Who in the world doesn’t like to save money? Well, I’m sure there are plenty of people who don’t, since many people love to spend like money is going out of style. However, many of us who enjoy personal finance truly see the value in saving. In fact, many of us enjoy saving money!
When it comes to saving money, I think that there are some expenses that come to mind quite easily and others that don’t really get taken as seriously as they should. Here are two examples of each of these types of future expenses we need to save for:
Obvious but Very Important Savings Needs
Think about what your current lifestyle is like. Do you like it? Or, would you really like to be able to afford more?
Well, just to afford the current type of lifestyle, we would need to have a similar level of cash flow. For example, a couple spending $5,000 per month would need to have that much cash flow in retirement to cover this standard of living.
To get that kind of cash flow strictly from interest income, one would likely need a decent amount of principal. At $60,000 per year annualized based on the monthly amount just described, with super low rates, the amount of principal needed would be a few million dollars. Not exactly a small amount!
Most people in this country don’t retire with this kind of money on hand, and pensions seem to be going by the wayside. With local and state governments potentially at risk for bankruptcy like we’ve already seen in one major city, do we want to counting on pensions anyway?
People can’t work forever, so it’s essential to save as much as possible for retirement.
The reality is that many people pay for their own education long after they received it! So, paying for another person’s education isn’t exactly something people are then ready to save for.
You know, kids do grow up fast. So even though your own student loans may be paid off after hard work, it’s important to start saving for your own kids. College is increasing at astronomical rates it seems, and yes – it’s important and not optional like a generation ago. Why put kids in a difficult position of having stress over paying off loans?
Of course, one’s own retirement shouldn’t be put on the shelf for college. It’s hard to borrow for retirement, while it’s possible to do so for college.
Overlooked Savings Needs
Gaps in Unemployment or Periods of Underemployment
When younger, it seems logical to think that we will progress up the ladder and see continual increases. Maybe at some point raises would at worst keep pace with inflation, right?
No, that’s not really right. People do cap out at some point in their careers, as not everyone can reach the top. At some point, people get expensive. The might mean being let go, or working for less than we might think we are worth.
That’s not to say we shouldn’t all be optimistic, because we should! Reach for the stars! But also remember that we just don’t know what exactly will happen. What I’m suggesting is that we should plan for the unexpected, and be prepared in case things don’t follow our best case scenario.
As we age, we sure don’t get healthier! Think about it, people seem to get all kinds of ailments and chronic conditions as they get older. Some people probably fare better than others, but most people deal with one thing or another. In some cases, these can be expensive issues.
Also, there probably aren’t too many people that find medical costs to be getting less expensive. Best to save as much as we can for these such costs!
Readers, do you prioritize each of these savings needs? Is there one or more that you feel like you don’t pay much attention to?