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Increase Your Savings Rate by 1% - Live Like a Mensch
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Increase Your Savings Rate by 1%

 

Jim Blankenship over at Getting Your Financial Ducks in a Row put forth a blogger challenge for those of us in the financial blogosphere. He is a financial planner, and he worries about the rate at which we Americans are saving (5% on average). So he suggested that we bloggers offer up a challenge to our readers. November is right about when most employers are going through their benefit cycles, so now is the time to amp up your retirement savings. And Jim has a very doable amount that he suggests we start with: 1%. So if you're not contributing anything to your retirement, start by putting aside 1%. If you're at 6%, up it to 7%. It may seem as though 1% will not make a big difference--after all, 1% of a $50,000 per year salary is only $500. But that's $500 you don't have to find later, $500 that will be earning compound interest, and $500 that you're probably not going to feel the loss of. Not bad for a paltry 500 bucks.

If you're not sure how to find that extra 1% to put aside, LO and I have come up with some ideas:

From the Source: Find Extra Money in Your Paycheck

1. If you get a raise this year, have 1% of it go towards retirement. This is a great way to not feel any pinch while still being responsible with your retirement.

2. Adjust your withholding so that there is more available in each paycheck to go toward retirement. If you get a big tax refund every year, you're basically giving Uncle Sam a no-interest loan. It won't take much of a change withholding-wise to get about 1% more each paycheck, which you can turn over to your 401k. Then your paycheck stays about the same size, and you can still get a modest return come tax time.

Frugality Matters: Reduce Your Expenses

3. You can likely find $500 in your budget over the year ($42 per month) that you can cut without feeling it. Some examples: one dinner out per month, your cable bill (Netflix is better, anyway), filling up on gas when you commute alone (because carpooling is awesome), etc.

4. Pay off your debt, but keep paying yourself. You're used to the equivalent of a car payment or a credit card payment or a student loan payment being part of your monthly budget. Once that debt is paid off, just keep the amount going out the same, but have the money deposited in your retirement account instead.

Save Your Pennies

5. A good old fashioned piggy bank or change jar is an excellent way to "find" money. Those loose quarters and pennies that might otherwise get lost in the couch cushions can add up quickly, particularly if you are a cash envelope family.

Attitude Shifts

6. I remember talking to a fellow teacher years ago who claimed she didn't save for retirement because she wanted to enjoy her money while she was young. Foolishly, I refrained from slapping her silly, which I regret to this day. She definitely needed an attitude adjustment. Saving for retirement is not giving something up. It's providing yourself with a gift. One that no one else is planning on giving you. It can be hard to find extra money in the budget, but giving your future self a 1% gift in 2013, and adding 1% each year, will cause a minimum of financial pain. And to be honest, can you think of a worthier cause than your own golden years?

To see other blogs in this series, please check out:

A Dozen Ways to Increase Your Savings Rate on Getting Your Financial Ducks in a Row.


 

Comments

 

A Dozen Ways to Increase Your Savings Rate – Getting Your Financial Ducks In A Row said:

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November 15, 2012 4:51 PM
 

frugal_fun said:

Random thoughts (which are really the best kind) ;) :

On the 401(k): We save up to the match in DH's 401(k) right now. I've read that people who successfully retire on mostly their own funds max it out. I hesitate to that because the 401(K) leaves us at the mercy of our employer's choices. We've rerouted additional savings into a Roth IRA for me, which, in a family where income is severely lop sided, means there are retirement assets in my name. If we ever get to the point where there's so much spare cash we're maxing out the Roth *pauses, dreams*, we'll reconsider maxing out the 401(k).

On the attitude: There is something to be said for making sure you are enjoying some of your money today. Having a heap o money when you're 90 and your wants are some food, companionship, and maybe a walk in the sunshine is totally pointless.

I have watched my in-laws ignore their teenagers (and from what DH tells me, they also did so while they were children) while they were growing up to gather those ever precious dollars because they were going to retire early. Which they haven't done because greed had gotten the better of them and they've chased one bubble right after another. And they've managed to alienate almost every family member in the process.

The kids are only here today. And there really are no guarantees you're going to make it to tomorrow. Not going completely overboard worrying about 4 decades from now and spending some money now can be healthy.

That said, I've seen first hand what happens when you go overboard in the other direction and save no money at all. My mother, whose motto is "I could be dead tomorrow" has always gone after what she thought she wanted with little regard to the idea she could be wrong about that whole dead thing.

As I type this, she's 72 and has a net worth of -$29,000 and getting worse each day thanks to an ill timed late in life student loan.  She is now 100% dependent on the state and my sister and I for her financial and emotional support. (She also divorced my Dad when she decided he was "holding her back" or "didn't want to be married anymore" - something like that at the tender age of 60.)

Don't be my Mom. :(

November 16, 2012 11:37 AM
 

Financial Bloggers Give Advice to Increase Your Savings Rate « Clark Hourly Financial Planning Blog | Saint Louis, Missouri Financial Education said:

Pingback from  Financial Bloggers Give Advice to Increase Your Savings Rate  «  Clark Hourly Financial Planning Blog | Saint Louis, Missouri Financial Education

November 19, 2012 12:26 AM
 

The “1% More” Movement’s Going Strong! Save 1% More In Your Retirement Plans This Year – Getting Your Financial Ducks In A Row said:

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November 19, 2012 9:59 AM
 

C’mon America! Add 1% More to Your Retirement Savings This Year! – Getting Your Financial Ducks In A Row said:

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November 21, 2012 9:39 AM
 

Increase Your Retirement Savings by At Least 1% in the Coming Year – Getting Your Financial Ducks In A Row said:

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November 26, 2012 10:13 AM
 

Take the 1% Challenge in 2013!!! | financialfiduciaries said:

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November 27, 2012 10:59 AM
 

Join in the Movement – Add 1% to Your Savings This Year! – Getting Your Financial Ducks In A Row said:

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November 28, 2012 8:50 AM
 

sos089 Save 1 Percent more in 2013 said:

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December 21, 2012 6:22 PM
 

Live Like a Mensch said:

As I've mentioned previously , I'm a big believer in aiming for a modest (under $500) tax refund

April 16, 2013 5:34 PM

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