“A part of all I earn is mine to keep.” George S. Clason, The Richest Man in Babylon.
We are always told that it is a good habit to save before you spend, and deep down we know it is probably true.
But when temptation strikes, it is important to be able to remind yourself exactly why you are saving, so that you don’t lapse into a spending spree which brings short-term pleasure but long-term pain.
Take note of our seven reasons you should save before you spend, and keep yourself on the financial straight and narrow. Get in the habit of saving a small amount each month, and reflect on the benefits you see.
7 Reasons to Save Before You Spend
1. It Puts You in Financial Control
If you can budget your expenditure to make sure that you are spending less than you earn, you are already on the path to financial stability, and taking control of your financial affairs.
Predictability is an important part of financial security, and if you save before you spend, you can significantly reduce the likelihood of nasty surprises when you check your account or credit card statement at the end of the month.
Take control of your finances, and you’re well on your way to taking charge of your financial future.
2. Saving is Money Good For Your Health
Saving money is good for you!
It’s true. Scientific studies show that financial security has a positive impact on our physical, emotional, and mental wellbeing.
People with savings in the bank report feeling happier and more secure than those who are living beyond their means, and they are also less likely to suffer from depression and anxiety, ulcers, back pain, headaches, and a host of other conditions.
When you save before you spend you are therefore not only investing in your financial situation, but in your body and mind as well.
3. Everyone Needs a Rainy Day Fund
None of us know what is going to happen around the corner. You could lose your job, fall sick, have an unplanned pregnancy, or the car might break down.
All of these things come out of the blue, and require money to see you through safely to the other side. If you save before you spend, you can create a safety net for yourself, a financial insurance policy to dip into if things don’t go to plan.
Your fund doesn’t have to be huge, but having the equivalent of three months salary or other income in a savings account would go a long way to tiding you over a rough period in life.
It’ll enable you to concentrate on sorting out the problem in hand rather than worrying about money.
4. Saving Gives You a Sense of Achievement
If you set yourself a savings goal, and reach it, you will feel a great sense of achievement.
Everyone has different reasons for saving, and once your rainy day fund is of adequate size, you might then start saving up for something you really want but could not normally afford.
Reaching your savings target, and then treating yourself in some way — be it with lunch out, a new pair of shoes, or a night at the theatre with your friends — makes the sacrifices you’ve had to make along the way worthwhile, and mentally reinforces your good behaviour.
5. Things Bought on Credit Are More Expensive
Unless you have an interest free overdraft, you have to pay overdraft fees each month for using it.
Likewise, unless you are 100% sure that you can pay off your credit card bill in full at the end of the month, you will have to pay interest on the outstanding balance.
The average APR for a credit card in the UK is more than 15%, which will quickly make the amount you have actually paid for items skyrocket.
6. Savings Make You Money
When you deposit money in a savings account, or invest it, it makes money for you, without you even having do anything!
Granted, interests rates are typically quite low at the moment, but your savings are doing the hard work for you and growing steadily.
But, if you choose to invest your money for the long term, your money will make you money – guaranteed!
What is more, thanks to compound interest, if you can leave your savings untouched in an account for several years, you’ll be earning interest on the interest, as well as the amount you have originally deposited, so your savings will grow larger still.
7. You Will Reach Your Financial Goals Faster
If you save before you spend, especially if you put aside a set amount from your pay check each month, you will reach your financial goals faster.
We all have different goals, understandably, but by adopting simple habits we can accelerate the pace at which we achieve them.
When you save before you spend, the benefits are clear, and not only for your wallet. You’ll be happier, healthier, and sleep more easily at night, knowing that you have greater financial stability.
To get you motivated to save before you spend and achieve your financial goals check out this book: The Richest Man in Babylon.
Over to You
What steps can you take in your own life to save before you spend? What are your savings goals? Share your own saving tips.
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