5 Times When It’s a Bad Idea to Save Your Money
It’s important to save if you want to buy the things you need, and if you want to buy the things you want. Most experts will tell you that the more you save, the more you will be prepared for the future, and of course, the more interest you can potentially earn. Saving for the future is incredibly important, and it should be one of your primary financial goals.
However, there are some occasions when you shouldn’t be putting your money toward savings. All of us go through financial ups and downs, and putting money away for later when you need the money right now can be a big mistake. Sometimes you have basic needs that require money, or an emergency arises, and it’s necessary to deal with these issues before putting money away for later. Here are five times you shouldn’t put your money away toward savings.
1. You can’t afford your basic needs
It seems like common sense that if you can barely afford a place to live, food to eat, and utilities, you probably shouldn’t be putting your money away to save for later. Still, the idea of saving has been so ingrained in us that it can be difficult to stop saving once you start. If you experience a financial hardship (such as losing your job) you may need to reevaluate your savings plan in order to just make it through the day. You need food and a place to live, and your basic needs should come first.
A study by Wider Opportunities for Women (WOW) found that 45% of Americans live on an income that doesn’t provide basic economic security; many people lack basic needs. Make sure that you prioritize your needs before your wants, even before your savings.
2. Collectors are calling you
If you’re frequently getting calls from collectors, you probably shouldn’t be neglecting these calls and putting your money away toward savings. If your bills have gone unpaid long enough that collectors are calling, you really need to determine if you can pay all (or at least some) of your overdue bills. According to Debt Consolidation Care, debt collectors can call you, can call relatives for your contact information, they can sue you and garnish your wages, they can seize your property, and of course, they can report the accounts, which will affect your credit report. Unless you want your credit report to take a big hit, or you want your parents to field calls for you, you should start paying, or at least talk to a lawyer if you are going to fight.
3. You have an emergency
Your savings can’t wait forever, but it can wait. An emergency, on the other hand, might not wait. If you need an immediate surgery, or your car broke down, or you are facing another emergency that affects your health or your job, your money should probably go towards fixing the emergency. While saving for the future is important, dealing with immediate issues needs to take precedence. Now, what constitutes an emergency will depend on your definition: if you are wondering if a family vacation to the Bahamas constitutes an emergency, it doesn’t. If you don’t have much money in savings, you should be putting money away unless you are facing a true emergency.
4. You already have an emergency fund
The other side of financing an emergency is that you should regularly be putting money aside toward an emergency fund. An emergency fund can help you if you lose your job, or face a medical or other emergency. If you build up a big enough emergency fund, you won’t have to decide whether to put money towards savings or spend it on an emergency, because you will already have money set aside. Though this is one type of saving, setting it aside from your general account is important. People disagree about how much money constitutes an appropriate emergency fund, but you can start by using an Emergency Fund Calculator. There really isn’t a magic amount or number of months that you should have saved; depending on your lifestyle, and how many dependents you have, you may need to alter the number.
5. You have other significant debt
If you have debt collectors calling you, you probably need to start paying off your debt. However, you don’t need to have an account in collections to be in serious debt. You could have a significant amount of student loan debt, and even with low interest rates, the monthly bills can add up. You also might have taken a loan out for a house you can’t really afford. These debt situations need to be handled, otherwise they can spiral out of control. Too much debt can affect your credit score, and make it difficult for you to take on other loans. Interest payments can also increase as your debt becomes larger.
The average U.S. household owes $7,327 on their credit cards. If you are carrying anywhere close to this amount on your cards, paying off those cards instead of putting your money toward long-term goals could save you a lot of money in the long run.
Saving for the future is essential: you need money for the things you will want and need in the future, and of course, for retirement. However, if you are currently facing an emergency, if you have a lot of debt, or you are not prepared in case of an emergency in the future, you might need to put your savings on the back burner for now.