Introduction
Good day and welcome to another article of mibe on a general topic of Finance and why you should try implementing it. Savings is a topic discussed everytime one tries to seek Financial freedom and as such it is needes in one's life mostly very important for the adolescence moving to adulthood abd then to senior citizens (where it will highly be utilized).
Definition of savings
Savings is a portiob of one's income kept aside for unexpected events or to fund various investment schemes. Savings is an act of keeping a certain percentage of income aside for future use. In this definition of savings, you cab deduce it just involves not spending some part of yoyr income, I do think a lot of guys don't like this or find this difficult, stick to the ending to know how and why.
Types of savings
From the above definition of savings you will note the Word emergency and funding of various investment (projects), this therefore leads to the two types of savings which compliment each other in creating Financial freedom they are;
Emergency fund savings: This type of savings is done for unforseen circumstances, as I love to put the idea out there, it should be a very small percentage of your income, if you have a health insurance which will handle immediate emergency, you might ask yourself why should I do this, you should consider having those and still having a liquid cash because we all know our insurance wouldn't actually cover all emergencies, thats where this comes to play. For instance, the hike in inflation may affect yoyr current income in terns of feeding you and your family instead of reducing your standards you wikk just take a little from the sum and compliment to it to ensure quality feeding still. It's major advantage it brings about calmness in state of calamity or distress and ebsure consistency in quality of life.
Challenges faced in adopting emergency fund
Lack of awareness towards emergency: A lot of people judge from tgere present condition forgetting everything will always be good until it goes wrong, no one can tell the future at least be risk mindful and manahe it to live life enjoying peace and lacking worry.
How to differentiate emergency from mere impulse: A lot of people will hardly try setting up what emergency fund will be used for and as such they just use it on impulse believing that it is an emergency, befire saving up an emergency fund, also have in mind and on a file what it should be used on.
Project fund savings
This is done to fund future projects, retirement age, it is done by keeping a certain percentage of your income. We all know not every financial project we want to start us is the sum of money readily available abd taking a loan most times is very risky and we mighr be trapped in debt or loose a certain percentage of our assets as compensation. Project fund us simply done to crwate more cash inflow into your life or business. Most times people encourage people to not keep idle money instead it should be invested and as such many people forsake emergency fund and promote project fund which isn't good, as they compliment each other in the long and short run.
Challenges of project fund savings
There isn't much to say as the objective in mibd is clear than that of emergency fund, only 1 is easily noted it is; *
NoImpulse buying/lack of budgeting*.
Types of project funding schemes
Sinking fund: It is done to reolace asset as it loose it's productivity and becomes fully depreciated or obsolete. It simply involves each money set aside is invested to produce fubds for the replacement of the depreciated asset.
Loan amortization: It's simply done to pay off loans for more information comment below **loan amortization or research else where.
Conclusion
You have come to the end of this interesting blog post which is a step to Financial freedom, peace and lack of Financial worries, below is another point on savings;
Savings is vital, and emergency fund savings is done to handle emergencies that occur at max for 6 months, depending on the fund you set aside, project fund savings covers retirement fund and other investment funds that will procure income in the long-run, you can simply say emergency fund is to maintain your quality of life a nd prohect fund (investment funds) are to improve your quality of life. Love to see you guys in my blog as i will be in yours below are my recent post on hive;
UNVEILING THE HIVE π; INTEGRATING TECHNICAL ANALYSIS TO HIVE FINANCE