The importance of saving money cannot be neglected. Saving money has its own proven benefits and is one of the best financial habits you can adopt. Saving your hard-earned money is very important as it protects you from a financial emergency. If you have some saved money then you can pay for large purchases, avoid taking debts, use your money in any medical emergency, and will feel greater financial freedom.
Not only just save your money but also you need to build your wealth, you will want to invest your money.
If you don’t invest, you are missing out on opportunities to increase your financial worth. Of course, you have the potential to lose your money in investments, but if you invest wisely, the potential to gain money is higher than if you never invest.
Here are reasons why you should save and invest your money
#1 – Saved money will help you in bad times
There are bad times when there is an urgent need for money. Your job can be lost and you may require money. Or there can be any medical emergency. We cannot tell what will happen in the future. So if we have enough savings then the situation can be handled in a much better way. But in these bad times if you don’t have money it can trouble you.
#2 – Save for your retirement
People generally neglect this simple point that they will stop earning one day and will have to take requirements.
Some people behave as if they will be getting a salary in their bank their whole life. They do not save money or invest their money or keep delaying investing money and then they realize they are now in a danger zone!
Don’t forget to remember that after you start your work, the expenses won’t ever stop from that point onward, but your earning will come only till you are 55-60 yrs!.
#3 – Earn higher returns
In order to grow your money, you need to place it where you can get a high-interest rate. The higher the rate of return, the more cash you will earn. Therefore, if you want the chance to earn a higher return on your money, you will need to explore investing your money.
#4 – To Get Financially Free
We all want to succeed at a stage in life once we don’t need to depend fully on our salaries. We all want to make A level of wealth in order that it’s enough to get some income for us to handle our basic expenses.
When you start working, you’ve got no wealth and you’ve got to rely 100% on your salary. But over time, your wealth basket must go up in order that if required – you’ll remove money if needed.
If someone needs Rs 40,000 a month for his expenses and he has 4.8 lacs savings – they know that they have a minimum of 1 yr worth of cash with them.
With 48 lacs – they will last for 8-10 yrs (not considering inflation here)
This way, you reach some extent in your life when your wealth itself is enough to make a stream of income that handles your basic expenses at least if not a lavish lifestyle.
#5 – Get Out of Debt
If you ever need to get out of debt, you need to have a little cash saved. Sounds ironic, doesn’t it?. Even if you are an exquisite planner, stats say that 1/2 of folks experience at least one totally unexpected expense each year. Maintaining a “reserve fund” may even assist you to observe in case your spending is getting out of hand.
#6 – To handle major life events
A lot of major life events are going to come into your life.
- Kids School fees (recurring)
- Vacations (recurring)
- Child Education Higher Education
- Buying House
- Upgrading of Car (recurring)
- Home Renovation
and lots and lots of small events which will demand money constantly!
If you will not save enough for the future what are you going to do? Depend on Loans? Get into a Debt Trap?
Starting your wealth creation journey early in life increases the chances of you meeting these financial goals with less stress and on time without compromising on them!
#7 – To explore an alternate career
A lot of people are not happy with their jobs. They feel stuck and they want to do something about it. But once you take a home loan and don’t possess any other skill, it becomes a permanent job for you.
You can’t quit and explore other career choices because you have no backup plan. Forget switching careers, ask yourself if you can even take a 2-3 yrs break from the job? Do you have enough wealth to support that?
If you save enough today, there will be a time when you will feel more comfortable taking that kind of tough decision. Having wealth on your side – gives you enough power to tell your boss that he sucks and that you are not coming from the next day!
You will be able to take calculated risks in life and try out many things. So start saving now!
A simple financial plan for you to invest your money
So here is a very generic roadmap on what you can do to invest your money
- First, take enough term plan and health insurance early in life
- Invest 20% – 40% of your take-home income into equities. The options can be a mutual fund, Index funds, direct stocks if you understand it
- Over time, as you grow older you may also have investments into debt mutual funds to lower the volatility of your portfolio
- If you wish to, you can also have some fixed deposits – but preferably very less of it
- Stay away from endowment and money-back insurance policies
- You can open a PPF account, but don’t over-invest in it at a young age!
Share market investing will help to grow your money in the long term. People used to invest in the share market to build their wealth in the long run. If you are scared of investing in the share market, then you are not alone. Individuals with very limited experience in the stock market are very scared of losing. If you are looking to grow your money by investing in the share market click here
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