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paper money on a scale

 

 

 

"Getting money is like digging with a needle;
spending it is like water soaking into sand."

Japanese Proverb





 

 

Reasons to Save Money

Living Paycheck to Paycheck?

It is a well know issue that many people in the U.S. live paycheck to paycheck. For some people who have very low incomes, saving money may simply not be an option. You can't really save money easily unless you have some money left over after you pay for necessities such as groceries, heat and rent. Yet, many others, people with middle class incomes and above who do have enough money to start a savings plan, may live paycheck to paycheck just because saving is just not a priority for them

I have a friend that owns a housekeeping service, and she tells me that the people who she has the hardest time collecting money from are often the ones with the most extravagant lifestyles. You would think that people who live in million dollar homes and drive expensive cars would be wealthy, but often these types of people may be living on the financial edge more than other people who live more modestly.

My friend tells me that at times she has more trouble collecting her fees from people in the wealthy neighborhoods than in middle class ones. Some will try to pay her housekeeping fees, which are very reasonably priced to begin with, in installments or delay payments for several weeks. Yet they will have a Jaguar or two parked in the driveway!

In the book The Millionaire Next Door, this category of people are referred to as "big hat, no cattle" types, meaning they try to give off the appearance of wealth without really having the net worth to support their lifestyles.

Interestingly, in the book The Millionaire Next Door, the reality is that many millionaires live relatively modest lifestyles. Their frugal lifestyles are exactly why they many became millionaires - because they always tried to save more money they they earned.

Reasons to Start Saving

If you are not the type to save money, here are some possible reasons you may to consider to help make saving more of a priority in your life.

1. To put your children or grandchildren through college.

2. To buy a home, or move up to a nicer home than you have now.

3. If you want to have a comfortable retirement, you have to start saving early. Social Security was never intended to to provide a sole source of income in retirement. Additionally, as most people are aware, the program currently has some serious funding issues that may or may not be resolved by the time you are ready to retire. A recent Money magazine tip suggested that as a quick rule of thumb your retirement nest egg should be 25 times the income you want to supplement Social Security and a pension. So if you would like to have an extra $40,000 a year in retirement, you will need to have a nest egg of $1 million saved up.

 

Reasons to Save for Retirement

Question: Should I count on Social Security for all my retirement income?

Answer: No. Social Security was never meant to be the sole source of income in retirement. It is often said that a comfortable retirement is based on a "three-legged stool" of Social Security, pensions and savings. American workers should be saving for their retirement on a personal basis and through employer-sponsored or other retirement plans. (Italics added)

From Social Security Online: The Official Web Site of the Social Security Administration -
Frequently Asked Questions

http://www.ssa.gov/qa.htm

 

Related Link:

Investing - Few young workers take heed of need to start saving now .

 

4. In case you become disabled and can't work, or you become unemployed for some other reason.

5. If you are planning to have children, saving money now may allow one spouse to stay at home when the children are young.

6. To have enough living expenses to live on in case of a natural disaster, such as a hurricane, earthquake or tornado. No matter where you live, there is probably some type of natural disaster that could happen to you or your family.

7. In case of divorce. Not many people plan ahead for a divorce, but the reality is that about half of all marriages in the U.S. end up that way. I've had a couple of friends who had spouses announce, somewhat out of the blue from my friends' perspectives, that they wanted a divorce. This can be really tough when there are children involved and the main breadwinner is the person who wants out.

According to the National Center for Health Statistics, there are 7.5 marriages in the U.S. each year for every 1,000 people and 3.8 divorces. If you do the math this means that about half the people getting married will eventually end up getting divorced.

This list of reasons to save money is not meant to be all inclusive. I'm sure you can find many other reasons to save, but these should be some good motivators to get started on a long term savings plan now.

 

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