Money is a utility which in its ideal form, is intended to improve our lives.
Now that we know that, there are a few instances where a product, service, or experience is worth
the extra cost (as long as you're not incurring credit-card debt as a result).
This might surprise you but, did you know saving money is a waste of time? Let me explain.
While it's true that you should save money, as unappealing as it may seem,
saving for an emergency, an unanticipated tragedy, or to build a nest egg for future investment are
all good reasons to do so. And beyond that, there is no other reason to save money.
If you put $50 in your cookie jar every week for a year,
you'll have $2,600. That sounds great, but if you invest $50 per week,
you will have substantially more money at the end of the year to show for your work.
Being frugal entails more than just saving money; it also means spending your money wisely. When
you go shopping, and you happen to buy a cheap product, it will most likely serve you well for
some-time, but it’s very likely that it will break and cost you more in either repairing or replacing
it. In the long run, it makes sense to spend more for a better, longer lasting experience.
So now, let's take a look at when it makes sense to splurge, in order to save later.
1.Wealth It may sound counter-intuitive,
but if you save all your money, you won’t become wealthy. You see, whenever you
save money in a bank, it puts you in a losing proposition due to taxes and low-interest rates.
To amass riches, you must invest in appreciating things,
which are called assets. And these assets can be real estate,
stocks, bonds, or other similar financial instruments that offer substantial returns. And
just about everything else in life, there is a risk associated with investing too.
However, when you invest your money, it has the potential to grow
exponentially. Which means it has the potential to grow very big,
and sometimes very quickly and as a result create true wealth for you.
If you begin by putting all of your hard-earned money in the bank, it can be extremely difficult
to withdraw it and invest it in stocks and bonds. It can feel like you're gambling, or worse,
throwing money down the drain, because many folks assume that stocks are expected to fall,
which is a valid concern. But, the good news is that if you invest for the long term, they tend
to rise despite a few hiccups and down turns in the market. Also, investing in real estate is
another good way to build wealth. And if you have time, I would suggest you take a look at NFTs,
they are very popular right now and it could make you substantial money, if done right.
2.Goals
Investing is the most sure-fire way to achieve whatever lavish material goals
you set in your life. Every path entails some risk, and investing is no exception.
You must decide how much risk you are willing to take before embarking on the voyage. Always
think about the risk vs benefit ratio. High gains come with a higher risk of losing money.
And you should never take on more risk than you can bear. The advantage of youth is obvious.
Because your earning potential is large, you can take on more risk when you're young. Investors
who are over the age of 50 must be more cautious. And the reason is simple, when you are that old,
you lack the ability to recuperate large losses due to your scarce earning potential.
If your goal is to advance your career instead of saving,
pay the cost and take advantage of every training opportunity. And this can either be on the
job training, or in a more formal setting, such as a university. Both are beneficial.
3.Quality of life
Investing improves your quality of life,
at least - financially. While you may believe that material possessions are unimportant,
you may disagree if you lack them. Health improves with quality of life, and longevity improves with
better health. Consider your health if you have no interest in material goods.
Invest in memories, not things. Traveling is a great way to enrich your life in general.
Different experiences in different countries can be eye-opening and motivating for new challenges.
You will almost certainly never be sorry for investing in a great trip.
The learnings that you can gain from a vacation are limitless, and especially if you take the
time to reflect on your learnings, the investment will pay off handsomely.
Learning new skills will always keep you motivated and your mind sharp.
To be honest, if you are not open to new challenges and learning new things,
you will not be able to succeed in today's world. The internet is full of any kind of
information you could want, and thanks to this wealth of information, every skill is learnable.
4.Providing a future
We all want to provide a better life for our children than the one we had.
It’s in our genetic code to do so. In terms of education, business chances,
and health, wise investments can provide better opportunities for your children.
The most challenging element of the process is typically deciding on a sensible investment.
If you are hesitant to invest in stocks, consider real estate.
Hedge funds are buying single-family houses in large quantities. Hedge fund managers
are well aware of the size of the rental industry and are keen to profit from it.
Rather than stock, you too might profit from this trend by investing in rental property.
5.Inflation
The economy has gotten almost as much attention as the covid pandemic in the last two years.
Because of the same pandemic, the rate of inflation has risen.
According to Trading-Economics, the annual inflation rate in the US
accelerated to 7% in the last month of 2021, a fresh high since June of 1982.
But what exactly is inflation, and how does it affect your savings?
In general, inflation is the rate at which prices for goods and services rise.
It could occur as a result of an increase in the cost of producing those goods and services.
Another reason could be that demand exceeds supply, causing prices to rise.
Whatever the reason, as prices rise,
you'll need more money to buy the same items you used to buy for less.
One of the biggest issues with saving money, especially in a savings account,
is that the interest you will receive will be lower than the inflation rate.
That means that over time,
the money you save will be less than when you first put it in your savings account.
And yes, your money will still be safe in your account. It is
just that its purchasing power will decrease.
Some of the ways to protect your savings from inflation is through:
• Avoid hoarding cash. Avoid keeping your money in cash. Investing it is the sure
way your money wont lose its value in time • Diversify your portfolio. Another method
of preparing for inflation is to have a well-diversified investment portfolio.
Diversification, which occurs when you spread your investments across asset classes
(stocks, bonds, cash, real assets, and so on),
industries, and countries, helps to boost investment returns while lowering risk,
such as inflation risk. As the old saying goes ‘don’t put all of your eggs in one basket’
6. Saving can turn you into a scrooge
If you’ve never saved money, you might be surprised that it can give you a real rush.
Seeing your savings account grow month after month can be very exciting and rewarding.
This may lead you to seek out new and more extreme methods of saving money.
You may eventually find yourself unwilling to
spend even a penny on something that isn't absolutely necessary.
You have squeezed that penny so tightly that you have squeezed all the fun out of your life.
There is a fine line between being frugal,
cost-conscious and being a penny-pinching tightwad.
You don't want to be a cheapskate. Instead, strike a balance between having no money
saved and saving every dime to the point where you can't even go out to eat once in a while.
7.Taxes
Taxes work against you. Have you ever noticed that it isn’t just
your parents or family members and friends telling you that you should save money?
Taxes reduces the savings. The current tax code confiscates a large portion of people's earnings;
it also imposes a higher burden on income that
is saved and invested than on income that is consumed.
This burden reduces families' ability to save for the future.
The most obvious bias in the tax code is the double tax on savings.
A taxpayer who spends his after-tax income incurs little or no federal tax liability.
The taxpayer who saves and invests the money is not so fortunate. Even though the income
was taxed when first earned, any interest or other earnings generated by that income is
subject to an additional tax. To make matters worse, because of capital gains taxes, double
taxation of dividend income, and death (estate) taxes, some income is taxed three or four times.
8.Social security
One of the primary reasons workers save is to build a retirement nest egg.
By providing all seniors with a monthly payment from the government,
Social Security significantly reduces the need to save.
Social security may be the governments biggest anti-savings program, but not the only one.
Policymakers may believe that the benefits of these programs outweigh the negative effects on
savings rates, but such benefits do not change the fact that the subsidies reduce savings.
Health programs. Healthcare programs provide large subsidies to consumers.
These subsidies, in many cases, reduce or eliminate the need for
households to save for unexpected expenses. These programs have also supplanted private
insurance, which is based on savings because companies invest premiums.
Education programs. Higher education subsidies
reduce or eliminate the need for certain households to save for education expenses.
Grant and loan programs from the government either replace savings with direct subsidies
or replace savings with debt. Indeed, some of these programs erode savings
even more because students may be ineligible for handouts if their families have too many assets.
Housing programs. Mortgage insurance,
direct loans, and loan guarantee programs are run by the government
and have the effect of lowering the down payment requirement for home purchases.
This increases default rates (because owners have less to lose if they walk away from a mortgage)
and the cost to the government; it also reduces the incentive for people to save.
9.Staying in debt
Many financial experts would argue that saving money while in debt is an oxymoron.
You may have money in the bank, but if you owe the same or more to your creditors, you're in the red.
You're probably paying much more in interest on your debt than you're earning from your savings
account, so you're even further in debt. As a result, it's a good idea to set aside
a small emergency fund (perhaps $1,000) and then attack your debt head on.
The sooner you pay off your debt, the more money you'll have to put aside for savings,
but you'll need a strategy for doing so.
Some experts argue that the best way to get out of debt is to pay down the smallest balances first
and then snowball your payments over time. Others would argue that it's better to start with
the debts with the highest interest rates because they're the ones costing you the most money.
What method you choose isn't as important as sticking with it for the long haul.
And finally, I will finish it off by saying ‘The golden goose is only good as long as she
lays eggs. If she doesn’t lay golden eggs you can kill her for the chicken, right?’
same applies to money ,like any paper, it is only good when it’s used.
So thank you so much for watching, subscribe if you are new and give this video a thumbs
up if you enjoyed it. With that said, have a great day and I’ll see you in the next one.