Debt can affect all other plans in life. Money poorly managed has ruined close relationships and made men mortal enemies. Saving indicates stewardship that respects the fact that money is a symbol of trade for a company’s goods and services or an individual’s energies. When debt overburdens resources, many end up in debt counselling, seeking debt consolidation, defaulting on a mortgage, or filing for bankruptcy protection.

How do individuals or families accumulate wealth?

They save by moving money received as income into a separate account before they can spend it. It doesn’t matter if you have received money from work or inheritance or have won a lottery, the rule is the same:

Save and invest 10-20% or more of your income. The debtor’s rationale, such as “If I can afford it, I’ll buy it,” must be replaced by “If I can afford it, yet do not need it, I won’t buy it.” Spending to the limit will one day mean there is no money saved for unexpected expenses or opportunities or, perhaps even more important, for retirement.

Some good reasons for investing

1. It gives us a sense of financial security, earned by continued discipline and adherence to the principle of saving, which adds to our sense of personal dignity.
2. Over time the potential reward is seeing our money work for us, gaining and compounding.
3. Saving paves the way for the actualization of our goals and objectives in life, such as acquiring a home, making major purchases, travelling, putting children through college or university, or going back to school ourselves.
4. Accumulated assets will increase our net worth and lead us to financial independence and security for retirement. Such control and flexibility are within our reach if we start now. Retirement savings allow us to enjoy financial security, eliminating financial anxiety, as we age. In the movie Vitus, the grandfather of the musical child prodigy happily said when he assessed his retirement wealth, “I did the calculations, and now I can live to 130.”

Change your way of thinking to get free of debt

Don’t be a wishful thinker by deciding to save what’s left at the end of the month or deferring a savings plan strategy for later, when “things get better.” Usually, there is nothing left at the end of the month and things never get better because the philosophy has not changed—spending above income continues and debts increase. Except for a home mortgage or loans for motor vehicle transportation and in some cases for investing, debt is a deterrent to financial independence. Commit to a strategy to pay down all household debt and start saving at least 10% of your income every month.

Plan for your dependant’s financial security

Make sure you have sufficient life insurance to pay off your total debts, including credit card balances, car loans, IOUs, and any business-related debt. Incorporate this with sufficient coverage to provide future income for your dependents.