There is a lot of wisdom on a lot of different topics to be found in the book of Proverbs. For example, Proverbs 21:20 in the New International Version says this: “The wise store up choice food and olive oil, but fools gulp theirs down.” Now, we have grocery stores and access to food all year round, so storing up food and olive oil doesn’t really make a whole lot of sense in today’s time. The Living Bible translation of this verse reads like this: “The wise man saves for the future, but the foolish man spends whatever he gets.” This makes a bit more sense and is more applicable to how we live today than when it was originally written.
This Proverb is pretty black and white: it is wise to save for the future and it is foolish to spend everything you earn. Here are some of the things we should save our money for:
- We need to set some money aside to pay for emergencies and unexpected expenses that will come up throughout life. There needs to be some money in the bank to pay for things like unexpected auto repairs, unexpected medical bills, and even unexpected unemployment. A good rule of thumb to go by is to have three to six months-worth of expenses saved up in an emergency fund (this is according to Dave Ramsey). This way, if you blow a tire or break your arm or something that we never want to happen but is always a possibility, then you have enough money to pay for it without having to go into debt. Emergencies like this are already stressful enough, but having an emergency fund removes the unnecessary stress that taking on debt would add.
- We need to save money to pay for college. Whether you’re a high schooler looking to go to college after you graduate or if you’re a parent looking to send your high schooler to college when they graduate, you should save money to pay for college. I don’t have any personal experience with taking student loans, but I have been researching them like crazy for a few weeks now and what I am learning just makes me angry. It is very easy to get caught up in student loans and then be stuck with them for decades after college. Student loans should be avoided as much as possible, so in order to avoid them, you have to save, save, save.
- We need to save money to fund our retirement. Yes, even if you still have 15 or 20 working years left, you need to be saving for retirement. Now, this is assuming that you have an emergency fund already saved up. If you don’t have an emergency fund, you should get that saved up first, then focus on retirement. The longer you are able to save for retirement, the more interest will be working for you. “Oh, it will be okay, I will just live on social security!” Look, if social security still has enough money in it when you are ready to retire, you will still be taking a sizable pay cut by living on only social security. I am personally not counting on social security and I would advise that you guys don’t count on it either. Here’s why: if social security is still a thing when we all retire, then great! It’s the cherry on top of our retirement. But in reality, it is a possibility that social security will be non-existent or will be significantly lower when we retire. I would rather set up my own retirement with my own money instead of relying on someone else to hopefully, maybe pay me a little bit of money to live on during what is supposed to be some of the best years of my life.
- We need to save money for large purchases. The best (and cheapest!) way to buy anything is without using debt. This applies to things like cars and even houses (although saving to pay cash for a house would require a lot of time and patience for most people). If you drive a car, odds are that you will have to replace that car someday for one reason or another. The hands-down best thing you can do when it comes to purchasing cars is pay cash for them.
- We need to save money for infrequent large expenses. Think auto insurance, property taxes, vacations, and other things along those lines. If you pay your auto insurance semiannually or if you don’t have an escrow account with your mortgage to cover your property taxes and homeowner’s insurance, then you need to set aside an amount of money each month to save to pay for these expenses. Do you want to take a vacation? If you’re like most people, the answer is probably yes. If you are wanting to take a vacation, then you need to save some money each month to pay for that vacation! It is not fun to go on a vacation just to come home to a couple thousand dollars in credit card debt because you failed to properly prepare for the expense associated with taking that vacation.
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This is for educational purposes only and is not intended to be used as personal financial advice. I have not taken into consideration anyone specific situation. This is simply based on my opinions and how I personally handle my budget and finances. If you would like one-on-one personal budgeting advice, please click the Budget Coaching button below or contact me to set up a free consultation call. Also, if you haven’t already, sign up for my monthly newsletter! I will be sending out exclusive content each month and you will get a free budget guide as a thank you for signing up!
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