If you ever want to have a good life – a financially secure life, then you need to save. Financial independence is the status of having control over your money, in terms of income and expenses. The easiest way to achieve financial independence is by adopting a flexible saving culture.
Saving is the act of keeping aside one’s assets for the sake of emergency or investment. It’s a simple way of preserving money to meet a specific need. Savings refers to whatever part of your income that isn’t spent or money reserved for a specific purpose.
The extent to which a person chooses to save is dependent on their preference for future security over present consumption. Here are a few reasons as to why you should save, besides gaining financial independence;
Why Saving Your Money Is Important
For Financial Independence
To attain a level of financial freedom, you need to cultivate a saving culture. Saving helps you afford basic necessities, manage emergencies, start a business, or invest in valuable opportunities.
Truth is, financial independence is not synonymous with being rich. It’s about having a good relationship with money.
Saving for retirement is an important goal that everyone should have. A consistent savings plan might not be glamorous today, but it will create a sense of control over your spending habits.
To cater for Expenses
The best way to cater for annual expenses is to prepare a budget and save for them in advance. It will not only save you time and money but also bring you peace of mind.
To get out of Debt
The easiest way to come out of debt is to prepare a savings plan, that would allow you to save 20% of your income. Then reach an agreement with whoever you are owing to pay them annually or quarterly till the debt is over.
How To Plan Your Savings
However, in order to save you need to have a main target or goal. This will help you strategize and plan your savings from creating a budget, setting up different accounts and building an emergency fund.
Creating a budget: On your budget, be specific about how much you have and what you really need to spend money on. Meaning that you have to cut out unnecessary expenses from your monthly budget. Beyond creating a budget, stick to it.
You can use the 50/30/20 rule as a guide to saving
- 50% for Expenses (which includes rent, food, transport, shopping, gifts)
- 30% for Savings
- 20% for Emergency funds
Setting up different accounts for certain goals or targets. You are less likely to spend money when it’s out of your reach. Until your money is safe from you, your savings will never grow.
Building an emergency fund with 20% of your income. An emergency fund will help you avoid going into debt if you ever lose your job, have to pay for medical bills or encounter unforeseeable circumstances.
If you tend to buy things on impulse, keep your card at home when going out. If you think you need something, give yourself 48 hrs to consider if it’s necessary. Otherwise don’t buy anything in a hurry.
Avoid debts, do not even buy things on credit. As a matter of fact, avoid anything and anyone that will cause you to spend beyond your budget.
Financial Independence is more than a goal, it is an intentional lifestyle that has to be maintained.