What’s the number one reason people don’t save money? Why do people put off buying that new car or home or that holiday vacation? Most of us have given at least some thought to saving money. We know we should save for retirement, that a college education will be less costly, and for those unexpected emergencies…
But the question remains – why saving money is bad? Why are we giving ourselves so much slack when it comes to our investments? And, most importantly, how can we achieve financial security while still keeping our frugal lifestyle? Fortunately, we’re here to offer some tips to save money, no matter how you chose to invest them.
Why saving money is bad? You’ll be surprised! The number one reason people don’t save money is that they think they have to spend it. They feel they must “invest” money in order to get ahead. They mistakenly believe that saving money means giving up on their dreams, hobbies, or living expenses. However, by not investing money in non-essential items, you can dramatically increase your living expenses and reduce your debt.
Saving money doesn’t have to mean digging into your retirement fund or liquidating your life’s savings to pay for an unplanned trip to Hawaii. It doesn’t have to mean mortgaging your house or spending your inheritance. The key is in knowing what to include in your budget. And the key is knowing which expenses are truly important to you and which are unnecessary.
When I say unnecessary, I don’t mean things like a new car, new shoes, or buying that new DVD player. I’m talking about the little things. Do you really need to spend 5 dollars on a shampooer? Probably not. But what if you’re taking a vacation and you realize that there’s a chance your hotel might get a little dirty and your skin might start to sweat a bit?
Saving money typically allows you to do more of the “why” instead of doing all the “what.” Saving money also allows you to do less of the “how” by investing in activities that allow you to receive a higher return. Investing in a vacation allows you to go to a beach, a resort, a park, and spend a week without worrying about checking your credit card bills at the end of the week. Investing in stocks allows you to invest in companies that will pay out dividends over time.
Saving money is good because it allows you to be conservative with your money. If you’re a spender, you need to learn how to control yourself. If you’re saving, you can find a way to invest your savings and get a high return on your investments. Why are some people opposed to saving money and investing?
It seems like a very logical question, doesn’t it? Why is saving a bad thing? Well, all things being equal, the higher the return, the better off you’ll be. The problem is that if you’re investing, then the interest you’ll be paying will be substantially lower than the interest you would be paying on a credit card or store card. Also, if you are a spender, then saving typically allows you to purchase things that you otherwise wouldn’t have been able to afford.
The second reason why saving is bad is that it often leaves you with a large emergency fund. When times are bad, this type of fund can be your savior. When times are good, you may have a smaller emergency fund but you’ll still have most of your expenses covered. This means that you’ll have more money left over for emergencies such as car repairs, home repairs, or any number of other types of expenses that don’t include your mortgage payment.
Your lifestyle decisions have another side effect. When you save money, you often reduce your ability to live above your means and live well below your income level. When you live below your means, you have less discretionary income and that essentially means that you’re living paycheck to paycheck. If you are in a situation where you are struggling to get by, saving too much money isn’t a good idea because you aren’t saving enough to live your life comfortably.
The last reason why saving is bad is that it’s easy to go overboard when you’re saving money. It’s tempting to go out and buy things that will make you feel good, such as designer clothing. But there are a lot of things that are way too expensive for most people to afford and yet they’d never dream of buying them if it were not for the frugal budget. It’s a fine line between getting rich and living comfortably. Don’t go too far in the direction of being a miser because that will ultimately lead to a financial crisis and the cycle of debt begins again.