(Newswire.net — June 25, 2021) — Are you a prudent or forward-looking individual or a person who just focuses on satisfying his immediate needs? If you are in the second category, you may be missing out on some significant gains your future can deliver if you save and invest wisely.
Many individuals think of initiating savings once they start drawing sufficient income from their businesses or jobs. However, the reality is that a disciplined savings habit should be an integral part of a person’s life rather than a secondary approach to spend first and save the rest. And as a matter of course, individuals can only start investing once they are able to build on their savings.
Besides, saving and investing require individuals to defer consumption in the present in favor of spending some time in the future. While it may sound distressing to some individuals, there are some good reasons to make this sacrifice:
1 Ensure Peace of Mind
The state of an individual’s finances usually weighs heavily on his mind. If a person feels there is not enough wealth to fall back on, he develops a sense that his survival is in threat. Saving and investing allow individuals to accumulate funds for times of their need, replacing the feeling of threat with safety and giving them peace of mind.
An individual can lead a stress-free life with the knowledge of sufficient funds in his kitty and will not have to struggle if situations take an unexpected turn. Some of these unwanted situations include an unforeseen layoff in the company, sudden hospitalization of a family member, and severe business loss.
2 Build a Foundation for Retirement
Retirement can mean different things for different individuals. It might mean taking a complete break from work and travel across the globe or quitting a full-time job to work part-time and engage in something you love. To create the future, one wants and enjoys flexibility in retirement, one needs to start saving and investing at the present age.
The sooner an individual starts retirement planning, the less he will have to suffer in the future and the more he will have control over his life. The power of compounding allows an individual to potentially offset the effects of inflation in his money over the long run, making him self-sufficient at the time of retirement.
3 Help to Tackle Emergencies
It is imperative for individuals to have some funds set aside for emergency situations to cover unanticipated expenses. Such emergency situations can include an unexpected car repair, a sudden job loss, or expensive medical bills. These emergencies can deliver a large setback to one’s finances if one is forced to turn to personal loans or credit cards.
Individuals can effectively tackle such situations by creating an emergency fund through saving and investing. The ideal rule is to create a fund that contains at least three to six months’ worth of living expenses. The rationale behind pegging the size of individuals’ emergency fund to monthly living expenses is to help their family wade through periods of income loss.
4 Make Your Dream Home a Reality
One of the most common financial goals that individuals aspire to attain is living in their own homes. When it comes to making your dream home a reality sometime in the future, it is vital to save your funds for the down payment and let it grow via investing. Experts suggest individuals should start saving and investing towards the down payment at least 5 years in advance.
While parking funds in a high-yielding savings account is a commonly followed approach in building a corpus for a home down payment, individuals can also explore some other ways to grow their money. Individuals can choose to invest their money in financial instruments, like index funds, equities, and certificates of deposits, or treasury bills to build their wealth. The approach should be to adequately understand your cash flow and requirement and give considerable thought as to the best place to park your funds.
5 Secure Your Child’s Future
Every parent wishes to provide their child with the best of everything in life, even when they are not around. When it comes to planning for your offspring’s future, an early start can make a real difference. Initiating the saving and investing process earlier provides an individual a long time to meet different financial goals, like a child’s education, marriage, or providing support in the initial stages of their child’s career.
Individuals can explore several investment options to financially secure their child’s future and take appropriate care of their child’s needs. These options can include stocks, fixed deposits, life insurance plans, and index funds. While choosing any of the investment options, an individual must give careful attention to relevant details like investment amounts, premium due dates, or plan maturity dates.
6 Improve Your Risk-Taking Ability
While taking risks may appear scary, the risk is the bridge that binds you with your success. Saving and investing allows an individual to build cash reserves, placing him in good stead to take calculated risks in life with less worry. These calculated risks may involve moving into a new city with massive job opportunities, starting a new business, exploring a new career, or switching to a job at a different firm with less pay but more upside potential.
It may be harder for individuals to pursue their passions and take such risks in case they do not have sufficient funds in hand. Proper financial backing enables individuals to get their ambitions off the ground and live life on their own terms. However, individuals should understand that the risk is not about jumping onto every opportunity while taking the right ones.
7 Help to Become Financially Independent
While helping individuals to build wealth, saving, and investing provide them with the freedom to make different choices in their life. This may mean quitting work and switching careers, taking a vacation to your desired location, supporting family members, investing in a new start-up, or taking early retirement.
Saving and investing can help individuals feel rich beyond their wildest dreams while reducing their dependence on receiving a certain paycheque to make life choices. One can easily gain financial security over the years and enjoy the benefits of managing their money if they follow through with intelligent and systematic saving and investing plan.
Remember, it does not take a lifestyle overhaul to become an investor and saver. There are some simple ways to save and invest money, which you may start practicing today.
Author Bio:
Damini: Damini is a Lead-Economics at Kalkine Media Pty Ltd, with around 4 years of rich experience catering to the media domain. She has key exposure to economics and equity research. Her expertise lies in performing economic and trend analysis and producing exclusive content for different sectors.