Why Saving Too Much Is Actually Bad for You

Why Saving Too Much Is Actually Bad for You

It’s hard to go for too long without someone advising you to save more money. It’s an important part of being responsible with your finances, and every adult needs to get a grip on their savings as early as possible in their lives. That said, some people tend to take this too far, and sometimes go overboard. Contrary to what you might think, there is such a thing as saving too much, and it can have negative consequences in the long run.

Mostly, it’s about missed opportunities. That money could often be used much better in other ways rather than sitting in your account idly. And if you don’t keep exploring those opportunities, you’ll never even realize they’re there in the first place. You’ll just keep piling on those savings with no end in sight.

It’s Good Up to a Point

Saving money makes sense up to a certain point. You should normally try to cover your expenses for a certain number of months, typically 6-12. The point of your savings is to allow you to comfortably get by for a period like that without having to worry about money. This is important in cases where you get struck by unexpected problems, such as finding yourself out of a job, or having to cover expenses that you hadn’t planned for.

But beyond that, there isn’t really much of a point in growing your savings account any further. You should be looking into ways to put that money to better use, usually by investing it in the right places.

Diminishing Returns

You might think that this isn’t entirely true because you’re still getting the benefit of interest over time when maintaining a savings account. And sure, that interest can get quite significant if you put a lot of money into the account. But what we said above is perfectly valid in this case as well.

Comparing this to investing your money into something will help you quickly realize why the difference is so great. The percentage you can expect to get back is much greater if you make the right investments. And if you keep putting your money into even more attractive opportunities, you’re only going to see more doors opening up in the future.

Learn to Invest

That said, it’s important to get a grip on the investment market as early as possible. It can take a while to build up your skills and establish the basic knowledge you need in order to navigate this field, but once you’re there, it will be much easier to seek out the good opportunities and put your resources into them.

You should keep this running as much as you can, because momentum can play a major role in your success when investing. You shouldn’t do it in periods or give up after hitting a few bad investments – you have to keep pushing. Of course, you should also know your reasonable limits (more on that below). But investing is largely about persistence and the ability to keep going.

How to Avoid Wasting Your Money

Of course, not every investment is a good idea. In some cases, you stand to lose a lot of money if you’re not careful. You should make sure to study each option that comes your way instead of jumping at the ones that seem most attractive. The thing about investing is that marketing can play a huge role in it in some cases, and sometimes certain opportunities will be presented as much better than they really are.

This means that you need to have a critical approach to seeking out the best deals. But it will take some time to develop the kind of common sense that’s necessary to get there in the first place. And to do that, you’ll inevitably have to fail a few times.

Always Have a Safe Baseline

Always have some backup plan in case things go wrong though. This includes knowing your lower limits and not going beneath them under any circumstances. Some people make the mistake of getting too confident in their investing abilities, and occasionally dipping below their critical levels. And while this might work from time to time, it’s mostly a matter of luck.

And when luck doesn’t work out your way, you stand to lose a lot from these incidents. That’s why any experienced investor will tell you that observing your own limits is one of the most important things in this field. Unfortunately, it’s also one of the things that require more experience in order to understand properly, which leads to seeing many investors failing in their ventures because they don’t know what they’re doing.

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