When money is tight, saving some for a rainy day can be an overwhelming concept. However, in the long run, not making efforts to build a financial nest egg may be harmful to your entire financial well being. There are many contributing factors that make investing and stowing away extra cash extremely important and can help you in the long run. Everyone needs some type of financial cushion to help them out in hard times. Whether the problems happen because of medical emergencies, job loss, or other unexpected causes – when you get hit by these problems and you have no investments to back you up financially, you may end up in financial ruin just trying to keep yourself afloat.
If you currently aren’t saving or investing here are a few scenarios to consider…
Say you end up unable to work at any period in your life. Those who have already taken the steps to invest their money are able to provide themselves with the cushion needed to help them manage through this situation and pay for their basic necessities, such as food and shelter. However, if you do not have a any cushion money to fall back on, you may be scrambling to find alternative ways to finance the basic necessities. When that happens you may think nothing of the charges you’re making on your credit cards and since you don’t have the money to pay off that debt – minimum payments are all you can afford. However, that debt will grow due to compounding interest and can grow at an astonishing rate. If you were to neglect any payments, that can result in years of having to clean up your credit mess.
How about if you are a homeowner that is cutting it dangerously close to missing mortgage payments? Those with investments can again find alternative revenue streams to continue to pay for their home and keep their credit history in good shape while they search for new sources of income. However, those who did not save anything for the rainy day will risk foreclosure and damaging their credit history, resulting in higher interest rates in the future and harming their overall financial health.
What if you unexpectedly get laid off from work? Even those who believe they have complete job security need to prepare for the overall worst “what if” scenario. Only by building an emergency cushion of resources will you be able to keep a roof over your head, food on the table and still maintain a “calm, cool, and collected” presence. All this is required not only to continue providing for your family, but to provide the confidence needed to aid you in your next job interview.
Investing is a way for you to provide for you and the ones you love with a level of financial security and peace of mind. Life will always throw you a curve ball, but by taking the necessary steps to invest now you can help protect your financial health in the future.