If you’ve read any of my previous posts, you know this isn’t a get rich quick website. Small, intentional steps in the right direction will lead to a well-stewarded, well-lived life. If you’re determined to change your family (financial) tree, the best way to do it is:
- Start early/now.
- Be consistent.
- Recognize there will be bumps along the road, so don’t give up.
- Continue to increase savings over time and let compound interest do it’s thing.
But maybe you’re already in a consistent pattern of saving. Maybe you’ve got paycheck withdrawals on autopilot and you’re planning to sail off into the sunset. Wait just a minute. Lately, I’ve been reading articles on how Americans are falling behind in saving for retirement. I can’t say I’m too surprised given the number of trends I see on the rise:
- Credit card debt is higher than ever.
- Student debt has more than doubled over the past two decades.
- Car payments and car prices have skyrocketed.
- Inflation is rampant, especially in the food and shelter divisions.
It’s no wonder with all of this extra debt, and the cost just to keep food on the table and a roof over our heads, that saving extra for something that seems so far away has dwindled. However, it might not be as drastic a change as you might anticipate.
The 1% Difference
The 1% difference goes like this: what if you could increase your savings by 1% and it would make a difference in the overall outcome of your financial goals? One percent might not feel like enough to make a difference, but research has shown that if you start early (let’s say 35 for the sake of our calculations) and save an extra 1% on your $60,000 salary, when it’s time to retire at age 65, you’ll have over $91,000. When you break down the numbers, your actual investment, of 1%, only equals out to $18,000 over the course of 30 years, but your growth plus that investment compounded gives you a huge boost!*
Now let’s say your income increases in a few years and that 1% now grows from $50/month to $60/month. All of a sudden, that 1% becomes over $106,000. With steady wage increases, increasing savings percentages over time, and keeping debt to a minimum along the way, it is possible to retire with ease. But the time to start is now. Don’t wait. Look into increasing your savings percentage by 1% today! You might be surprised how easy it is to adjust to living without that 1% (especially if it’s a pre-tax contribution). It might even spur you to save more in the future. Saving an extra 1% might just be the key to future financial freedom.
Start Today
Retirement experts suggest the goal of shooting for 15% retirement savings. If you’re there, congrats! Keep working toward that goal and you may even get there sooner than you thought! But if you haven’t started saving yet, or you’re well-below the recommendation, saving an extra 1% today will put a smile on the face of your future self. If you’re at 10%, try increasing 1-2% each year for a few years until 15% (or more) is sustainable.
Remember the 5 P’s – Proper Planning Prevents Poor Performance. There’s no time like today to take on the 1% challenge. Let me know if you do it so I can cheer you on!
*This calculation uses an average rate of return of 9%.
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