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There’s no denying that money can be difficult to manage and it’s difficult to know the things you should be saving money for. Regardless of what you earn, it can often feel like we don’t have enough- that’s because when your income goes up, often your outgoings do as well. It’s easy to see people in big houses as people who have lots of disposable cash, but their big house will be more expensive to run. All in all, most of us (except the very wealthy) can feel the pinch with money on a regular basis.
For this reason, saving is important. We need to have savings to prevent us from getting into debt, and to act as a buffer if a sticky situation arises and we need money to put it right. Here are just three things that all of us should be saving for, regardless of our income.
A special occasion or luxury
It could be saving for Christmas, saving for your wedding, the ultimate vacation or a new piece of technology that you really want. As well as long term ‘emergency’ savings that you never touch unless you genuinely need to, it’s worth having separate shorter term savings where you’re putting money aside for a specific goal.
When you do this, it means you’re not being tempted by loans and credit cards which can quickly land you in debt. It’s not to say that all lines of credit should be avoided, used properly loans and card can help to build your credit score and put you in the best position for applying for things like a mortgage later on.
However, it’s spending ‘money you don’t have’ on luxury items just because you want them now that can get you in trouble. The best way to utilize a credit card for example is to spend on it and pay back all (or most of) the balance each month, making sure that you’re not accumulating too much debt. This way you avoid high interest charges, but you still get green marks against your name each month that show you’ve been paying on time.
The best way to save for special occasions or luxuries like holidays is to plan ahead. A few dollars a month can really add up and allow you to afford the things you want without falling into debt. If you struggle putting money away, in the case of a special occasion you could buy items towards it when they’re on sale. Christmas paper and decorations in January for example will be a snip, put them in a box and keep them for late in the year.
An emergency or unexpected bill
There’s nothing quite as stressful as an unexpected expense coming out of nowhere, requiring money that you simply don’t have. It could be a medical expense, a broken down car or appliance, even a loved one needing to be bailed out of jail! Thankfully there are loan companies like Amistad Bail Bonds designed for this scenario, but it’s always helpful to have money available as you just don’t know what will come up.
Life is full of twists and turns, it’s not always easy but having money behind you can often prevent a stressful situation from becoming even worse. Another way you can protect against many emergency scenarios is by getting insured. If you have boiler insurance for example, you won’t have to be stuck without heating or hot water until you can afford to fork out for a new one.
If your house is burgled, with home insurance you won’t end up out of pocket replacing everything you own. Medical and dental insurance will protect your health and prevent bills costing many thousands to accumulate.
In some cases, having some savings put away could prevent you from losing your house. If you lose your job unexpectedly and can’t afford to make mortgage payments your home could be repossessed and you could lose everything. Having money stashed away that you can use until you find something else would make a massive difference. Aim to have at least three months of mortgage and bills payments put away in your emergency fund for this reason. Only ever touch this account if you absolutely have to.
Research has shown that as millennials, we’re simply not saving for retirement. Low wages, zero hour contracts and the high cost of living combined can mean that many of us barely have money to live in the here and now which could explain this.
However, it’s important to think ahead. Even a small amount every month will add up, and will make the later years of your life much more comfortable. When you’re in your twenties and even your thirties it feels like retirement is a long way off and you have plenty of time to get everything sorted. However, starting early is key, it doesn’t have to be a huge amount just what you can afford.
After you’ve worked hard your entire life, you want the chance to be able to enjoy leisure and hobbies and to do that you’ll need to have money put away. The state pension (if you qualify) will only be just enough to live on, if you want more for yourself in your later years then start thinking about it now.
Ideally, you will have bought a house and paid off your home by retirement age so you’re not having to pay for accommodation. But there will always be bills, food and other expenses that need to be covered at the absolute minimum.
It can be difficult to save money, many of us are living paycheck to paycheck and struggle even being able to afford the things we need in the here and now. But if you’re able to, even if it’s a small amount, having money put away will make your life so much easier in a sticky situation. Rework your budget, find out if you’re overspending anywhere and make cutbacks. That way, you free up some cash to save.
Are you a saver? Do you have shorter and longer term savings goals?