Savings can be a lifeline when you’re going through a difficult time financially. It will help you cover the costs of emergencies or a sudden lost job. It also gives you peace of mind and prepares you for making larger purchases down the road.
Despite its importance, many people have not mastered the art of saving money. In fact, more than 60 Americans don’t have enough savings in their bank account to cover a $1,000 emergency. They sink further into debt instead.
If you’re a financially savvy person, you’ll tap into the importance of saving and use it only for emergencies. You never know what lies ahead, and here are a few reasons that you’ll be glad you started saving today.
You need a new car.
Most people on a budget don’t prioritize having the newest cars. Instead, they get as many miles as possible out of the car they already have. Unfortunately, that often means you end up stranded on the side of the road, and you finally realize that you need a new car.
This time, shop for a car that will be a little more reliable. You don’t want another dead-on-the-side-of-the-road scenario. It doesn’t have to be a fancy car. A used vehicle with low miles will be significantly cheaper, while keeping you on the road problem-free for several years.
Savings makes car shopping a lot easier. You can always finance your vehicle, but if you have no savings and a high debt-to-income ratio, you’ll have a difficult time getting approved for a decent loan amount. You’ll be stuck with another high-mileage clunker that might die sooner than you think.
Do vehicle research before setting foot on a car lot. With patience and hours of research, you’ll might find the perfect used Lexus for sale with the right mileage and a great price.
If you’ve saved diligently for this purchase, you may not have to finance the vehicle, and you’ll own it free and clear. Think about the freedoms of not having a car payment every month.
You want to go back to school.
Going back to school to further your education is one of the most noble actions you can take. It’s the first step towards a better life and a career that you love. But it’s pretty expensive.
The average cost of an education at a state college is $25,000 and the average cost at a private institution is $10,000-$20,000 more than that. Thankfully, government grants and scholarships are available, depending on your income. You may also be able to apply for scholarships for non-traditional students, which will cover some of the costs.
However, it likely won’t cover your entire education. Besides the costs of tuition, you also have books and housing to worry about. You may also need to cover your cost of living if you’re not planning to work full time while you go back to school. Not everyone can work while they’re in school, and you’ll need to factor in living expenses.
Deep savings makes going back to school a lot easier. It can allow you to quit your job and focus on school full time. You won’t have to worry about making ends meet while you pursue your next career. Even if you have to take out loans to cover the cost of your tuition, you’ll have your savings for living expenses.
If you’re still worried about costs, look into an associate’s degree, which is two years instead of four. Many jobs that require an associate’s degree pay just as well or better than some degrees that require a bachelor’s degree.
Consider this when using your savings to live on while you’re going back to school. If you’re savvy with your education and money, it won’t be long before you’re making a better living.
You have an unexpected medical emergency.
Medical emergencies are aptly named because you never know when they’re going to hit. You might have escaped medical calamity thus far in your life, but there’s no guarantee that you’ll make it another 10 years without something happening.
Nobody wants to think about emergency situations, but if you have a plan for when it happens, it’ll be a lot easier to handle. First and foremost, make sure you have the money to cover as much of the medical expenses as you can.
The average emergency room visit costs more than $1,233 for treatment, X-rays, and other procedures. This is the out-of-pocket cost, not the amount that your insurance will have to pay. If you don’t have insurance, your bill will be significantly higher. A savings account containing just $1,000 will make this emergency much easier to bear.
There’s also the risk of developing a serious illness, such as cancer. If you’re a woman, you should know that one in eight women will be diagnosed with breast cancer in her lifetime. If you research facts about breast cancer, you’ll also learn that most women who are diagnosed early on beat it and live cancer free for the rest of their lives. But they have hefty medical bills, even with insurance.
Don’t expect that you or your family will never get hurt. By saving for such an occasion, you won’t have to worry about the financials while getting yourself or a loved one well again.
You’re being sued for something.
A lawsuit can come out of nowhere, and it’s not cheap. You may be sued for personal injury, negligence, custody of your children, saying the wrong thing, posting something negative about someone on Facebook, a divorce, or committing fraud or another crime. Lawsuits are rarely expected, and the costs add up quickly.
Howard Fensterman, an attorney on Long Island who has represented many cases for those who least expect it, recommends having savings in your bank for this event. By the time you’ve hired your attorney, paid travel and business expenses, covered paperwork and court fees, and worked through other costs, you could be looking at $10,000 to $100,000 in fees.
Grants and legal aid institutions can help you cover these out-of-pocket costs, but unless you’re granted a generous settlement from being sued, you’ll be thrilled that you had some money put away to offset the costs.
You want to start a business.
Starting your own business could be your ticket to financial and work freedom. If you hate working 9-to-5 behind a desk every day, making a low wage, this venture will likely get you out.
However, you need money to do it. The average startup costs for a business are about $30,000. You can always take out loans and apply for government grants, but lenders usually won’t lend you the money if you don’t have some savings upfront.
Your savings will be your ticket to a new job that’s all your own. It can take years to get where you need to be financially to start a business, but the rewards will be there, and you’ll be thrilled that you started saving now.