It’s the beginning of a new month again. Payday was already a week ago and the wallet is emptying fast. All those debit orders, account payments to settle, expenses to cover and one emergency trip to the ER, with an inconsolable toddler, have taken its toll on your financial position.
In fact, the short-term loan you took out eight months ago to expand on your small business idea has morphed into an extra strain. The plan was put on hold once again, leaving only the loan repayments behind.
If any part of these scenarios sound familiar, you are probably one of many South Africans living from paycheck to paycheck. More common than you may think, this state of existing from hand to mouth is where the majority of the population find themselves at some point on their journey.
This is especially true when people are faced with major life changes, growing family circles, unexpected career moves and emergencies that derail even the most carefully laid plans.
Is it wise to live this way for an extended period of time? The truth is it makes life more stressful, and less financially secure than it needs to be; all because one small detail of your financial life is missing: active and effective savings. Here are 10 ways in which intentional saving opens doors to a better life:
Savings sweat for you
Savings and investment can be considered a passive income as your money works for you, while you get on with other pursuits. The money sweats for you by earning interest.
Depending on your personal risk profile (we all have different risk aversion thresholds), the interest-earning spread will differ and the time required to see sustainable returns will, too.
If you seek high returns quickly, for example, you may be willing to invest in higher risk portfolios.
Savings make dreams come true
Following through on an intentional savings plan achieves goals. When we have S.M.A.R.T. goals – which are specific, measurable, achievable, realistic, timed – our plan is more like to end favourably. Stick to the plan and realise your dreams.
Saving is a vital money management skill
Even though it may not feel like it, being on top of your saving strategy is just as important a skill as managing monthly expenditure.
Earning more leads nowhere if your disposable income increases at the same rate as your spending. Earning more should rather lead you to save more, which opens up opportunities for the future.
Saving money is lucrative
Savings lead to wealth – real and lasting wealth. Sustainable wealth is the key to increasing living standards for future generations and securing financial comfort in your old age. Saving also enables new ventures, great ideas and lifelong dreams to come into being.
Saving encourages long-term perspective
When we sacrifice now in lieu of future financial independence, our perspective shifts from staying afloat to building a life boat. It helps us create a long-term perspective, encouraging delayed gratification for the sake of future success.
The execution of a long-term plan is a way to stay motivated and involved in the practical steps of each day. Focus on sustainable growth, rather than becoming disappointed when you notice no immediate improvement.
Savings creates breathing room
When we have a savings buffer zone in our personal finances, the unexpected isn’t nearly as terrifying. Saving creates room for the unknown, taking the pressure off disposable income. It is a platform from which to deal calmly with what life throws at you.
Intentional saving is positive for the soul
Once we forget about the little things we are giving up this month in order to save, our efforts produce a sense of achievement.
We feel vindicated when it comes to watching our savings grow, or when we are able to cover an emergency expense situation using some of the savings accumulated so far.
Financial independence feels absolutely wonderful, especially when it has taken a measure of hard work, commitment, sacrifice and self-control on our part.
Depleted savings make everything else more difficult
Stating the obvious, a zero balance on your savings account makes dealing with emergencies completely impossible; and stressful.
Diligent saving may seem like a tedious exercise, but the extra cash will surely be appreciated in times of unforeseen need.
Even if it is not enough to cover the entire cost of the emergency, it creates a buffer and ultimately decreases the amount you may have to borrow.
It decreases the potential interest portion, therefore, you may need to repay over subsequent months and years.
Saving and investing takes time
Any long-term strategy requires patient endurance before any results become evident. Keep going. Saving and investing will reap marvellous benefits for you and your family, but it needs time to grow to a level that is worth talking about, especially when contributing only small monthly amounts to the resource pool.
It is easier to notice quick results when you invest a lump sum. Even large amounts, though, need time in the market to move in the right direction and smooth out kinks caused by unpredictable marketplace events.
Savings create higher standards of living
Wise and intentional saving strategies have the potential to catapult an entire generation onto a higher standard of living.
Suddenly, without noticing it, your family’s financial position plateaus onto solid ground, even in times of a personal financial emergency or economic crisis.
You will reach this point, and it will be worth the months and years of intentional saving, which may have taken sacrifice on your part.
How successfully have you managed to save money in the past? It is never too late to implement a new strategy for savings and investment.
Reassess your personal financial position regularly and make it a top priority to be intentional about measured savings (before deductions have eroded the money pool). Saving opens doors!