If you are reading this, chances are you already know the benefits of saving money. It is pretty straightforward that most people can appreciate why it is a good idea to save.
You need to save because emergencies can pop up at any time. You need to be in a financial situation where you can cover and fix any emergencies that might come up which includes medical emergencies, loss of job or home. You just never know what is in store in the future so you need to be prepared by saving money up to take care of these.
You need to save because while retirement might seem like a very distant idea when you are young. But time really goes by quickly that you will be in retirement age sooner than you think. So the earlier you put money away and save up will be better.
So with all these reasons for saving money, here are also the top 6 reasons why people fail to save money. People may already know what should be done but unfortunately, they fail to do it. So if you want to save money, make sure to avoid all these reasons.
1. Failure To Pay Themselves First
If you are working to earn a living, you have to remember that you have to pay yourself first. Sure, you have expenses but you must also set aside a firm chunk of money for your savings. This is how you pay yourself. You may brainstorm about ways in minimizing expenses or earning more income but these can truly come into play if you pay yourself first.
2. Focused Too Much On Saving A Chunk Of Income
If you are too focused on saving a particular part of your income, you are failing to see the larger picture. Sure, the main reason you are saving is that you want to grow that money. But if you are trying to limiting yourself into saving only a small chunk of your income, it will not happen. Your savings must ramp up in the same proportion as your income that if you get a pay raise or a promotion, your savings rate must also go up.
3. Mistaken Ideas About Inflation
Inflation is the silent killer of your money. There is no mistake about it. It is out to destroy what you worked so hard to earn. This is why it is really important to remember that it is not a solution to spend your money thinking that inflation will also eat up your money in the end. It is a fatalistic way of looking at savings. So the best way is to save up your income over a long haul and invest it so that it grows fast and big enough to beat inflation. This is how to turn income into assets and how to preserve it.
4. Confusing Wants With Needs
If you really think about it, you really don’t need that much. Sure, you need a roof over your head, food in your belly, water to drink and air to breathe. These needs are fairly restricted that you will not need much of it to live. Unfortunately, once peoples income increase they think that “wants” become “needs”. This is wrong. You have to focus on your needs first, then your savings and if anything is left over, you can then focus on your wants. This helps to build discipline and to keep an eye on your long term goal.
5. Failure To Adopt A Savings Plan
If you fail to plan, you are planning to fail. It is really that simple. If you just keep thinking that you need start saving but never really get around to it, you will never save enough to meet your needs. So it is crucial that you sit down and put up a savings plan even if you are unemployed or haven’t started saving. Keep in mind that this plan, regardless of how well it is put it together, will only have real value if you put it into effect and that is done by taking action.
6. Investing In Non-Assets
Put in as rough a manner as possible, an asset is something that puts money in your pocket. On the other hand, liability or an expense is something that takes money out of your pocket. This is a simple way to explain it. I know that there are technical definitions regarding assets, but let us stick to a simpler definition.
If you have money saved up, you might think that you are investing in assets when in reality you are just wasting your money. Case in point, many people invest in jewelry thinking that its costs will go up. But unless you are investing in a jewelry made by a world-recognized design house such as Rolex, chances are that its real value is only the price of the base metal that it is made of.
So you have to be very clear that once you have your savings, you must invest it in things that actually appreciate in value like real estate, stocks, bonds and everything that works to put money back in your pocket.