Why We Save Our Money.

United States Personal Saving Rate

Everyone knows that you should save your money.

But how many people actually do it? According to the latest statistics, not many. The savings rate in the United States has steadily gone down in recent years. My wife and I are on a mission to change that, at least for us personally. We believe that saving money is essential to living a comfortable life. That is why we do our best to put away as much money as possible, without living in a shack or eating Ramen noodles day in and day out. Having a large amount of money saved up has been a benefit to us in so many ways, that I wanted to share a few things that saving our money has brought us.

First of all, we hope it will allow us to retire earlier than our peers. Who really wants to work day in and day out until they are 80 years old? Not us. We do not have a problem with work, but I know that is not the only reason we were put on this earth. It can’t be, as that makes no sense at all! So by trying to save us much money as possible, we hope to be able to relax in the second part of our life. This is very important to us, as we see a lot of people that are still working full time jobs late into their life. We do not want to be one of them. Also, saving money allows us to take a few well deserved and needed vacations every year. I think taking vacation is an essential part of being alive; it makes you step away from the norm and look at things from a different point of view. Vacations are good for your mind and your health, and can really give you a sense of why you are working in the first place!

Emergencies are a fact of life, and we like to be prepared. Something as simple as an expensive car repair can be incredibly damaging to your finances if you are not ready for it. If you have a savings account, you can pay to repair the car with cash and not run up more credit card debt. It also allows you to keep older cars longer, as it usually is a lot cheaper to make the occasional fix to a car than it is to buy a new one. Having cash set aside for emergencies can make those mountains into molehills when you know you have the money to take care of whatever it is.

Our savings MAKES us money. Through the power of time and compounding, the more you have in savings, the more money you can make from that savings. So it really is not about the fact that you have $1000 in a savings account, its that that $1000 is making you more and more money every day, month and year that goes by. Pretty soon, that $1000 has turned into $10,000 and is making you even more money on top of the money you set aside. This is a very good reason to have savings accounts!

While we do not have children right now, we are planning on starting a family relatively soon. And because of the fact that my parents paid for most of my college expenses, I would like to do the same for my children. I do not want to burden them with huge student loans the minute they graduate, so they are always playing catch up with their finances. If I can help them to avoid that, I will do everything I can to do so. College is not getting any cheaper, so by saving money for my children can enable them to graduate without debt, I am all for it.

Having money in the bank gives my wife and I complete peace of mind if one or both of us lost our jobs. We know we would be fine for quite some time before we ran out of money. Not that I even want to try to see how long we could go, that’s not it at all. But it is quite nice knowing that while we depend on our jobs for our paychecks, if we were to lose them tomorrow we would not have to go into debt. Or end up homeless living on the streets. Putting aside a chunk of change just for this scenario is a biggie with my wife and I, as we know that you cannot depend on employers to take care of you like in the old days.

We both have pretty large families, and if anyone ever needed anything from us for a legitimate reason, we would be more than happy to lend and/or give out money. Family is very important to us, they are the foundation that creates our safety net, and we would like to be able to give back if anyone needed a helping hand. Saving money enables us to know that we could get someone out of a jam if they really needed it.

As I mentioned in a previous post, saving our money has allowed us to live a dream of ours of living at the beach. Growing up on the East Coast, I was around water my entire life, but my wife grew up in the Mid West, where beaches are rarely found. So when we met and were living in suburbia here in Los Angeles, we made a choice to save money for a while and then move to the beach. And I could not have asked for anything more, as I see the sunset every night now go down over the water. It made saving our money to make this happen even more worthwhile.

However, the one downside to living in Los Angeles is the price of housing. A small 2 bedroom 2 bathroom home in need of updates in a not so great neighborhood still fetches over $600,000. But we looked at this in a positive way, in that it gives us more time to save money so that we have a real down payment for a house when we leave Los Angeles. These people that put 0% down and interest only payments for 5 years are asking for it in the future. If you cannot pay the monthly payment on a 30 year mortgage, you have no business buying a house. I have already seen one friend have to give his place up because he could not afford it. That is why we intend on saving up a 15-20% down payment so that from day #1, we own something other than a piece of paper with the banks name on it.

One last thing – having money in the bank allows you to pay for expensive purchases like furniture or doctor bills in cash. There is nothing worse than being in debt and then adding to it with purchases or health care costs. Once we bring home a new couch or whatever, we know it is already paid for and we do not have to worry about paying 10% interest on any purchases.

The above all being said, here is what saving our money does NOT do for us:
Buy us BMW’s or Merecedes
Buy us 103 inch plasma tv’s
Fly us first class
Buy us designer clothes (Come on, $195 for a pair of Diesel jeans? Are you serious?)
Many more things.

We save money for what is important to us, not what is important to other people. And that allows us to live a comfortable life on our terms, not on other people’s. We do not make a lot of money, lest you think that. We are just very careful what we spend it on.

Give it some thought, I am sure there are things you spend money on that are not important to you, but what you think is important to those around you.

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Comments (11)

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  1. Harm says:

    Sounds a lot like why I save….
    I remember the shift from thinking, “boy,
    if I can save up a lot of money, I’ll be able
    to live on it for a while, or be able to buy a
    lot of STUFF!” to “boy, if I save up a lot of
    money, I’ll be able to invest it, and have it
    pay me!”

    (and yeah, nothing is a worse buy than
    designer clothes :P)

  2. It really would take quite awhile for $1000 in a savings account to give you $10,000 worth of buying power when you consider inflation. Even if you disregard inflation, it could still take 47 years at 5% interest.

  3. david says:

    It’s a hypothetical example, Lazy Man.

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  6. I agree completely and why I also do not have kids yet. I want to afford them without any debt. Sounds crazy to a lot of people, including people who are in debt but paying it off. They tell me to just have a kid, after all money doesn’t matter. I think there is a point where you can responsibly afford a child without debt, and waiting until that point is not unreasonable.

  7. david says:

    Totally agree LivingAlmostLarge….debt should be eliminated (at least credit card debt!) before having kids, it makes life so much easier!

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