There is no question that saving and spending money is a delicate balance. Moreover, doing one more than the other can have immediate effects on your finances both good and bad. What makes this a lot more challenging is the fact that there is no constant formula to follow. Your finances can change over time forcing you to adjust along with it.
You can be raking in more than what you need one month and then barely even having enough for groceries the next. Changes like these are usually the result of money decisions coupled with developments in your life. You might get a promotion at work which comes with a pay raise or you could have taken out a car loan for the next few years.
The art of saving and spending money is constantly evolving that what may have worked for you in the past may not be appropriate for your current situation. The decision on where to make adjustments rely heavily on lessons you have learned in the past as well as your current state of finances. Thus, it is important that you have all the information you need on hand to make informed money decisions.
You cannot just guess and pick a number out of thin air when you start talking about your finances. It is surprising that Forbes shares how two-thirds of Americans cannot pass a basic financial literacy test. As you are dealing with numbers, you need to be precise with the amounts you are working with. A few dollars short on your payments can lead to bigger trouble in the future. It is also possible that you hold out on possible investments and lost potential earnings in the process.
Living your life means spending money
Choosing between saving and spending money is a tough task but you need to understand that spending money is a big part of life. It is close to impossible to live a life without having to spend on the things you need in life. Even for your basic necessities, you need to spend money on food, electricity, gas, and even for the house you live in.
The way you spend money and where you spend it on is where your control begins. You have the power to choose where your money goes. Outside your basic needs, the choice is up to you whether to rent or take up a mortgage loan. You decide as well if you will stick it out in commuting to and from work or get a new car.
Even with the basic needs such as food, you have control over the amount you spend for each. Do you prefer eating in fancy restaurants every weekend or even spending for lunch and dinner in a nearby restaurant every single day in the office? You need to spend to get what you need and want in life but understand that you have control over these actions.
Your future quality of life depends on what you save
When you try and look at how saving and spending money affects your finances, understand also that it has an effect on the quality of life you can have. This applies to both the present and future one you are preparing for. How you save money and how you spend the same will dictate the type of lifestyle you will have.
Focus on these areas when saving money
When it comes to saving money, there are a few areas where you need to focus on. These funds would need to be prioritized to help you secure your future better.
Getting caught up in an emergency without any savings will not only add stress but could put you in further debt. To be able to cope with the financial need of any type of emergency, you could be left to rely on your credit or worse, consider fast loan approvals which comes with high-interest rates. Having some reserve funds to help you get through some of the toughest times in your life.
The idea with your emergency fund is to look at your expenses for the past few months. You then start and aim to save a month’s worth of expenses. This means that if your income is compromised due to an emergency, you have enough in your reserves to pay for one month’s worth of expenses. As you get to save for one month, start adding to it to save anywhere between 6 months to a year’s worth of expenses for your emergency fund.
When saving and spending money is considered, one of the funds you also need to look into your golden years and the money you need to enjoy it. Retirement should be an exciting phase in your life and the more you save up for it, the happier you can be in retirement. This seems pretty simple enough but preparation begins as early as your first paycheck. Remember that Gallup shared the average retirement age is at 62 years of age.
You need to know what you want to do in retirement. This will come to you sooner or later and you need to adjust your savings accordingly. If you love to travel, make sure you consider the cost of visiting new places in retirement. If gardening is what you love to do, save up for a big piece of land so you can wake up every day in the beauty of your garden. The important thing is to prepare early for it so you do not find the need to get out of retirement just for your basic needs.
One of the most challenging hurdles for a lot of young people nowadays is student loans. It can take away opportunities because you had to prioritize it so early in your career. This is why it would be great if you can help your children save up for it as early as now. If you can give them a full ride then why not but any support you can give them can go a long way. Any amount you save lowers down their need to take out a loan.
The idea is to find the right balance
The bottom line when it comes to saving and spending money is finding that right balance and being able to make quick changes when the need arises. Of course, you would want to always spend less money and save more but there are times when you can be better off doing the opposite. It might sound weird but using your money can help you secure your future finances.
It can be spending more on your business to help you get more clients. If you have a side gig, you might find the need to spend some money on it to put you in a position where your products or services merit a payment from clients. It can be investing in equipment that you need or even taking up classes to help you improve your craft.
It is not impossible to strike a good balance between saving and spending money but you need to be able to make adjustments as you go along. What works today might put you in debt the next month because your finances change over time. Make sure to be on top of these changes so you can make informed decisions.