Why save money?

  What is Saving?

Saving means setting aside of a certain portion of income to meet future financial requirements. Saving is what remains from income after expenses, which can be calculated as income minus expenses.

Saving = Income - Expenses

Saving is important for securing an individual's financial well-being, achieve long-term goals and financial security. It also provides a sense of peace of mind.

It is often stated that: "Don't save what is left after spending, spend what is left after saving."

Wrong Approach: Income - Expense = Saving.

Correct Approach: Income - Savings = Expense.

Why We Save?

There is no right time to start saving, the earlier we start the better.

Some key reasons why saving is important:

• Saving enable us to build an emergency fund to cover unexpected expenses, such as medical  emergencies, business loss, etc.
• To meet financial goals such as buying a new house, to meet cost of higher education of children, planning for retirement and so on.
• So, start saving today and take the first step towards financial freedom and peace of mind.

Now we will will understand the difference between needs, wants, and desires can help in prioritizing spending. Neglecting needs for wants and desires can lead to financial difficulties.

In order to prioritize your spending and increase your savings, it is essential that one should understand the difference needs, wants and desires.

NEEDS

Needs are necessary for survival. These are basic in nature. Examples of needs include food, water, housing, clothing, healthcare, etc.

WANTS

Wants are not essential for survival, but enhance one's lifestyle and comfort, such as, entertainment, dining out, vacations etc.

DESIRES

Desires are strong aspirations like buying a dream luxury car, latest electronic gadgets like high-end mobile phones, etc. To satisfy desires, one may be tempted to borrow money. 

If we spend too much money on our desires or wants without prioritizing, budgeting and therefore saving may become difficult. Therefore, one should prioritize the allocation of money first towards needs and then towards wants and lastly toward desires without losing focus on saving.