Around the months of December and January, family finances always seem to be at their least, only to "magically" grow in the months of February and March. This seems to be a constant cycle for most, but why is this? Why does Christmas time seem to be a burden to many and then "tax time" seem to be a windfall? I want to depart from the normal photography speak and talk about money. Your money, my money, our money, it doesn't matter, we really want it to last as long as possible.
I was talking to a young man the other day about saving. He told me that he would like to, but he could not afford it. When he made more money then he would start saving. I tried to teach him the lesson that I learned much too late in life. I understood how he felt, because when I was younger, I felt the same way too. How could I put away $25 a pay check but still be able to enjoy the fruits of my labor from working? When I get a raise, I'll start saving, is what I kept saying to myself; but here is what I found.
Ten cents from every dollar doesn't seem like a lot at the moment that we earn it or that we choose to spend or save it, but it is one of those things that over time it makes a difference. Here is what I am finding. The average person over 40 years will earn almost $1,500,000 during that time. Putting away 10 cents of each dollar during that time, will give someone in the neighborhood of $200,000 when interest is taken into account. A 5% return a year by that point, will give an extra $10,000/year that would not have been there if we never saved. Unfortunately many of us would never get there. We think "saving" $500 on a $30,000 car is more important than saving $500 a year from our income.
We are in a culture where we "save up" for something, but rarely save up for "NOTHING." Meaning that most of us save up for a car, a wedding, a house, a vacation, but we really are not taught the habit of saving for saving's sake. So I will stress these three reasons to save.
- A Rainy Day. Or the Emergency fund so to speak. I live in Florida, I know that every year we will get some kind of hurricane warning and it may require us to evacuate. I should have a certain amount of ready cash ready for that instance. If I drive a car, and I know that my tires cost $150 each, then I should have $300-800 ready for an immediate emergency. NOT TO PAY BILLS. Bills are a foreseen regular expense which should be offset by income and not savings.
- Income can no longer be earned. Retirement, disability, or just simple old age can be a reason why you may be earning less. Savings are a good way to offset the lack of income, but should be the sole method of replacing income.
- Opportunity. In my opinion, the only reason why your savings should ever be used outside of the previous 2. A great opportunity comes along. This could be an investment, real estate, a trip or some other even where the return is greater than the cost and is facilitated by ability. (savings)
I am by no means the richest man in the world, but there is no reason for me to work decades and be one of the our seniors, who after bills are paid, have less than $500 left over in their savings account. Is there any reason you should be in the same situation?
There is nothing wrong with having nice things, or spending money. If you have earned it, do with it as you please, But for those out there who want to make a financial change, the habit of saving is a great way to start.