Building a fortune comes a single step at a time. While many people are looking for a get rich quick scheme, they simply don’t exist. In the same way that you can’t get into shape overnight, master a skill in a single day, or climb a mountain on your first try, building your wealth takes time, discipline and commitment. If you are struggling with how to increase your savings don’t try to save huge chunks at a time. Employ a slower and more effective strategy.
The 1% Technique
This technique is where every three months you increase the amount you allocate toward savings by 1% and you don’t stop until you can’t save anymore. It may seem easy to do, but eventually intense savings gets painful. Three months gives you enough time to get acclimated to a lower level of spending but also gives enough urgency to make necessary changes. Here is what it looks like for a family with an income level of $60,000 to implement the technique.
Year 1 starting out at a 1% savings rate:
- January-March $50 saved per month.
- April-June: savings increased to 2%-$100 per month
- July-September: Savings increased to 3%-$150 per month
- October-December: Savings increased to 4%-$200 per month
- January-March: Savings increased to 5%-$250 per month
- April-June: Savings increased to 6%-$300 per month
- July-September: Savings increase to 7%-$350 per month
- October-December: Savings increase to 8%-$400 per month
Of course we can continue with the illustration but I’m sure you get the idea. A family that employs the 1% technique after 2 years will be saving $4,200 more per year than when they started two years ago. They have had the time to adjust to living on less and continue to increase their savings. Over a 2 year period they will have made an incredible amount of progress and they don’t have to stop at saving 8%.
The key to this technique is to continue to push, determine that you will ratchet things up and you’ll be surprised at how high you can get your percentage. You can always increase your savings by more than 1% but keep building up. The reality is that you can save money. Believe it. Think you can’t save 15%, 20% we challenge you to prove yourself wrong. In fact if you get your savings percentage over 50% using this technique, we will feature your story in an upcoming blog post because we could all learn from you! Like running a marathon you build to it over time, but each of us is capable, we just have to start somewhere.
Building up your Savings Muscle
No one becomes an all star saver overnight, it takes discipline and hard work but you can get there. Your ability to save money is like any muscle in your body, it can be strengthened slowly over time. If you begin lifting weights and throw 300 lbs on the bench press, you are going to hurt yourself. In the same way if you set out to save 40% of your income in the first month of your intentional saving you’ll become frustrated when you inevitably fail. Start small and build slowly, you got this!
How have you been able to increase your savings, have you reached the point where you can’t save anymore?