Whether you are young or old (or somewhere in between like me), whether you are employed, self-employed or run your own business, whether you are living the high life or just managing between pay packets; whether you are working in a restrictive corporate environment or have the freedom to work where and when you choose, there is one thing for certain and that is we should all get into the habit of saving because that is the only way to true financial freedom.
When it comes to saving there are plenty of people who simply put their head in the sand – they think their finances will all be OK in the future – they may have an employers' pension or a private pension (or both) and be eligible for a state pension but will that really be enough for 20+ years of retirement? And if old age and retirement are a long way off it is only by saving that you can buy a home of your own that will give you financial security for the rest of your life.
Statistically we are all expected to live much longer even than our parents; the average life expectancy in North America is between 78 and 81 depending on exactly where you live. In places like Japan, Switzerland and Singapore, if you are a woman, you could be expected to live to the ripe old age of anywhere between 85 and 87 years old. What that means is that even the best laid pension plans could fall well short of what you need to maintain a good standard of living in a comfortable home for the rest of your life.
By starting to save a little extra now, whatever your age, you can make a difference – you just have to start. You may already be paying into a pension plan but almost all of us can manage to save just a little bit more if we try. It's certainly not easy but one way to get into the saving habit is to set up a direct debit to shift money to a savings account or investment as soon as you are paid – that way you won't even miss the money after a while.
For those of you still in the early part of your life and career you may believe that your salary will rise and then you will be able to afford the down payment on a home of your own (or a new car or go on a once-in-a-lifetime holiday, whatever it is you dream of). However, unlike the years of growth before the long global recession that we all suffered from and are only now starting to recover from, salaries have not risen in real terms for more than a decade. For some people their salaries have actually fallen over that time in real terms as salaries are not keeping up with rising prices.
According to the American Economic Policy Institute (EPI) salaries have not risen at all since 2000 for those at the middle of the wage distribution. The growth in salaries at the very beginning of this century has effectively been wiped out by the length and severity of the recession and has not recovered. For some people their salaries have actually fallen since 10 years ago.
So what does this mean? It means you cannot rely on rising salaries to fund the lifestyle you want as previous generations often could. So the sort of future you have is entirely up to you and you can influence it by taking control of your finances. Stop frittering away money on non-essentials and start saving for a better future.
That doesn't mean you can't enjoy life now – after all who knows what may happen in the future – but it does mean saving for a better future. If you enjoy eating out in restaurants then you can still do that – just go less often – or skip dessert! If you enjoy exercise but are paying expensive gym fees then try cancelling your membership and take up running instead, which is free. And, as I said, once you get into the saving habit you will hardly miss that little extra that is being set aside each month.
If you are on a low income and just managing to make ends meet from one salary to the next, the idea of saving part of your income may seem impossible. Even if you manage to put a small amount away each month there are likely to be times when you need to use that money for unexpected costs like a hefty car repair bill. But there will also be times when you don't have to use your savings and gradually your savings pot will start to grow.
There is never an ideal time to start saving but the right time to start saving is now – don't put it off any longer.