Increasing Your Saving Rate

The most important part of investment is increasing your saving rate. Someone who saves 30% of his income but invests with mediocre returns will be far better off than someone who invests 10% of his income brilliantly.

The chief gurus of the "Save More Money" movement are Jacob of Early Retirement Extreme and Mr. Money Mustache (really!) of

While I haven't yet read all of Early Retirement Extreme (his book is on request for me at the library) I have read most of Mr. Money Mustache's (MMM) site.

I've said that getting married was the impetus that made me start working towards financial competence, but I owe a debt to MMM as well. I think getting married planted the seed of desire towards being financially competent, but MMM gave me the kick in the pants I needed, as well as the roadmap I've used to build my own plan towards financial competence. I can't recommend the MMM site highly enough -- it's an excellent starting point towards financial competence.

What I learned there is that the single most important way to secure your financial future is to spend significantly less than you make. This helps you in two ways:

  1. Your nest egg grows more quickly
  2. Once you retire, if you keep your expenses low, you can live on a smaller nest egg.

We've got a ways to go here in the Schofield household to reach our goal. Currently, we want to save 30% of our income each month and apply it to either debt or investment. In November we were at about 10% and in December, due to Christmas presents, we're at about 0%. I'm not proud of that. (You can read about response to that -- A No Gift Christmas next year.)

So our goal is to decrease our spending each month by 10% until we're saving 30% of our gross income. (I'd prefer to be saving 50%, but I want to set an achievable first goal.) I'll keep you posted as to how we do. Tell me in the comments how much you're saving, and what savings goal you're striving for.