Being able to save for everything you need will put you in a better financial position in the long run. This will mean that you will pay less for what you are buying and will put you in a less stressful situation. Keep in mind that some borrowers don’t care that they are in debt, as long as they are able to repay it.
The crisis comes when there is a job loss or some health issue arises and there is no money in the kitty to pay the bills.
A person who has set up his finances properly will take into account such emergencies in his financial planning.
Saving money is a no brainer; Here are five main reasons not to borrow.
1 no loan
Borrowing money to buy things you need or want puts you in debt. It means that you are indebted to someone else. Sooner or later all this has to be paid back with interest. Debt doesn’t go away until it’s paid off, so there’s no point in burying your head in the sand if you’re indebted to your creditors. Creditors have every right to expect repayment of their money whether they are banks or other lending institutions or family members.
2 cost of borrowing
Borrowing money has a cost attached and that cost is interest which is sometimes referred to as “dead money”. Paying interest on goods you buy on credit increases the cost of the goods. The habit of buying stuff on credit adds up to a huge amount over the course of your lifetime. That interest money could have been used to build up the nest egg. Commercial credit is the worst type of credit expense because the value of the item purchased on credit is lost with the passage of time. Another name for commercial loans is dumb loans.
3 Money ready for emergencies
Emergencies do arise from time to time. The car breaks down, the washing machine needs repair, you have a toothache and need to go to the dentist, you need a new pair of glasses. Financial emergency can happen due to any number of reasons. If you have money set aside for these, you can turn to these emergencies without worrying whether you have the money to pay for them or not. Every responsible person has an emergency fund to protect against financial shocks that may come from time to time.
4 A nest egg for the future
Saving money means you are able to build a nest egg for the future. If you are a responsible person then you must have some sort of retirement plan where a part of your salary goes into the fund. In New Zealand it is called Kiwisaver. I cannot stress enough how important it is to be enrolled in KiwiServer if you are from New Zealand. Government incentives make this plan a no-brainer. Your country will have its own plan with its benefits.
Take advantage of 5 specials
If you do not have money then you will not be able to take advantage of the special. This does not mean that you should spend money for any reason other than a specific reason. Your own common sense and self-control should be employed here.
6 A Dollar Saved A Dollar Made
There is a saying that a dollar saved makes a dollar. The truth is that a dollar saved is better than a dollar out because you don’t pay taxes on a dollar saved which is not the case when you make a dollar. Every dollar you save can work hard for you in any investment.
A competent money manager will have no place in his vocabulary for words such as loan, credit, credit card, loan, lay-buy or hire purchase. In fact all these are dirty words for a person who wants to get ahead financially.
Having said all that, there may be times when borrowing money can be beneficial.
And it’s a huge but.
You have to be absolutely sure that the payoff is worth your time.
Take student loans for example; You must be absolutely sure that the type of job the course helps you qualify for is something you really want to do, otherwise the entire course will be a waste of time and money.