A penny saved is a penny earned is the most popular saying that you must have heard about, but it seems good as long as it is marked in papers. When it comes to reality, you emphasise earning more and more money. The more you earn, the better your financial condition will be. If you have not faced the fact, you must be surprised to know that even a good wage earner end up being broke. Why does it happen? If earning a handsome amount of money is everything, you will never be broke. Of course, your spending is a real culprit. Most of the people do not bother about their spending as they start making a good amount of money, and as a result, they continue to spend on and on. Higher spending means lower savings and higher need of loans in case of emergency. The recent outbreak of COVID19 has taught a lesson to people that they should not underestimate the importance of savings. Being under a lockdown period for a couple of weeks when all streams of cash stop flowing in makes a worse financial condition. When you come across an emergency like you need money urgently to repair your laptop or you have lost your job and you do not have money to pay your bills, getting guaranteed loans for unemployed people becomes a bit difficult unless you have any other source to make repayments. ‘
Why is saving essential?
If you are not well off, you will need to plan for large expenses, for instance, buying a car, a home etc. Saving is more crucial when you are making enough money to make your ends meet. As life is unrelenting and never stops throwing a curveball, you need to have savings to meet an unexpected expenditure. Expenses continue to go up but income does not rise as proportionately and hence you cannot afford to become reckless. If you have set a goal to have £10,000 for your retirement, you need to start saving for it today and be consistent with your saving. Otherwise, you will have meagre funds to live off your golden period. After a couple of years, you may want to buy a new car. As you know that your current car is depreciating day by day and you will need to get a new one, you should start saving money immediately even though you do not need it now. Likewise, if you want to buy a house, you will have to start saving for a deposit right away. You will be able to meet such expenses only when you plan your savings and naturally you will have to cut down on your spending. Saving is not just crucial for planned expenses but for unexpected expenses too. You can lose your job or any other unexpected expenditure pops up. It can be hard to meet these additional expenses out of your regular income and hence you should have savings. You cannot decide the size of savings randomly. It depends on your goals. If your goal is to set aside money for a wedding, the size must be large enough to cover all wedding expenses, and if you are stashing away money for unforeseen expenses, it should be at least worth three-month of your living cost. It is better if it is worth six-month of your living cost.
How to make it true
To make it true, first off you should create a budget to track your spending. Budgeting ensures that you spend within your means. Take stock of total expenses you make every month to get an idea of your spending limit. It is good as long as spending is less than your earnings, but there are still some chances you can save. Rent, groceries, utilities are essential spending, but you can cut back on discretionary expenses. For instance, the total expenditure accounts for April month is £500, but after cutting down on your expenses you bring it to £400 in May. However, both months you successfully managed to stash away 10% of your income as savings. Additional £100 you save is your earned money. Remember that money you earn is not your actual earnings as it involves your expenses. The money you have left after paying for all of your expenses is what called earned money. There is no denying that you need to save money, no matter how much you earn and the best way to do is budgeting. With the help of budgeting, you can track your spending and ensure that you are not spending beyond your capacity. Improve the ways of savings, invest money and avoid taking out debt as much as possible. Debts are affordable only when you need money for urgent reasons and you have the repaying capacity.