Why is it hard to save money?
The decision to save or not to save is always a personal choice. Everyone’s financial situation is different, and therefore not everyone is able to allocate the same percentage of his or her income towards savings. However, everyone should be saving money (even a small amount) on a regular basis.
Here are some of the reasons clients often tell us ‘why they cannot/or they think they do not need to save’.
There is always something in the market that needs to be bought.
You can always enjoy a better television or a newer car, but splurging on the latest models can be expensive and often unnecessary. We often see young professionals frequently upgrading their cell phones and that too on EMIs. Everyone wants the latest iPhone!
However, is it in your best financial interest?
Let’s live today and leave the worries for tomorrow.
This is probably the most common reason why people choose not to save money, and it is also probably the biggest financial mistake that anyone could make. Just because you have other financial priorities, such as travelling or buying new gadgets, doesn’t mean that you can’t save money for your future at the same time. The longer you wait to start saving, the more you will need to save.
I am young right now. I can start later.
This is another huge financial mistake, which a lot of youngsters make. Procrastination can be very costly.
For example, if you save Rs 5000 per month for 20 years at an interest rate of 15% p.a, you will accumulate ~Rs 75 lacs by the end of 20th year.
If you chose to start saving later and say you save for only 15 years instead, you will only accumulate ~Rs 33 Lacs. This is the power of compound interest which early savers and investors enjoy.
I will anyways leave everything when I die-So why bother with saving?
This is true, but no one can predict when he or she will die. If you don’t have sufficient savings to take care of your financial needs in your old age, you will have to depend on others (Would you want to be dependent on your kids!). You may or may not be able to lead a life of your choice.
I am too young to start thinking about retirement
If you have more years to grow your money, lesser is the amount you need to save.
For example, someone who is 45 years and wants to accumulate Rs 6 crores for his retirement (age 60 years) needs to save Rs 90,000 per month. Total investment during the 15-year horizon will be Rs 1.71 Crores. However, a 25-year-old has to save only Rs 4,000 per month to accumulate the same amount upon his/her retirement (age 60 years).
Get into the habit of saving as early as you can.