The Wise Investor
There are some very large items, like a car or a house,
where it is not practical to save up, and a loan is normally
required. However, apart from these, you should save up for
Kate looked glum. If she kept putting aside money for so
many things, she reasoned, there would soon be nothing left
over for herself.
"Don't look so depressed, Kate," her grandfather said.
â€œRemember that you are spending this money already. The
budget is simply to allow you to be better organised with
your finances. This approach will leave you with more
money for yourself, not less.
Saving has several advantages. First, it eliminates the
interest that you pay on credit.
Right away, you have more money for yourself. Second,
it makes it brutally clear just how much money you are
spending on all these different items. If you choose to spend
your money on large purchases and gifts, that is all very
well, but at least you will see clearly why your week-to-
week cash seems a bit tight.
The chances are, you will decide that you don't really
want all of these things after all. Since you are allocating
money before you purchase, and not afterwards, you can
change your mind and spend the money on something else."
John paused for a rest, and looked at his granddaughter.
She was not as bright as she had been, and he briefly
wondered if it had been wise to paint the picture so honestly.
"I know you're right, John," Kate said with a weak smile.
"I guess I'm just a kid at heart, and I want everything right
away. Gifts, too, just seem to be free when I don't have to
hand over cash." Kate took a deep breath, and looked up at
her grandfather. "OK, John," she said with renewed
determination, "the second rule of budgeting is to save up for
all your purchases."
"I know it sounds like a nuisance, Kate, but it will leave
you better off at the end of the day. You will have greater
control of your money, and you will have more to spend. It