Within the volatile economic climate, money is gained and lost in the blink of an eye. The key to financial freedom lies in the ability to manage assets and report gains. A key indicator that measures personal assets is a savings account. Are savings to be used or kept for a rainy day? This a question needing answers. What are the circumstances when savings need to be used? Provided below are certain scenarios detailing the use of your savings.
Continuing Education or Initial Education
Pulling money out of savings to continue education, pay for a first-time degree program or complete a degree is supported if the education will positively affect income or job security in the future.
Pros – More education could lead to a higher paying job or employment if unemployed.
Cons – There is no guarantee education will improve earning potential or ability to find work.
Paying off a Substantial Debt
Certain debts come with interest rates that are higher than savings rates. Car loans, for instance, may carry interest rates as high as 20% or more. Money may be pulled from savings to pay off this debt and reduce the amount of interest payments over the life of the loan.
Pros – This means paying less interest for debt.
Cons – Reduction in savings could mean less money to fall back on in case of emergency.
If vehicle repairs are needed to assure transportation to and from work, withdrawing money from savings may be a necessity. Without proper transportation, income cannot be earned, and thus, no additional money can be added to savings. It is important to shop around for the best price on all vehicle repairs and have repairs completed by certified mechanics that back the work with a guarantee.
Pros – Secures transportation to and from work.
Cons – Results in a reduction in savings that could take months or years to add back into savings.
Emergency Living Expenses
Unemployment rates are higher than ever before, which could mean tapping into savings accounts to pay household bills. Savings should only be used for necessary bills, not luxury bills. Cable, internet connection, cell phone, eating out and entertainment are considered luxury expenses. Necessary expenses include electric, water, sewer and food. In some areas, government agencies offer support for household bills in time of need. These services should be used or researched before pulling savings.
Pros – Maintains basic human necessities.
Cons – Without sufficient income, savings can deplete quickly.
Emergency Medical Expenses
No one likes to think about hospital or emergency medical bills. When emergency medical bills happen, money from savings should be used to ensure proper health care. If medical insurance covers the patient, savings should be used for up-front co-pays only. Many medical bills can be placed on a monthly payment plan with an affordable payment amount.
Pros – Securing health care during emergency medical situations.
Cons – May deplete savings account amounts quickly.
Making informed decisions is the difference between financial freedom and ruin. The nest egg built should be treated with care. At times, the nest egg is the only resource available to sustain livelihood.