Money may not buy you everything, but surely, with enough money in your hands, you could control your life better. You need money mainly to accomplish and maintain your present basic lifestyle and more importantly, in future. Further, you would need money to achieve what you wish to have beyond your basic requirements during your lifetime.
This ever evolving world around us will keep pulling you towards things that are beyond your basic requirements. Earlier, it was just food, home, clothes, education, and marriage, but now these basic things have expanded to things such as communication requirements and vehicles. This expansion of basic requirements has gone beyond one’s imagination today.
Therefore, it becomes important to avoid some of these impulsive expenses and save money to fulfill your necessities first and then save more to meet your dreams beyond these necessities.
We cannot predict future precisely. We can only estimate our future needs through approximate numbers. Thus, the need to save money for future becomes vital.
Five specific reasons why you need to save:
Emergency funds – These could be for a number of things such as need for a new house due to natural calamity, out-of-pocket medical expenses, or sudden loss of income. You will need to apportion money for these emergencies to avoid resorting to debt to pay for what you need.
Save to at least six months of your monthly income for emergencies. This money needs to be liquid, do not invest from savings made for this purpose. Hold these savings in liquid state and do not lock them up against any liability or in term deposits.
Post retirement needs – You will retire someday. At that point, you may need savings/investments to replace your monthly income. Further, you would need more money to provide for expenses longer than before, with increase in average life expectancy.
Inflation – Mismatch in value of money now and in future due to soaring inflation in things we buy and services we use makes it imperative for you to save as high as possible.
Dependents – You may have the responsibility of your dependents be it parents, siblings, wife, or children. You should consider saving for the basic requirements of your dependents such as maintenance of ongoing lifestyle, children’s education, and marriage.
Goals – Life is not just about accomplishing your basic requirements, it is also about achieving your lifetime dreams along with those of your loved ones.
For starters, you need to save at least 20-30% of your monthly income or whatever minimum possible. Further, you need to stick to this practice while trying to increase your savings.
Systematic savings will not only secure you better against unforeseen events. They will also help you achieve your goals beyond your fixed necessities.
We will talk about next step i.e. investing your savings systematically in our next blog.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.