The difference between rich and poor is the difference between income and expenses. If you have something leftover from your income each month to put aside then I’d say you can consider yourself rich in a sense. Would you like to save more? How about 25% more? I know I would, and that’s what I plan on doing over the next 12 months.
Saving 25% of your income may seem impossible at first. But break it down to baby steps and you’ll find it’s quite doable over time.
Start saving 1% of your income today and finish with 24% within twelve months.
Let’s start small. Not everyone can save that much cash, nor does everyone want to. Some people like the idea of spending money and treating themselves. They work hard after all, they deserve it. But they don’t realise that instead of paying themselves what they deserve they’re paying everyone else and having nothing left over.
So I’ve decided to set myself a challenge. I want to be saving 25% of my income by January 2017.
I started my challenge with my first pay cheque in January 2016. I started with 1%. So how in the world will I manage 25% by the end of the year?
I get twice per month. That’s 24 pay cheques in a year. With each pay I’m increasing the amount I save by 1%. I’ll start January 2017 with a 25% savings rate. How awesome will that be?!
It’s not much. But every two weeks I’m learning to live off less. This way I’m not going crazy and going cold turkey. It means I can slowly build up my savings rate and still finish the year off with several thousand in the bank.
It’s not always easy though. I need to be conscious of my spending as it’s so easy to dip in to the savings account. A better way to do this would be to have an account that either charges for withdrawals or you can’t withdraw from for at least 12 months.
The first four pay cheques were easier, and now things are getting tougher. I need to be a little stricter in my budget as I’m nearing the 10% mark. I’ll need to be even stricter when I get to 20% and so forth.
But here’s the thing. I’m working towards earning more too.
I’ve increased my income in my day job. This will automatically increase my savings rate.
I’m working on writing books, freelancing and blogging. The money I earn from these avenues will go back to funding my side business as well as savings. 20% tax, 30% business, 50% savings. Starting a business costs money.
What if you get paid monthly? You could still be saving 12% after one year. Or if you can, you can simply increase your monthly savings by 2% and end up with 24%.
Say for example you’re earning $4000 per month. You start with 1% in month one, and continue increasing by 1% until you get to month twelve. In this example your savings might look something like this: $40, $80, $120, $160, $200, $240, $280, $320, $360, $400, $440, $480. You’ll finish the year with $3,120. How much difference would that make to your life? Aim for 2% increase and you’ve doubled your savings to $6,240. Much easier than starting with $260 or $520 from month 1, isn’t it?
We’re in April and I’ve just reached 6%. It’s not groundbreaking, my savings balance is still low compared to some but it’s growing. Slowly but surely, I’m getting the hang of this savings habit and I’m loving it.
Don’t be fooled by baby steps. They can lead to more success than huge leaps, especially when you want to create a lifelong habit rather than a short-term fix.