Financial Stability Season 1 || Savings || By @hisgeneral || 100% Power-Up

I want to welcome everyone to this publication. It has been informative, educative and fun all the way. I also want to specially thank the MODs @xkool24, @kinkyamiee, my country rep @bright-obias and every member of this reputable community not forgetting my regular supporters, you all are nothing less than genius.

The season 1 of Financial Stability has covered some financial issues which includes: Strategic Planning, Financial Problems Affecting Strategic Planning and Budgeting. Today, we will be discussing Savings which will bring us to the end of this season 1.

Savings is said to be the money left over after making subtraction of consumer spendings from disposable income over a specific time period. Thus, Savings denotes an individual's or household's net surplus of funds after payment of all expenses and obligations. Savings can be kept in the form of cash or it's equivalents like bank deposits, that are not exposed to risk of loss rather is accompanied with correspondingly minimal returns. It is through investment that Savings can be grown, and this demands that the money however be put at risk.

Savings encompass the amount of money that is left after expenditures. There are various life objectives for which people save, these includes rent, retirement, child's college education, down payment for a home or car, a vacation, or many other instances.

Savings may typically be reserved for emergencies. For instance, if a person’s monthly paycheck is £5,000, and expenses comprise £1,300 for rent payment, £450 for car payment, £500 for student loan payment, £300 for credit card payment, £250 for groceries, £75 for utilities, £75 for feeding, and £100 for gas. Since the monthly earnings is £5,000 and the sum of monthly expenditures is £3,050, there is therefore a £1,950 left over as savings. If this excess is maintained as savings and later there is an emergency, there definitely will be some money to live on while settling the issue.

The inability to maintain savings, may be described as living paycheck to paycheck hence, supposing a person encounters an emergency, there is always not enough money saved up to live on as such one may be at risk of debt or bankruptcy.

Calculating Your Savings Rate

A person's rate of savings is the percentage of disposable personal income which is conserved instead of spending it on consumption or responsibilities.

Take for instance that one's net income after taxes is £25,000 a year, which is known as disposable income, and £24,000 in consumption, bills, and other expenditures is spent within a year period. The total savings are $1,000. Dividing the savings by disposable income and multiplying it by 100 will give a savings rate of 4%.
That is:
£1,000 / £25,000 x 100 = 4%

Why Is Savings Important?

Supposing one don’t earn much and can hardly pay bills, the notion of saving money might appear ludicrous. When one only have say $5 left at the month end, why even hassle to try saving? Because everyone has to begin somewhere, as well if one work at it, then the financial situation is feasible to improve in the course of time. Saving money indeed is worth all the effort.

• Financial Independence

Independence and freedom to do what you want when you want within the confines of the law is one of the best parts of being an adult. Nevertheless, the less one save, the more debt is accrued, and the less independence one will have. Therefore, if one desire to be financially independent and unshackled, beefing up savings is only option.

• Minimizing Financial Risk

The more money in one's possession, the less risky the financial circumstance will become. Assuming one have $10,000 to his/her name, and then invest $6,000 to begin a personal business, 60% of the net worth has just been risked. Whereas, if one save and invest until the net worth crests 1million dollars, then utilize $60,000 to start a company, only 6% of the net worth has been risked.

Additionally, when one only invest 6% of net worth, it’s pretty feasible one will make up for that in interest, alone, within the next year. Consequently, saving and investing money minimizes financial risk. Plain and simple.

• Emergencies

It is certain that throughout life, there will be some emergencies. Ranging from a family emergency which could require flying across the country, to less emotional emergencies such as a broken down car, having a reasonable quantity of money saved up keeps one from annexing financial stress to the pile.

Seriously, money is the last thing one need to be bothering about in an emergency. Therefore, it is important to do one's future-self a favor and save up an emergency fund. Hopefully one will never want to utilize it, however if one dose, one will be beyond grateful it is there.

• Leaving A Financial Legacy

If death occurs, what kind of financial legacy would one be leaving behind? Would the story be one of debt as well financial burden for the family? Or, would one leave a legacy of financial grit, wisdom and honor.

One's financial legacy is important and means a lot to the people around. Whether at the age of 20 years, or 80 years, the way one handles money will sure enough leave lasting effects—either positive or negative—on loved ones. Therefore, for goodness sake, come out of debt, cut down expenses, and place an importance on saving and investing money. This is one of the best ways to honor one's family and friends.

The Bottom Line

Saving money is exceptionally crucial. It offers peace of mind, broadens options for decisions that have a key effect on the quality of life, and ultimately offers retirement option. Most people that are wealthy got there via a combination of hard work/smart savings and investment decisions. You can become one of those people, too.

Written by:
@hisgeneral

Thanks to everyone of you for reading through. From me to you is "have a pleasant day".