Personal Savings: A Financial Necessity Or Mere Frugality?

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It is common sense, I guess, for people not to consume all of their income without reserve. However, without a strong reason or motivation, people might not be able or even want to save money at all.

Economic and financial experts and professionals have tried to distinguish between saving and savings.The former refers to “any income not used for immediate consumption” while the latter refers to “the amount of money left over after spending”. This distinction is however often misunderstood¹
or used interchangeably.
But for the purpose of avoiding misunderstanding, let me focus on the latter —savings.

Savings is said to be

the money that a person has left over after they subtract out their consumer spending from their disposable income over a given time period²
and can be kept in the form of cash or cash equivalent.³

I once heard debates from some quarters about which is more advisable: saving or investing?
That debate can go on for all I care. Both are encouraged. Investment promises some returns, but usually involves risk. Saving on the other hand, unless you’re holding your savings in the wrong place, doesn't involve risk; there may even be little interest rates accrued over time.
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The Necessity?

The necessity to save money depends on individual reasons or goals. Some save for their child's education; some for retirement; others as a down payment for a home, a car, vacation or some future events.

Some people may also find saving money to be difficult due to reasons such as:

1. A lack of saving culture. Not just financially but generally.
2. Poor financial knowledge and habits like impulse buying, reckless cravings, unintelligent generosity etc.
3. Depending on a single source of income which is not enough to fund daily expenses.
4. Economic hardship and High cost of living which is taking a huge toll on one's finances, especially for those living in third world countries.

It’ A Matter Of Psychology

Not being able to save or not seeing the need to do so is just a matter of one's mindset about money. Because

money relies more on psychology than finance

So it doesn't matter the size of your income, you just have to adjust your mindset the fact that you need to save money regardless of your alibi because saving is a good financial habit

and building wealth has little to do with your income or investment returns, and lots to do with your savings rate— Morgan Housel

How Can You Create Savings?

If you are in the category of those who cannot save or those who think there is no need to save, here is one take and a few tips:

Life can be unpredictable. Hence, tomorrow is not promised. But you don't know what might happen next nor how tomorrow may turn out to be. Freedom is the new luxury, and pursuit. Technology is almost taking over the labor market. That means that in a few years time your technical abilities may no longer be reliable, and you will not be working all your life. You should consider saving money from now on.

Start saving for no reason: “You don't need a specific reason to save”. Maybe you do—to develop the habit.

Start little by little: Yeah, no matter your income. You know what they say about little drops, right?

Diversify Your Sources: You should consider multiple streams of income, and not just relying on one. Money should be coming from different sources so can decide the one(s) you can use for “saving” and the one(s) you can use for “savings”. (Remember the distinction?)

Don't mind looking broke: You should consider trying to stop impressing people. It's just your mind messing with you—nobody cares. How you look; what you wear; what you own; how much you earn, have or spend is all you. You're the only one cumbered with that load of care, and nobody cares about your loads. They only see you having what they want for themselves —not a damn thing ’bout you.

Prioritize your cravings. To avoid habitual spending or impulse buying, you might want to check your desires with a scale of preference. The idea is to spend less by designing less.
You may also need to consider you cycle. Yeah, they say >show me your friends..” Yeah, you sure know the rest. You need like minded people in your cycle to keep your savings ball rolling.

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It's no big deal. Either now or sooner. Whatever your choice or excuse, just save money.

Posted Using InLeo Alpha

Posted Using InLeo Alpha