Why Saving Money is the Key to Financial Freedom

If you want to build wealth and have a secured future, then saving money is very important for you. For buying home, land, vehicles, for marriage, higher education, travel, etc, you need a lump sum amount in your hand, which is only possible, if you save money. Whether you want to live a quality life, or deal with emergency situations, you need to have lump sum amount as savings.
There are many reasons to save and several ways to save. Here in this article, I have discussed the important aspects of savings that you should know.


10 Reasons to Save Money

1. It's a step towards financial independence: By saving money consistently, you accumulate enough money to live a comfortable and enriched life, and have the liberty and authority to buy the things you like.

2. Helps you in an emergency: In case of emergency, when sudden need for money arises, your saved money helps you. For example, if you lose your job, it will take you almost a month to get a new job, and another month to get your salary. In this case, your savings will help you to survive, and prevent you from taking unnecessary loans and bankruptcy.

3. Enables you to take calculated risks: When you have enough money, you don't have immediate pressure of generating income, and so you can take risks like starting a business, changing professions and exploring your interests.

4. Reduce Stress: When you have adequate savings, you are more likely to be less stressed about your future goals like retirement, marriage, kid's education or unexpected expenses like healthcare.

5. Benefits of compound interest: If you invest your savings in fixed deposits, recurring deposits, etc, you'll benefit from the compound interests, which will be added to your initial savings at periodic intervals. In the next compounding period, the interest is added to both initial and interest amount. This helps you in increasing your savings and beat inflation.

6. Achieve long-term financial goals: With planned regular savings, you can accumulate enough money to fulfill all your future aspirations, like higher education of your children, their marriage in future, buying new home, etc.

7. Debt Free Living: When you have enough savings, you are ready for any emergency, and hence prevent yourself from taking any loan, and lead a debt free life.

8. Promotes a good life: Your savings helps you in achieving your financial goals, increasing your income and wealth, and living a comfortable life.

9. Better Retirement: After retirement, you have no source of active income. In that case, your savings will determine the quality of your post-retirement life.

10. Leave a legacy: By saving money, and building wealth, you leave a legacy for your children and future generations. Due to the wealth you build, they will live a comfortable life.


How to increase savings?

As we know,
Savings = Income - Expenses

So, in order to increase savings, will have to:
1. Increase source of income (which will increase the overall income), OR,
2. Reduce unnecessary expenses.

In order to achieve this, we should follow these advice:
1. Try learning new things and increase your skill set, so that you can increase your source of income.

2. Learn time management and try to live a disciplined life. This will help you to do multiple works together, and hence your sources of income will increase.

3. Limit your credit card usage. This will prevent you from unnecessary expenses and high interest rates.

4. Try to record and keep a track of your monthly expenditure. This will give you a clear picture of your expenses, and you'll be able to differentiate between necessary and unnecessary expenses.

5. Create a budget for savings every month. In your monthly budget, make a target of savings, and reduce your expenses to achieve that target. This will help you in focusing on what is important, reduces the chances of over-spending, and lets you save as planned.

6. Invest in long-term financial tools, like fixed deposits (FD), recurring deposits (RD), bonds, gold, shares, mutual funds, insurance, ULIP, NSC, PPF, etc. This will grow your money, giving you good returns in the long term.