Saving & Investing: Why It is Important to Save Money If at All Possible (9th Blog Post)

The total amount of income we earn will naturally impact the total amount of money we spend and, alternatively, can save. What you don’t spend you can save. If as an adult you earn just enough to “pay the bills”, then saving a portion of your income simply may not be possible. However, if your personal financial goals when you become an adult do involve what inevitably will be relatively large expenses (think buying a home, buying a car, helping to support a family, going away on vacations, helping fund a college education, starting a business, having a comfortable retirement, etc.), then you may need to save money in order to be able to achieve those goals. Furthermore, stuff happens! Financial emergencies, unexpected expenses that are not emergency-related…..these things happen in life and having the ability to tap into some savings increases one’s financial flexibility and, in turn, can help create greater financial stability in one’s life. Of course, having some savings to tap into when and as necessary can also reduce the emotional stress that goes along with unforeseen events.

So what are realistic examples of financial emergencies?

How about the loss of one’s job and the loss of income that goes along with it. You still will be on the hook to pay your rent. You still will be on the hook to pay your utilities bill. You still will have to buy groceries.

How about an unexpected medical problem? Let’s say you get seriously sick or a loved one gets seriously sick. Let’s say you get into an accident or a loved one gets into an accident. Sure, health insurance may help cover some of these associated costs. But health insurance won’t cover the loss of income that potentially may result from such events. And health insurance has its limits. What I mean by this is people usually have to pay out-of-pocket for some portion of their healthcare expenses even if they have health insurance. Moreover, health insurance plans may not cover an individual procedure and may impose limits on reimbursable coverage.

How about an expensive home repair? Let’s say a leaky pipe or a frozen pipe or a toilet that overflows or a mold problem or damage to your home caused by a natural disaster like a fire, flood or hurricane. Fixing such problems is not inexpensive. And once again, even if you have renters insurance or homeowners insurance, insurance plans have their limits and those whose homes are insured may still have to pay out-of-pocket for some portion of their home repair expenses.

How about an expensive automotive repair? Perhaps you or a loved one got into an accident. Or perhaps there was no accident at all but something happened to your vehicle and it requires a professional fix. Sure, auto insurance should help, but just because you have auto insurance does not necessarily mean that you will not have to pay some portion of the cost of repair out of your own pocket.

How about an emergency involving your pet?

Oh, by the way, even when an insurer covers an expense, you may have to lay out the cash initially to cover that expense in its entirety and then wait some period of time for the insurer to partially or fully reimburse you.

What are realistic examples of unexpected expenses that are not emergency-related?

How about the cost of repairing or replacing a home appliance that is no longer working?

How about you lost something you need, or a loved one lost something they need, and you now have to replace it?

How about some activity that you or a loved one had not planned to participate in but now wish to participate in?

How about new glasses?

How about the zippers of your bag or of your child’s knapsack no longer work and you need to replace the bag or knapsack?

How about unplanned travel?

How about a bill from your pet’s veterinarian?

How about a gift that you suddenly have to give but had not planned for?

How about an increase in the amount of taxes you have to pay?

As adults, it will be important for us to save money if at all possible. This is true regardless of our personal financial goals. If we eventually, for example, want to buy a home, buy a car, help support a family, go away on vacations, help fund a college education, start a business, or have a comfortable retirement, then we may need to save money in order to be able to achieve such goals. On the other hand, even if we have none of these financial goals, it will still be important for us to save money if possible. The reason: when we become adults, lots of unexpected expenses can be expected. Yes, one can try to borrow money or sell something to pay for unexpected expenses, but neither of these alternatives realistically is a particularly good one.

I would love to hear from you. Any ideas, experiences, thoughts, comments and questions….please do share.

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