The Hummingbird Blog

A Series of Insights Into Savings, Personal Finance and Behavioural Science

Part 3 - The “Conventional” Way of Saving Money

There is no doubt that saving money is crucial when it comes to developing a healthy financial life. This is also true when thinking about long-term financial health and stability. Furthermore, saving money for the purpose of financing an emergency fund is of the utmost importance. As we have mentioned earlier, those who do not have a rainy-day fund are finding it hard to make ends meet at this point. Thus, it is crucial to make an effort to build such a fund.

Traditionally, saving money boils down to cutting back on expenses and putting some funds in the bank for safekeeping. In theory, this seems simple enough. In practice, it is quite difficult to achieve. In fact, it’s not so much an issue of not wanting to save money. The issue boils down to an inability to do so.

For starters, as debt and bills pile up, individuals may feel overwhelmed about their current situation. In such cases, people may resort to leveraging their credit lines as a means of bridging the gap. Unfortunately, credit is generally used for consumer debt. In other cases, credits are used to pay off other credits, thereby creating a never-ending cycle of debt.

Then, wages aren’t growing fast enough to help families simply save raises in wages. In the past, wage increases could be saved as they were far more frequent than they are today. But with relatively stagnant wages and a global economic crisis at hand, wages are unlikely to grow any time soon.

Also, there are psychological factors that affect people’s decisions to save money. These psychological factors tend to be related to a lack of “urgency”. In fact, it’s quite common to hear people talk about how the government will help them out or how things will turn around soon. When people don’t feel a sense of urgency, they tend to delay decisions. In this case, we’re talking about the decision to save money. However, there comes a point in which income is simply insufficient. Sadly, it may be too late to do anything about the situation at this point.

As such, it is imperative to take into consideration that saving money is an urgent proposition. Delaying this action may lead to an unsustainable situation. In that event, it may be nearly impossible to get ahead. While it’s not a question of condemning people to a life of poverty, it does signal the fact that getting ahead in life will become harder and harder as time wears on.

Therefore, the need to find unconventional ways of saving money becomes more evident as time wears on. This is why making a solid psychological impact on individual citizens is absolutely vital in order to reverse this trend. After all, one of the major keys to financial health and wellbeing is the ability to put money away today so that it can be utilized later on when it’s really needed.

Close Bitnami banner