Why saving money is costing you more money.
Many of us have grown up being told to save money. Why are we always told to save our money and not spend it? It is a Scarcity Mentality. You are taught that there is only so much money and you need to hoard it all so that you will have some when you need it. I am not saying that you should not be saving money. I actually agree that you need to same money because you need to be ready for hard times that might come, but I also think that just saving all the time is not the best practice.
I think that you should try to save up 6-12 months of expenses so that if you lose a job or some other large event happens you will not be financially stressed. But how will I saving money cost me more money? If you are saving money you are probably putting the money in a checking or savings account. Most checking and savings accounts are not earning a very much interest. Even C.D. accounts aren’t earning very much interest. You could put that money to use somewhere else that would otherwise be saving in something that would give you a higher return on investment.
So what should I do with the money instead of putting it in bank? First of all let’s see how leaving your money in a savings account could be losing you money. For example…if you are earning 1% on the money you have in your savings account and inflation is 2% per year, you will be losing 1% of your savings per year that you leave it in this account. You can see this concept if you think about how this year you might be able to go to a restaurant and buy a hamburger for $5. Next year that same hamburger might cost $5.10 but the $5 that you left in your savings account is only worth $5.05. So should I go and buy a bunch of stuff and hold onto it so that I can sell it later? NO, most of the stuff(junk) that we own goes down in value the longer it is owned because everyone wants to new hot item not the old stuff. So then what should I do with my money?
There are many things you could do with you money. You should try to create multiple streams of income to help reduce financial stress due to worry about losing main stream of income. You could invest the money in the stock market through a company that will invest it for you. You could also invest your money in real estate. I’ve heard it said that 80% or millionaires have some of their investments in real estate. You could also invest in a new business that you would like to create that could help you to find financial freedom.
Whatever you decide to do with your money make sure that you do your research and are confident in what you are investing in. If you just start throwing money at different avenues you will not make an informed decision and you could lose even more money than you would have had you just left the money in a savings account.
Leave a comment below and tell us ‘What do you do with your extra money?’