People that will not settle for less have a long-term outlook in life as well as in behaviour, one concept that they have taken to heart is that generally success is long-term. People who will not settle for less are not consumed by short-term and often selfish acts that characterise most people in life. People that accept mediocrity are fixated on living only for today, they hardly think about tomorrow. Some have already given up on their future such that they spend their lives dulling the ache of a desperate existence by escaping the present through drugs, opiates, alcohol, gluttony and excessive consumption of television. They justify their attitude by saying "You only live once", whereas people who will not settle for less, successful people use the maxim of only living once to achieve lofty goals and change people's lives through philanthropy and innovation. You will find that the people that settle for less live like there is no tomorrow, this reflected in their attitudes towards saving money be it for their own goals or their children's education.
When behavioral economists study why people have such a hard time saving money, the biggest factor isn't spending as many would like to think rather it is inertia, what they call "status quo bias." That means you're more likely to keep doing whatever you're doing rather than change it. But this flies in the face what we are doing here we do not settle for less the mediocre type of living we constantly break the mould and it is no different in saving. There are so many reasons why we should develop a habit of saving a portion of our income and getting ingrained in our psyche such that it will become second nature like brushing our teeth. Here are some of the reasons why saving a portion of our income is imperative;
Something For A Rainy Day?
We live in a very volatile and unpredictable world which is always dynamic and it is only those people that are better equipped to deal with these changes in everyday life that survive. While no one wants to think they will loose their jobs or their businesses one day it is fact that they have to live with that one day our source of income might not be there. the general rule of the thumb is to have an emergency fund that can pay your everyday expenses for 3 months without resorting to borrowing, up until the time you get another job or be able to start another business. Its not only loosing your job that you have to plan to, an unexpected car breakdown, a broken boiler, a toothache, a bereavement in the family.
Retirement
One day you will have to stop working, it is another reality of life, few people pay attention to the question of how they will fund their retirement. Unless you have a job that guarantees you a pension or if you are eligible for state pension like the one offered in UK then you really have to start thinking about putting some money aside for your retirement. Even if you are eligible for state pension you will find its not adequate as you will only receive £10 200 per annum if you have in continuous employment for 30 years, if you use the Joseph Rowntree Foundation's estimates that you need £15 000- a year to live comfortably in your retirement age, which impels those that just wanted to settle for the UK state pension to save more. The quicker you start the better you will be positioned when the actual retirement looms. According to Alliance Trust, a personal pension provider, how much you need to put into a pension each month to generate a pot worth £100,000 at age 65. Here are their estimates:
- If you start saving at age 30 = £75 per month
- If you start saving at age 40 = £150 per month
- If you start saving at age 50 = £350 per month
A Deposit For A House
Unless you have won a lottery or inherited a lot of money if you want to own a home you will need to start saving for a deposit of your house. With the current economic climate it is difficult to get mortgage regardless of your income and credit rating without putting down a significant amount of money as a deposit. Most lenders require you to have at least 10% of the cost of your home as deposit if you have good credit rating, if your credit rating is average to bad then you will need a large deposit which most lenders insist should be between 15-30% of the total value of your home. According to Nationwide, Britain's largest mortgage loan providers the average cost of a house in England and Wales is £165000, which means you will need an average deposit of £16500 if you have AA credit rating, if your credit rating is average to poor then you will need between £24500 to £49500 to be able to purchase a house. If you buy a house in 5 years then you will need to be saving at least £3300 per annum or £225 a month with good credit rating otherwise you will need £9900 a year or £825 a month with dodgy credit rating.
Education
You might be thinking of going back to school to ensure better earnings, you might be planning to get a masters degree again to improve your career prospects or a PHD. It might be your children's education that you might be thinking about putting away funds for collge or university. The costs for private and public education are rising every year, and it's getting tougher to meet these demands. Tuition fees have risen by 32% between 1999 and 2009 according to Delta Cost Project in their report titled "Trends In College Spending. Which highlights the need to put a portion of your earnings aside for your own and your children's education. A better education breaks the cycle of poverty that affects people from generation to generation.
Car, Holiday, Luxury Items
There is no point working your socks off just to be able to get by, I think you might have already picked this up not only from the title of the blog as well as numerous times in any of the articles here including this one. Life is not meant to be a dull monotony act of of survival but it should be both rewarding materially and emotionally. A lot of people have not taken a vacation in over 10 years, well it is the usually the same tired reasons that they cannot afford and holidays are expensive. There is nothing that is stopping you to put aside a few pounds or dollar each month towards that holiday you have always wanted whether its in the Caribbeans, or Maldives or South of France. Frankly there is no way you can have £2500 to £5000 for that dream holiday unless you save each month towards it. The same applies for that new car you have always wanted, that TV those Jimmy Choos, that season ticket to see your favourite football team every time they play. Calculate how much it will cost you and start saving towards it today.
Wealth Building
The greatest teacher on money Robert Kiyosaki in his best selling book ever written about money "Rich Dad, Poor Dad" he says pay yourself first. Before you pay anyone else pay yourself first, let other people scramble for what is left of your money after you have paid yourself first. Wealth building should never be confused with popular get rich schemes, you will only get wealthy if you are 1) making money 2) saving it and 3) investing it wisely. Unless you are putting a portion of your income aside and then investing those savings wisely then there is no way you will ever become wealth obviously unless you inherit a lot of money or win the lotto. If any amount of money is saved regularly coupled with principle of compound interest it can grow significantly.
For people that will not settle for less, saving should become a habit, akin to brushing teeth every morning. That way it will be passed to our children,and eventually it will be so ingrained in our psyche that it will become our culture and define us. Most people that live an average life dismiss saving even little amounts of money but its not the amount you are saving that matters the most it is principle. As people that strive for the best in our lives lets leave people who have a spending culture but never have a saving culture.
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