Nowadays, people want everything right away, so the question is, why save money if you can simply borrow it? That way, we can buy everything we need right away and live well today, rather than wait until we can finally afford to buy something.
On the one hand, this logic is indeed correct, but it must be understood that credit will never become a daily habit. Because the question is so ambiguous, we decided to investigate what and when it was better to save money or borrow anyway?
It is first necessary to understand the main benefits and drawbacks of these two options
When it comes to borrowing, the biggest benefit is, as mentioned, the ability to buy everything now. We don’t have to wait months or even years to get what we want.
Not only can it be convenient, but it can also be financially profitable, because under normal economic conditions money is falling all the time, so money is now more valuable than in the future. This is a major plus, but there are a number of downsides to credit.
The list of cons of credit and other loans is much longer than the list of benefits
First of all, it should be understood that loans are not free services. They are subject to interest payments, so the regular purchase of things and services on credit means that money is wasted. In the case of borrowing, you only have to pay the amount specified by the merchant for the product or service, but when borrowing money you also have to pay for the credit, so it is not profitable.
Second, loans are very risky. Early or late, the loan will have to be repaid and you cannot guarantee that you will have enough money in the future to do so. If the credit is not paid on time, you may have to pay penalty interest, or even debt recovery can go to court.
The biggest benefits of saving money are stability and independence
You can save money at any pace, and if you have any financial problems, you can just temporarily put off saving money and wait until you have money again. You do not have to make any commitments, except to make a promise to yourself to make your savings more efficient. It is very important that this accumulated money is your own money that has already been earned and no one will be able to claim it for you. Another major benefit of saving money is that it has a better understanding of the value of money, which discourages unnecessary purchases. Understanding how hard it was to make and save this money will make it much harder to part with it, making all your purchases more prudent.
However, collecting also has its drawbacks. One is the aforementioned loss of value. This is especially true for long-term savings, because if you paint the money for several years, the money you put on today, due to inflation, will lose some of its value after years. There are other, less significant, disadvantages to money making, such as lack of motivation. It is very difficult to save money and you may want to spend your money regularly. In this way, saving money becomes ineffective and the saver may not even get to the coveted things.
As you can see, each method has its own pros and cons
They mean you can’t say for sure what’s better or worse. Instead, each situation must be assessed on its own merits, taking into account different factors. In certain situations, these pros and cons can increase or decrease, so it is important to understand which situations are better for saving money and which are better for borrowing.
Borrowing is permissible and even advisable when money is needed to fulfill very large and important goals that are only relevant at a given time, such as studying, buying real estate, etc. It is understandable that such things should be accumulated for years, but often are needed at the very beginning of life, and here, too, is reflected in the loss of value of money. Saving for so long will certainly lose some of your value.
Borrowing is also permissible if you really need the money, and you know that you will be able to return the money later without any problems. There are other specific situations where borrowing may prove to be more profitable and appropriate, but it must be understood that borrowing should not become a habit. In most situations, however, money should be saved because it is more profitable and less risky. Independent living on credit is not an acceptable practice as it prevents a stable financial situation and causes unnecessary losses.