plenty of money
Many people develop big spending habits in anticipation of their current income staying the same – or rising – indefinitely. Or they splurge on something in expectation of a bonus in December, or a raise at some point soon.
Status quo bias is an enemy of investors. It’s also an enemy of savings. Perhaps tomorrow you’ll earn more than you’re earning today. But maybe things won’t be just like this, and maybe you’ll lose your job or break your leg or get a divorce. And if you have a lifestyle that can only be supported by a big income – and no savings – you could be in for a lot of trouble very quickly.
The 50/30/20 Rule
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