You may have read many blogs and articles related to saving money. And authors mentioned that the best way to save money is to “keep aside 10% of your monthly income”.
Do you think that it is an efficient way to save money? Many of you must be agreed, and some of you may not be. But let us clear that a ten percent saving rate is a myth. If you are following it, then you must know the negative consequences of it.
We have considered both the phases of this saving method. Let’s have a look at them but first understand the basics.
What is the 10% saving rate method?
It is a way in which you have to save money every month. Suppose you earn £3000, then you have to save £300 every month. It may seem an efficient method, but wait; it has many loopholes that every person should know.
Voids of the 10% saving method
There are so many negative aspects of this way of saving money. We have discussed some popular ones. You can read them one by one.
Void #1: It is not suitable for long term
Most people save money to cope with future expenses or for retirement. But in this, you may forget to consider the unexpected cost. These are the expenditures that can cut down your financial situation anytime.
However, there are many external options through which you can stabilize the situation. You may approach your relatives or friends or rely on some borrowing methods like a loan.
In the first scenario, it may happen that your close one could not able to help you with the exact amount. In this type of state, you can opt for the second one. But for that, you have to approach online lenders in the UK who offer emergency loans for poor credit people. You can get the funds even if you have less-than-stellar-credit scores.
Now, with the borrowed money, you can stabilize the situation.
But wait! Do you think taking assistance every time is an ideal choice? Absolutely not
So saving 10% of your income will not help you to achieve the long term goal because of these unexpected costs.
Void #2: What will happen if you won’t be able to save 10%?
It will feel low when you see that you are not able to save enough money. You may able to save 5% or 2% of your income. Eventually, everything depends on your monthly income and how you spend the money.
Saving does not mean that you have to save a lot of money. No, it is a myth; you can save according to your situation. Many such cases occur wherein the first-month people could able to save good money, but in the next month, he could not.
You do not have to worry about the savings target. Whatever you can save go ahead, small savings can help you a lot and feel active too.
Void #3: You will bind to your thoughts
You may find it corny, but a limited mindset is responsible for the restriction in human growth. In this saving strategy, you have the idea that 10% is enough (because many financial authors suggest). Due to this, you will not try to save more money.
But the truth is that if you want to achieve long term goals like buying a house, then you have to increase your savings. First, it would be difficult for you to save more than that, but with the time you will acquire the habit of savings, then finally you will able to aside 20%, and then 30%.
These are the voids that a 10% savings method has. So, consider these points if you are going to start. But we could not fully consider this way of saving money waste. It is useful if you have short term goals like managing course fees or buying some technical gadgets. But for the long term, you should not follow it.