Put simply, not saving money is dangerous, and it comes with consequences. Whether you are making a conscious choice not to put money away, or you just have a spending problem, you are risking a lot.
Saving money is the foundation of your financial success. So, until you make a point to consistently save money, your financial future will be unstable. And the longer you neglect your savings, the more risky things become.
What follows are the top 10 dangers of not saving money. Spenders, beware.
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Unprepared For Financial Emergencies
Financial emergencies are a fact of life. One moment you think everything is going great, and then, boom, your water-heater stops working, or your car breaks down. And in those moments, if you haven’t properly prepared your finances, you may find yourself scrambling to get by.
Here’s the thing, whether you have money saved-up or not, you are going to have surprise expenses pop up now and again. The only difference is that the more money you have saved, the less of a financial emergency these surprise expenses will feel like.
For example, if your furnace were to go out in the dead of winter, and you neglected to build up an emergency fund, finding the money to pay for a new one would feel like a crisis. Not good. Whereas, if you had $25,000 just sitting in an emergency fund, replacing your furnace would feel less like an emergency, and more like a slight financial inconvenience.
What’s the moral of the story? If you don’t save money, unexpected expenses will feel like emergencies. Meanwhile, saving money takes the financial sting out of surprise expenses.
More Likely To Go Into Debt
It seems like you can put just about anything on a payment plan these days. From a new pair of shoes to an engagement ring, to a brand new boat, you can finance almost anything you want to buy. On top of that, it has never been easier to get approved for a credit card.
But both of these options come with interest, reduced cash flow, and shelling out a portion of your income to somebody else until you pay it off.
When you don’t make a conscious decision to save your money and pay for things outright, it is easy to drown yourself in debt. That’s just another danger of not saving money.
You know what a lack of financial preparedness and too much debt have in common? Financial stress. And the longer you wait to start saving money, the more you are inviting stress into your life.
To be honest, there are a number of reasons why not saving money leads to financial stress.
For instance, if you want to quit your job and pursue something you are more passionate about, but you don’t have any savings to back you up, you are running head-first into stress no matter what you decide. If you quit your job, it will be stressful trying to make ends meet. If you don’t quit your job, you might stress about the time you are wasting at a job you don’t like.
When you don’t have a nice pile of savings, you lose options. And a lack of options is a stressful situation.
Fewer (Or Less Enjoyable) Vacations
Everybody needs a vacation now and again. But without savings, it’s easy to let time slip by without a single day of rest and relaxation. Let alone that beach vacation you’ve been dreaming about for years.
When you don’t save money, vacations become less and less frequent. Now, I know you might be thinking, you can just put it on a credit card and all will be ok. But the more you do that, the more you increase your debt load. And the more debt you have, the less money you have to pay for vacations.
Not saving money leads to fewer and fewer vacations. And paying for a vacation you charged to a credit card — after all the fun is over — is equally as painful as not going on a vacation at all.
Unprepared For Major Life Events
You know what moments are fun? Major life events. Big moments like weddings, new babies, and graduations are just a few of my favorite celebrations. In fact, I recently just had a baby, and it is the best thing I have ever experienced. Though, I couldn’t imagine having a baby without a hefty amount of savings. (Talk about stressful)
One thing I know about big events, is that they cost money. And if you really want to enjoy them to the fullest, you should do them the honor of saving money. I mean, think about it, if you haven’t properly saved for a major life event, you are casting a dark cloud of financial regret over the celebration.
Do you really want to tarnish the celebration of a new baby with a big hospital bill you didn’t properly save for? Would you rather prepare for your daughter’s wedding so that you can enjoy it, or spend the entire engagement scrambling for money to fund the celebration?
Major life events are worth the effort of saving money. If you choose not to save for them, you are in danger of missing out on the fullness of joy they bring.
If you haven’t already, here are a number of major life events you should start saving for:
- Maternity/Paternity Leave
- New Baby
- College Tuition
- New House
- New Car
Lack Of Freedom
When I was a teenager, the less responsible I behaved, the less freedom my parents gave me. Whereas, if I operated within the rules, came home before curfew, and got all my homework done before hanging out with friends, I was rewarded with more freedom. The same goes for money.
The more you practice saving money, the more financial freedom you will find. In reverse, if you choose to do the irresponsible thing, and not save money, the less financial freedom you will have.
Let me put it this way, do you think somebody with one million dollars has more financial freedom than somebody with one-hundred dollars? Of course they do. But I can almost guarantee that the person with a million dollars behaved much more responsibly with their money over a long course of time than the person with one-hundred dollars.
My dad always says to me, “there’s freedom in boundaries”. When it comes to personal finance, if you set boundaries on your spending so that you can consistently save a large portion of your income, you will end up with much more freedom.
(P.S. the boundaries to which I am referring are otherwise known as a budget. Just sayin’.)
Lower Risk Tolerance
When it comes to financial risk, most people automatically think of investing in the stock market. And while they are right to let their mind go there, there are risks in everything we do with money.
For example, if you choose to spend every penny of your paycheck each month instead of saving, you are risking your ability to ride out a financial crisis. If you choose to go into debt, you are risking your future cash flow.
However, in most cases, if you choose to save money, you are reducing your risk.
Think about this: if you chose to invest your money in retirement before saving an emergency fund, you are placing your investments at risk. Why? Because, in the event of a financial emergency, many people will choose to pull money out of retirement (incurring a penalty and taxes) in order to pay for it.
Meanwhile, if you have a fully funded emergency fund, you are not only protecting your current investments, but your savings allows you to handle a little more risk. So, instead of cautiously clinging to your investment money by placing it in low risk portfolios, you can stand to invest it in a stock-heavy portfolio that has more potential for growth.
Limiting Your Ability To Help Others
Here at Be The Budget, we talk a lot about money being a tool. It is a tool to provide financial freedom for you and your family. It is a tool to pay for college for your children and grandchildren. It is a tool to build a lasting financial legacy in your family tree. It is a tool to help others in need.
So, if you don’t save, you are not only in danger of losing your ability to help yourself, but also others. The more you save and invest your money, the more financial ability you have to benefit the lives of the people around you.
Setting A Bad Financial Example
As I mentioned earlier, my wife and I just recently had our first baby. And with this momentous occasion, has come a plethora of conversations about how we plan to set a good financial example for her.
And one of the staples of a good financial example is saving money. When you save money, you are setting a positive financial example for the people (especially your children) in your life.
Are you really willing to risk that by choosing not to save?
Lack Of Self-Discipline
Until you are in the habit of it, saving money is easier said than done. But as you begin to grow in your habit of saving, you will find an improvement in your overall self-discipline.
You see — at least from what I have observed and experienced — when you practice self-discipline in saving money, it affects other areas of your financial life. Not only will you get better at saving money, but you will get better at saying no to impulsive spending.
As you start to see the positive results that saving money has on your financial life, you will be more inclined to learn more about personal finance, make better investing decisions, become more consistent with your budgeting, and much more.
By choosing not to save money, you are sacrificing self-discipline; and with it, all its wonderful benefits.
Choosing not to save money is a dangerous road full of financial consequences. The good news is, saving money is a simple action that will bring stability, confidence, stress-relief and freedom to your life. Additionally, it is critical to the success of your financial life. So, get out there and save some money. It will be one of the best financial decisions you have ever made.
Have you ever experienced the dangers of not saving money? Is there anything you could have done differently to prevent the financial consequence you experienced? Comment below.