There are some simple reasons why I make sure I’m putting money into savings.
- My savings is a priority in my monthly budget.
- I treat my savings with the same importance I do any bill.
- I need savings for a secure future, including retirement and emergencies.
When I created the budget I live on, I made a list of my essential bills first. That way, I can be certain I allocate money to cover them before distributing any remaining funds to discretionary expenses.
My essential bills include obligations to creditors, such as my monthly mortgage payment. But they also include sending money to savings. In fact, I treat investing in retirement accounts, as well as several other savings accounts (including my emergency fund, vacation fund, and home repair fund), as must-pay bills that get the same level of priority as my obligations to others.
Savings really is essential
The biggest reason I consider investing in savings accounts to be a crucial monthly expense is because not saving money can lead to a host of financial problems.
Now, paying bills is important to avoid ruining your credit and facing financial disaster, such as foreclosure or eviction. But for me, it’s equally essential to save money to avoid other types of financial crises.
Without savings, for example, it would be very difficult to live as a retiree — Social Security benefits replace only about 40% of preretirement income (not the 80% to 90% most experts recommend). Without savings, a home repair bill, disaster, or trip could also lead to debt, which can cause long-term financial hardship.
Since I believe that my financial stability depends on having plenty of money in savings — just as it depends on paying all of my other bills — I see no reason to treat investments in my retirement and other savings accounts differently than my mortgage, monthly phone bill, utilities, and other obligations that I’m 100% certain to fulfill.
Treating savings as a must-pay bill gives it the priority it deserves
The other big reason I treat savings as a must-pay bill is because by doing so I can ensure that I’m actually going to accomplish my financial goals — and that I won’t instead spend money on things I regret.
I’ve determined exactly how much …….