Save more, spend less! That’s the mantra of most personal finance authors. For most people, this is easier said than done. However, there are a couple of strategies to accomplish the goal of saving more but without spending less in the process.

save, piggy bank, money

What’s the secret? It’s simple, instead of spending every dollar from a salary increase or “extra” money you receive, save a portion of it. In a book written for his adult children, Cary Siegel describes 99 principles for money management. Several of his principles directly relate to this idea for saving more money without spending less.

The first principle is whenever you receive a raise, instead of immediately increasing your spending, commit to setting some of it aside. Siegel suggests allocating 50 percent of every salary increase to savings. While you might not be able to do this much, there should be room to save some of the increase since you’re already living on your current income.

Two great places to put this money would be towards your company retirement plan (especially if you’re not already taking advantage of any company match programs) or building emergency cash reserves. Many banks will allow you to setup automatic transfers from one account to another. Taking the time to do this once makes future transfers effortless. If you have credit card balances, this principle can also help reduce this burden much quicker than just making the minimum payments each month.

Another strategy recommended by Siegel is to save 90 percent of any bonuses or lump sum payments (such as an inheritance or tax refund) you receive. Why this amount? First, since these sources of income can fluctuate and are not guaranteed, ramping up your lifestyle to the point you’re dependent on this money could set you up for significant financial issues down the road. Second, the ability to spend some of it (on something you want versus need) still allows for some enjoyment now without sacrificing your future.

The underlying benefit of both of these principles is it doesn’t require any sacrifice or reduction in your current spending so it eliminates the excuse of not being able to afford to save. Next time you’re rewarded for your hard work with a raise, why not put some of it towards your future financial independence? If you’re expecting a tax refund this year, what better time to get started?

As published in the Racine Journal Times | March, 2017

Recommended Posts