Nothing Matters More than your Savings rate. Now that I’ve been deep on the journey to financial freedom, one learns quite a bit. From investing, making every dollar and hour count, to maximizing your investments to the highest level with tax efficient accounts. Additionally, I’ve learned the utmost importance of having an extremely high savings rate. One cannot do any of the items above if you spend all of your money! Here is why in personal finance, nothing matters more than YOUR savings rate.
the savings rate – why it matters
A few years ago, we came out with striving to save 60% of your money and the immense benefits of doing so. We have also worked to reduce expenses, whether that’s battling the internet provider or paying off the auto loan. Doing those things can greatly reduce your expenses, leaving the opportunity to achieve a higher savings rate. I say opportunity, as one can easily spend that new unlocked cash flow on material items.
So why now am I writing about why nothing matters more than your ability to achieve a higher savings rate? The topic actually falls in line with dividend investing allowing you to take back control of your time and life. Having a high savings rate actually is the idea behind it all, allowing one to do something such as that. What can having a high savings rate allow one to accomplish?
- Taking a poll on how much you actually need to live on a monthly/annual basis
- Allows one to discover that you don’t need to add stress to your life working for a company, if you can take less but have more time in return
- Allows one to invest into many different opportunities, such as stocks, real estate, businesses etc..
- May allow additional charitable contributions
- Can help loved ones in a time of need with time, monetary potential and other means
- Could allow more time to be spent on actually projects and side hustles that one enjoys
- Allows more time to be spent with loved ones
- Ultimately – CAN ALLOW ONE TO ACHIEVE FINANCIAL INDEPENDENCE!
There it is. That last one truly hits it. Being able to save more, allows you to be free or a better opportunity to be free.
how to increase your savings rate
How do you increase your savings rate? What’s the actual mechanism behind this? I will list out a few:
- Reduce your expenses:
- Housing costs
- All forms of insurance
- Auto and transportation costs (see ya auto loan!)
- Eating out/food costs (hello Aldi and more enjoyable dining experiences)
- Negotiate everything, every time
- Taxes! (Part 1, Part 2, Part 3)
- Increase your income:
- Negotiate your salary at work
- Interview elsewhere ; ) and have your own free agency (i.e. like Sports)
- Ask for more benefits
- Side Hustle your way to more income
- Invest into dividend stocks
- Rental income
- Negotiate your salary at work
Related: 5 Ways to Save $500 TODAY!
Related: 7 Ways to Save your way to $773,000!
Even doing a little bit of each one, goes a tremendously long way. I want to provide examples, as the proof is always in the pudding, to show that this is for real! I used to only bring in less than $1,000 in dividend income for the year, for example, around 4 years ago. Now, because I continued to save and invest those dollars, I am now well over a projected $9,000! This was primarily due to saving as much as I could, in the right manner.
How about having a side hustle? Bert and I have added almost $150 from last month alone from side hustles and we may be breaking that amount here in the current month. Also, I am about to pay off my car, luckily and angrily, which is going to open up $284 a month going forward for additional savings. I then can use this unlocked cash flow for further items or this simply reduced the amount that I need every month in the way of expenses. This all allows one to be financially independent as early as possible.
The question now comes down to this. What can you do to be decreasing your expenses or increasing your income? Are you ready to do more or do things differently, in order to achieve better results? There’s only one thing left to do and that’s the continued march onward to financial independence everyone! Thank you for stopping by and feedback, comments and suggestions would be appreciated.
-Lanny