Increasing Your Personal Savings Rate
1:17 AM
Personal Savings Rate or PSR is the fraction of personal income that is not consumable. In the United States, the average PSR is 4%. However, it might come as a surprise to you, but for the year 2008-09, the PSR in the States was a record high of 6%. Currently due to the present economic slowdown, people have now probably realized that only their savings can help them sail through this difficult period.
When it comes to increasing our PSR percentage, there are several things we can do. For example, spending only 80% of what we normally spend on discretionary living expenses (that means spending just $800 for every $1,000 we spend now), we will not only become better money managers, but we will manage to save enough to lead to extravagant lifestyle in retirement. Here are some more steps that we can take to increase our PSR:
Start By Making a Focused Effort
An obvious starting point would be to make a focused effort to set aside money in an actual savings account. The easiest way to find success with this method is start with a small amount (say $50 of every pay check), and gradually increase the amount as you adjust to your new budget. As well, the act of establishing a savings plan will allow you to become better off financially.
Draft a Budget
Chalk down a budget. Don't go too stringent at first. Allow room for unexpected expenses so that you are ready for them when they arrive. Instead cut down on discretionary spending arenas like entertainment and going out to restaurants. Maintaining a budget that helps you save up to 20% of your monthly expenditure would be your first step towards increasing your personal savings rate.
Be Disciplined
Be disciplined all along. This is not something that you have to do for a month or two and then revert to your normal spending habits. Keep a long-term perspective in mind to gain maximum benefits.
Patience is a Virtue
You will need to practice patience when it comes to improving your personal savings rate. Results may take time, but they will surely appear. By practicing patience, you will find that the results will actually appear quicker than you originally thought. A best practice is to ignore the savings statements when they come in the mail until a full year or two (or more) have passed.
Self-Control
Keep your flexible and open spending habits to the minimum. Now that you are on a budget, you cannot go out and buy the latest products in the market especially if you do not need them.
Monitor Progress
You will also want to track your progress as you go. This could be as simple as matching your month-end balances to what you planned in the initial budgeting process, or it could involve tracking every cent that passes through your wallet.
Allow for Adjustments
Finally, make sure you allow for ongoing adjustments to your plan. This means being flexible when it comes to your budget. If you find yourself straying for your initial plan, adjust the plan, not your spending. What's done it done, so move on. Incorporating flexibility in your plan will allow you to find success; without it, your budget is sure to fail.
In summary, an increase in you PSR can guarantee long-term happiness and a minimized stress load when life throws those unexpected curve balls. Building a plan and keeping at it will afford you better control over your finances and as you start to celebrate small successes, you will never look back.
When it comes to increasing our PSR percentage, there are several things we can do. For example, spending only 80% of what we normally spend on discretionary living expenses (that means spending just $800 for every $1,000 we spend now), we will not only become better money managers, but we will manage to save enough to lead to extravagant lifestyle in retirement. Here are some more steps that we can take to increase our PSR:
Start By Making a Focused Effort
An obvious starting point would be to make a focused effort to set aside money in an actual savings account. The easiest way to find success with this method is start with a small amount (say $50 of every pay check), and gradually increase the amount as you adjust to your new budget. As well, the act of establishing a savings plan will allow you to become better off financially.
Draft a Budget
Chalk down a budget. Don't go too stringent at first. Allow room for unexpected expenses so that you are ready for them when they arrive. Instead cut down on discretionary spending arenas like entertainment and going out to restaurants. Maintaining a budget that helps you save up to 20% of your monthly expenditure would be your first step towards increasing your personal savings rate.
Be Disciplined
Be disciplined all along. This is not something that you have to do for a month or two and then revert to your normal spending habits. Keep a long-term perspective in mind to gain maximum benefits.
Patience is a Virtue
You will need to practice patience when it comes to improving your personal savings rate. Results may take time, but they will surely appear. By practicing patience, you will find that the results will actually appear quicker than you originally thought. A best practice is to ignore the savings statements when they come in the mail until a full year or two (or more) have passed.
Self-Control
Keep your flexible and open spending habits to the minimum. Now that you are on a budget, you cannot go out and buy the latest products in the market especially if you do not need them.
Monitor Progress
You will also want to track your progress as you go. This could be as simple as matching your month-end balances to what you planned in the initial budgeting process, or it could involve tracking every cent that passes through your wallet.
Allow for Adjustments
Finally, make sure you allow for ongoing adjustments to your plan. This means being flexible when it comes to your budget. If you find yourself straying for your initial plan, adjust the plan, not your spending. What's done it done, so move on. Incorporating flexibility in your plan will allow you to find success; without it, your budget is sure to fail.
In summary, an increase in you PSR can guarantee long-term happiness and a minimized stress load when life throws those unexpected curve balls. Building a plan and keeping at it will afford you better control over your finances and as you start to celebrate small successes, you will never look back.
About the Author:
With more than 16 years in the financial services industry, Chris Blanchet has helped thousands of people improve their financial lives. He is the author of Help Fix My Finances, a personal finance program of the same name. He maintains a Debt Free Blog at How to Repay Deb.com.
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