Saving with purpose and not just for saving’s sake

November 27, 2006 at 4:05 pm Leave a comment

I was looking through my copy of The Total Money Makeover on our way back home from my mother-in-law’s yesterday (she asked if she could borrow it to see if she could glean some tidbits on money management) and a quote on page 8 stood out to me. It stated, “Savings without a mission is garbage. Your money needs to work for you, not lie around.”

I think too often we hear how important it is to save money. But, for what? Just retirement or a rainy day? No. Where people get confused is that they save money just for the sake of saving. Because that’s what people are telling them or they feel it’s important to do so. Don’t get me wrong, I think it’s absolutely crucial that people learn how to save. But, I think it’s just as important that they learn why they should save too.

Raindy day.
Grandma always said, “save for a rainy day,” and she’s right. You can call it a rainy day fund, an emergency fund, and I’ve heard some call it a “God-only-knows” fund. Whatever you call it, you should always have some money set aside for emergencies to catch those murphy moments in life. It’s absolutely important that you define ahead of time what constitutes an emergency. Remember, a leather couch is not an emergency.

Golden rocking chairs.
Another important aspect of saving is for retirement. If you don’t save enough for retirement, and make money work for you via 401ks, IRA’s, Roth IRA’s, etc., you’ll find yourself leaning more and more toward help from family or, God forbid, the government. Come on people, the government can’t even handle it’s books, do you think they’re going to take care of you? I don’t think so. It is up to you to make sure you retire with some dignity. So read up on the different aspects of retirement savings for yourself. Who else will do it for you?

How much?
We are bombarded by hundreds of marketing and advertisement campaigns on a daily basis. You ever see or hear the popular phrase “same as cash?” I’ll be honest with you, it’s not the same as cash! But we fall for it every time. These marketing ploys make things “seem” affordable, but they’re really not. If you can’t pay for it, don’t buy it. Plain and simple.

So what does that have to do with saving? Everything. If you know you’re going to need to buy something, why not save for it? Of course this has everything to do with planning. For example, we all know Christmas is in December. With the coming new year, when you sit down to do your budget, figure out what you normally spend on Christmas gifts and expenses, divide that by 12, and you now know how much money you need to set aside for Christmas. It’s simple. It just requires some thought and planning.

Just remember, give your dollars a name. It doesn’t matter what it’s for, a car, furniture, barbecue grill, etc. Just make sure it’s earmarked for something, or else it’ll be used for something else.

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Entry filed under: Saving and Investing.

Drive free, retire rich To be or not to be?

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