Everyone around you keeps on reminding you to set aside funds for future use but what happens if you are not saving money? If you purposely neglect to save money because you want to enjoy life at present. You would rather spend the money now and worry about the future when you get there. This can make for a pretty exciting life.
You get to travel to places that you want to visit and not have to worry about saving up for it. The things you want is just a purchase away. Here are some of the things that can happen if you opt to not save money.
Not saving money for retirement
When it comes to saving money, one of the most important accounts is your retirement fund. It is a challenge for a lot of people to save up for it especially the young ones. One reason is that retirement can be too far off into the future that they do not see the value of saving today. However, this thinking will push retirement date further away.
It could have contributed also to the facts that 21% of Americans do not have any retirement savings at all according to NorthWest Mutual. If you do not save for retirement in the future, you will not have any funds to use once you retire from work. You need to understand that you cannot work all your life. The time will come that you will have to retire.
Forced retirement usually happens due to the age of the employee. Once you stop working, your source of money becomes very limited. The quality of life in your old age will largely depend on how you save for it now. The earlier you save, the higher your chances of making the most out of compound interest to increase your retirement fund.
If not, you will find yourself trying to postpone as long as possible which means you will be working well into your old age. It is also possible that if you already retired because of old age, you could be looking for a part-time job just to make ends meet. Your children could also be taking up the financial responsibility for your retirement needs.
Not saving money for emergencies can put you in a very tight spot when the need arises. Just to put it in perspective, CNBC shares that about 40% of Americans cannot manage a $1,000 unexpected expense. This means that not a lot of people are saving for emergency situations. One reason for this is that consumers might already be too complacent with their current finances.
They do not think that anything bad will happen and even if it does, they believe their current pay can more than makeup for the expenses. However, this is the thinking that gets people in trouble. If the unexpected emergency is being laid off from work, you suddenly do not have any source of income to cover your expenses. This is one of the reasons why you need to save for emergencies because more often than not, your income will be affected.
If you do not have any savings, you risk getting into debt as you try and cover for your daily expenses. The first to be used is usually credit cards because it is the most convenient and easiest to use. You do not have to seek approval from anyone, you just pull it out from your wallet and swipe. The challenge here is the repayment that comes after.
If you are already having a hard time financially, there is a good chance that you might not be able to pay down your card. When this happens, you either miss your payment due date or just send out the minimum amount to stay current. What this does is increase your payment over the next few months which will compound your problem.
Not saving money for college expenses of your children can come back to haunt you financially. First off, you need to appreciate the fact that a college education is worth it. Your children will have a better chance of being on track for a good life. This can open doors for them such as a good profession and better-earning potential.
Now you might think that you were able to get through college with just student loans and even some work on the side. That is all good but if you can help your children focus on their studies, why not? You can start with a 529 plan for their cost of attendance. This is a tax-advantaged specifically designed to help save for college according to the Securities and Exchange Commission.
If you do not save for their college expenses, a lot of things can happen. For one, they might come to you asking you to cosign a loan. Now you might not think much of it at first but if they start missing payments, you will start to feel the pinch. Your credit score could start going down and you will be responsible for paying back the lenders.
If you did not save money for college, your children could keep asking for money to get them through college. If you graduated from college, you have a first hand knowledge just how expensive it is. There are a few things you can help them with to lower down college expenses. You can open their eyes to the possibility of attending community college for the first few years. If need be, take out federal student loans first rather than private ones. You can also guide them through scholarship and grant applications so they can get free money for college.
Not saving money for big item purchases
One other area in your finances you migh not be saving for are big-ticket items. Oftentinmes, these are needs as well so you can have a better quality of life. It can be buying a car, a tv set, a new laptop, or even buying a house. If you do not save money for these things, you can end up missing out on these items or worse, getting in unmanageable debt just to acquire them.
What usually happens is that you take out your credit cards for the purchase. When you are buying a house, you really need to take out a loan. However, it does not mean that you cannot save up for it. In fact, you need to because you have to put a downpayment on the house. The bigger your downpayment is, the more manageable the succeeding payments can be. You can also pay it off it a short span of time if you get over not saving money.
How to save money more efficiently
Now that you have an idea on some of the things that can happen when you do not save for the things you need, here are a few tips to help you save money better.
Save and forget method
This is a strategy where you save money and you try and forget about that account after. Much like how you pay your creditors and countless lenders. Once you pay them every month, you never see that money again. Your only concern after is saving up to make another payment. Once you do that with your savings, you will be surprised by how much you will have at the end of the year.
Automate your savings
If you want to save better every month, you can look into automating your funds every month. You can set it at specific dates in a month where you automatically transfer money from your salary account to different accounts. Once can be for retirement, emergency, or any other account. This way, the money is out of your account and into specific funds even before you get any ideas of spending it.
Not saving money will give you a more challenging time in reaching your financial goals and could put you in debt as well. That is why it is important to know what can happen so you can put into action the necessary steps to avoid them.