Saving can literally save your life – no pun intended there. If you list the benefits of saving, you will come up with a really lengthy list. Just as budgeting is important in your financial life, so is building up your emergency fund.
What you have to realize is that the uncertainty of the future prompts us to be prepared. There is always the possibility of a change and the danger there is that there is a 50% chance that it can turn for the worse. If you have a family and people are depending on you, that should make it more of an urgency that you establish financial stability – and that entails an adequate amount of savings.
Why saving should be partnered with debt relief
Even when you are in debt, you need to allocate your limited funds into your savings too. Regardless of the debt relief program that you will use, you need to find a way to grow your emergency fund at the same time.
It had been a subject of debate as to whether you should prioritize your debt payments over saving. Both of them are very important in improving the financial condition of anyone. If you compute the mathematical effects, you will realize that paying for your debts should be the priority. The money you will waste on the interest of your debts is much greater when compared to the interest you will get from your savings account. But if you think about it, saving will help you get out of debt too. Here are the arguments to that.
Your savings will keep you from sacrificing your debt payment fund.
In the event that an emergency requires immediate funding, your restricted budget will require you to sacrifice one or more of the usual expenses that you make. Most of the time, it will be your debt payments – especially when you budget is already down to the bare necessities. That will end up incurring you late penalties and fees that can grow your balance significantly.
Your savings will keep you from borrowing money.
In case you do not want to miss any of the payments that you are making, one option that people usually make is to borrow money to finance that emergency need. Like the first, this will increase your debt amount and that can put you worse than when you started.
Your savings will keep you focused on your debt despite any emergency.
The great thing about your savings is the fact that it provides you with a sense of security that will keep you focused on solving your debt problems. You don’t have to worry about missing out on payments or applying for a new loan. You don’t have to swallow your pride to ask for help from the people around you. The savings that you have built will help you deal with both your usual payments and the emergency situation without any difficulty.
While paying off debt and saving both have strong arguments in terms of who needs to be prioritized, you need to find the resources that will help you do both. In the end, it is not a matter of which is more important. It is how you will find the means to finance both.
How to grow your income to boost saving
The obvious solution to take care of both saving and debt is to grow your income. There are many ways to do this. Here are a couple of suggestions that you can implement.
Spend more time at work.
If the business operations of your employer can accommodate it, you can request to work double shifts or take on more projects in exchange for overtime pay. This will make it easier for you to increase your take home pay because you don’t have to learn a new skill or new processes. You simply have to put in more hours doing what you normally do at work.
Invest in a passive income business.
This is probably the preferred way to increase one’s cash flow. It simply means setting up a business that you do not have to work on constantly for it to earn. Samples of this is a rental income that you only have to invest in once and keep earning from until it wears off. It can also be an online store that you only have to visit a couple of times to make sure that you have enough inventory and the shipping is working well. There are suppliers who will take care of the logistics for you and all you have to do is to manage your orders. The online store remains open and earning even as you sleep.
Earn from your hobby.
If you have a skill that can create products that you know will sell, you can start putting in more hours doing what you love to do. In essence, it will not feel like work at all because you love what you are doing and you are good at it. You can improve your skill and earn a decent income from enjoying your hobby over the weekends. If you are into carpentry, you can offer to make garden furniture for family, friends and neighbors. If you can cook, you can offer to cater to small gatherings.
To help you monitor your savings, you can use one of the many tools available online. We came across an article in US News that lists the free money saving mobile applications that you can download. You can even use the saving calculator from CCN Money to help you boost your retirement savings.