Saturday, March 28, 2009

Saving small amount of money will give you good return. How?

Once we start earning for our self, we always think of saving a percentage of money in our savings account, but at the end of the month we find that zero amount of money has been saved, why is it so? I have an answer to this question; I don't know whether you will agree to it or not, the answer is that we don't plan our monthly budget. If we can plan our expenditure (necessity items) then I think we can compromise a bit on our likings and we would save at least few dollars per month.
I am saying all these because we know it well or we hear it very frequently that saving small amounts of money is not the trouble. Yes, if we start our saving with a small amount, then it really takes a lot of time and effort but once these small amounts get accumulated it can have a dramatic effect on your overall financial health.

There are many people who think that saving and spending are relatively same, i.e. if we save $15 a week then it is just the opposite of spending $15 a week. I don't know, why will they think that saving and spending are relatively same? We all know that if we save a very less amount in our bank account then also we earn interest on that amount. So, whatever amount we save, we normally get more in return. Another reason I do have, that is when we did not start earning, then also we had expenditure; in economics we term it as "dissaving". If you think a bit, then you will know why I am using this term "dissaving" over here. When we did not have any earning then also we had to spend some amount of money to feed ourselves. So, we did spend our money. Now, do you think, that saving and spending are relatively same?

If we continue to spend without doing any saving of our very hard earned money, then what will be the ultimate result? Don't you think we will slowly sink into debt?

After sharing my views with you by giving theoretical explanation, let me explain with the help of an example. Suppose, we start saving $15 a week and interest rate we keep it @ 3%, now if you are able to save this $15 each week, then after 4 years you will be able to accumulate a bit more than $4000 in your savings account.

Now I would suggest you to think in the opposite way taking the above example into consideration.
If you are short of $15 per week and if it continues for 5 years and you use your credit card to overcome the shortfall, then what will be the outcome of this?
You will sink into debt of an amount of $6000 for 18% credit card interest rate. So, you need to pay more $2000 to clear off your debt.

After reading this article of mine, I think I will be able to convince my readers (esp. extravagant spenders) to start saving money with a less amount and save themselves from any unknowing downfalls.

1 comment:

  1. Hi Rachelle,

    Your article is really appreciated. It is really good to start saving with small amount and see the benefits later in life. I was aware of this but due to my low fix salary and high expenditure (my needs), at the end of the month there was no saving in my bank account. After compromising few thing in my life style i was able to save some amount which is giving me a quite a good returns.Also to inform you that this return came to me on the time when i was in a need of finance urgently.

    This is for your reader: For your love one you must have taken all the measures to keep them safe and healthy like health policies, medical polices, life insurance cover and etc and each one try arranging the policy premium from their fix expenditure. Similarly start saving and you will get the benefits out of it which at the end will make some one smile (can be with a help to your love one or spending to fulfill your own dream)

    Reahelle... keep up the good work. God bless you...

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