The economy is still floundering and the fear of being unable to meet future expenses continues to loom large in the minds of most people. Savings are at an all time high with conservatism being the key characteristic of all investments being made in recent times. Saving is fine, but there is a limit to how much you need to save.
Avoid Penny Pinching
Post recession, many people tend to overdo saving by putting away every spare cent. This may give you a confident feeling for a while as you watch your emergency fund grow. But sacrificing every little ‘extra’ can get awfully tedious and frustrating. In fact, denying yourself those little extra pleasures often ends in a hugely expensive shopping spree where you simply end up throwing money. Give yourself a break and allow a small ‘fun spending fund’ for every month to keep your spending urge in control.
How Much Do You Really Need?
It is important to sit back and take a long hard look at what you really need to save for. Medical expenses, post retirement living expenses, children’s education and such critical expenses should be top priority. Make a list of these future expenses and also try to guess how much you will need. You can get a good idea by asking others who have made these expenses recently and then factor in inflation. Now you know exactly how much you need to save.
Where Can You Cut Current Spending?
There may be some current spending that you can cut back so that you end up with more cash on your hands. For example, if you have two cars where one will suffice, then sell the other to save money on gas, insurance, maintenance etc.
Saving for Fun as Well as Essentials
This is especially true when it comes to retirement planning. Post retirement life is a time for doing all those things you never had time for earlier. When you make out your top expenses list, make sure you also add hobbies or vacations you intend to enjoy in your retirement years. It wouldn’t be difficult to get that motivation as you are really saving for your future enjoyment.
Saving beyond a reasonable estimate of future expenses is to simply lock up your money unproductively. Saving is essential but it needs to be done with proper planning so that you can strike a balance between a good current lifestyle and a safe financial future.
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