Why Your Future Depends on You Saving Now even if You have Nothing to Save for…yet
When we think of saving we think we have to be saving for something. I mean who saves for the sake of saving? Not many, I bet.
But let me show you how saving for savings’ sake will be one of the best financial decisions you’ll ever make.
Life is great at throwing all sorts of curveballs at us and if we don’t have a cash cushion — our very own get-out-of-jail-free card, then we’ll be stuck.
Much of the financial stress that people get into is a result of not having cash to bail them out.
It could be an expensive divorce (having 2 divorced aunts I know the process doesn’t come cheap), an out-of-the-blue expense that your insurance won’t cover or having to quit your job to look after a sick child/parent. Or a redundancy!
None of these nasty surprises can be predicted. No one gets married thinking they’ll get divorced (even though 50% of marriages end in divorce!) or that they’ll have a child who needs more help than others requiring a specialist (and pricey) private school.
But having a savings bucket will literally be your lifeline. It’ll be the difference between surviving and thriving.
Life rarely goes to plan so you must plan for the plan not going to plan!
But life happens. It’s messy and complicated. The fun lies in its unpredictability and uncertainty. (Read here why your investments rely on you embracing uncertainty).
If we knew what our entire lives would look like imagine how boring would that be?
The messiness and complications are less fun! But they happen to everyone.
No one has a free ride, even when you think they do.
People who have it “perfect” on the outside often have it pretty imperfect on the inside.
No one knows what goes on behind closed doors but we all have our fair share of things not going to plan.
Planning for the unplanned will give you the peace of mind that when things go haywire your finances can carry a lot of your burden.
And that starts with building your savings. Read here the 3 simplest ways to boost your financial resilience.
If you aren’t planning for the unplanned how will you be able to fund them? This is why you have to start saving. For savings’ sake.
So that when something unexpected, unplanned and totally unaccounted for happens, you’ll be prepared.
Having the finances to cope is a good chunk of the hardship out the way.
Imagine having to go through any of those things and not have the finances to cope.
That would make the situation 100X harder to deal with.
Don’t do it to yourself.
If you think life rarely goes to plan, just look at the stock market!
Think about these past 5 years and what’s happened since then — both in the markets and in the real world. Take the 2018 stock market crash. In December 2018, the S&P 500 fell more than 9%!
We had the breakout of covid and the crash to end all crashes in March 2020. I still remember how I was meant to interview for an internship at a fixed income firm. The interview was cancelled, rescheduled and the programme was eventually cancelled.
In March, The Dow Jones fell nearly 3,000 points — the largest single-day drop in U.S. stock market history. People lost their jobs. Overnight. Wealth vanished. A lot. And we went into lockdown. The world effectively came to a standstill.
And within a couple of months, the stock market was back to its 2020 level and then some!
Things got too overheated. Inflation started to gather steam and it hit its highest level in 40 years while interest rates were then hiked to a 14-year high.
Stock markets got freaked out making 2022 one of the worst years for stocks and bonds who both crashed ~20%. Safe to say it’s been nothing short of a crazy rollercoaster!
Cash gives you the chance to buy assets on the cheap
But had you had cash on hand throughout the highs and lows (but especially the lows!) you’d be in a very different position.
Whoever had bags of cash in March and pounced on the stock market lows were rewarded.
But it takes patience.
Cash loses value each year as inflation eats away at its value. But the value of being able to take advantage of once-in-a-lifetime investment opportunities that come your way, that you can’t put a price on.
I learnt this the hard way. In March 2020 I had £0 in cash. I had invested all I had in a bunch of start-ups that when it came to the stock market I had nothing to show for it.
So, I had to wait a few months till I could invest. By which point, as you all know, markets’ recovery was well and truly underway. I had missed the boat. (Psst: only if you’re curious — read here my top 6 learnings from my 2yr investment anniversary!)
But cash isn’t just about snapping up cheap stocks. It’s about being able to invest in new and exciting investment opportunities that come your way.
Often, the most exciting things come your way when you’re least expecting it. And when you’re outa cash. That’s Murphy’s Law for ya!
So it’s worth always keeping some cash on hand for these sorts of things. Keep it and be patient. Don’t be tempted to use it for a naughty shopping spree or whatever.
Cash will give you opportunity and flexibility. It can multiply your wealth when you least expect it.
Savings give you room to change
Life is ever changing, so you must plan for that change. Imagine what the next 5, or 10 years will look like! Our imaginations simply can’t handle it.
And while we can’t possibly know what will happen over the next few years, we can at least plan for it. Making sure that whatever happens, our finances will have us covered.
Your savings will give you that flexibility. To choose something different to what you planned for.
We all think we know exactly what we want. But as life changes, we’ll change too which means our goals and desires can, and will probably, change.
A chunk of savings means you’d be able to quit your job to take on a lower-paid but way more flexible one. It means you can send your kids to that more expensive school and so on.
Having no savings means you have zero flexibility. Zero room for error. It means that your entire plan has to go to plan!
But the one thing about plans is that they rarely go to plan.
“Man plans, G-d laughs!”
So keep planning and enjoy watching your plans not go to plan.
Welcome to the game of life!
Disclaimer: This is not investment or financial advice. It is my opinion only. This is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment
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