Unless you are ultra-rich or have a business churning out unmanageably uninvestable levels of cash ;-), it is important to save some money.
In this context, I have already written about a common dilemma that people face- Spend Today or Save for Tomorrow? My personal view (in few words) is that there has to be a balance between the two. For a more detailed view, please read the article (link above) in your free time.
But what triggered me into writing about savings again, is an interesting article by Morgan Housel titled Let me convince you about saving money (link).
In the article, he makes two genuinely important points about why you should be saving. And no… it’s not just about your financial goals or for financial planning, etc.
Read the two points below and you will know:
- The best reason to save is to gain control over your time.Everyone knows the tangible stuff money buys. The intangible stuff is harder to wrap your head around, but can be far more valuable and able to increase your happiness. Savings gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. Every bit of savings is like taking a point in the future that would have been owned by someone else and giving it back to yourself.
- That flexibility and control over your time is an unseen return on wealth. When time isn’t on your side you’re forced to accept whatever bad luck is thrown your way. But if you have flexibility, you have the time to wait for no-brainer opportunities to fall in your lap. This is a hidden return on your savings. Savings in the bank that earns 0% interest might actually generate a meaningful return if it gives you the flexibility to take a job with a lower salary but more purpose, or wait for investment opportunities that come when those without flexibility turn desperate.
(Underlines are mine).
Doesn’t that make a lot of sense?
It’s a no-brainer that having some money saved up can help you deal with unexpected circumstances and emergencies (remember emergency funds).
Apart from that, it also helps you take advantage of situations, where those without savings can remain helpless. You might have the two of the 3 Cs in your favour, i.e. Courage & Crisis. But unless you have the Cash (3rd C), you cannot take advantage. Read more about Three Cs to know how you can benefit from it when investing.
Morgan’s emphasis on gaining back control of one’s own time (by saving) resonated with me – as I am of this firm view that we should try to get back as much ownership of our time as possible. And his two points reminded me of an interview (link) where I was asked about what money meant to me?
Here is what I had answered:
Money is simply a means to an end and not an end in itself. Having the maximum possible amount in my bank account at the end of my life is not what I aim for. When we are in a salaried job, we simply rent out our ‘time’ to employers. So by that logic, having enough money should allow one to have the freedom to spend his time in ways that he wants, i.e. having enough money is a means to getting back the ownership of our own ‘time’. Every day, I see rich people who are almost always worried about money and complain of not having ‘time’. That is not what being rich means to me. That is not what having lots of money should result in. But having said that, it does indeed help to have a decently reasonable amount of money – an amount that will take care of basic needs, help improve quality of life and also take care of few aspirational needs like travelling abroad, etc.; and let’s not forget that having money (and more importantly, properly managing it) helps secure our futures too. Most people work for money. But with proper planning and common-sense, they can turn the tables on money and make it work for them! So basically, money is a game that people need to play. But unfortunately, it’s the game that ends up playing the people!
So giving you control of your time, helping you achieve your goals, allowing you to take advantage of rare investment opportunities. There is a lot that saving (and investing) allow you to do. So think about it. Why are you saving?
By the way, Morgan Housel is one of the best writers about personal finance and investing out there. And last year, I got an opportunity to interview him. I highly recommend what he has to say in this 3-part interview here, here and here.