1% savings strategy
An interesting strategy is making rounds these days. It is the 1% savings strategy.
Managing your money isn’t easy. There is no dearth of suggestions and strategies that will all tell you the same things in different words. Moreover, the focus of money management gurus is the investment of that money.
While I would never dare to deny the importance of investments in money management, I still want to draw your attention to another aspect of it, i.e., savings.
Many of us don’t realize the importance of savings before we hit our fifties and we are nearing retirement. At such a turning point in your life, it does become a little difficult to start saving, especially when you are not used to it.
And even if you had been saving here and there, chances are that you need to buck up with it now. But how do you do it?
I suggest you try the 1% savings strategy to boost your savings with less effort. Read along to find more about it and see how it is an easy and non-strenuous technique that you can apply today!
What is it and how to apply it?
1% is such a small number that you may think ‘what difference can this strategy even make to my savings?’
But what if you tell you that with this little change applied to your monthly or bi-weekly savings is how you can save more money and reach your goal in half the original time.
Don’t take my word for it. Believe in maths. Here is a very simple example for you.
For the ease of understanding let us say Susie earns $10,000 a month and as of now she is saving 5% of her monthly income. So her monthly savings are $500 and in a year she saves $6000.
But this is not enough for her retirement plan. So she learns about the 1% strategy and starts saving 1% more each month.
Her savings figure start to look something like this:
- January $500
- February $600 (6% of 10,000)
- March $700 (7% of 10,000)
- April $800 (8% of 10,000)
- May $900 (9% of 10,000)
- June $1000 (10% of 10,000)
- July $1100 (11% of 10,000)
- August $1200 (12% of 10,000)
And before I go from September to December, Susie has already saved around $6800. By the 8th month in the year, he has crossed his original savings of one year.
This is the power of small changes.
Here are some benefits of this simple savings strategy:
It is as easy as any savings strategy can get
It requires no degree in advanced mathematics to implement this strategy and add 1% more into your monthly savings. It is easy to apply and gives good results.
It is a comfortable change
After deciding that you wish to increase your savings, the transition can often be difficult when you suddenly have to cut back on expenses. But that is not the case with this 1% savings strategy.
The number 1 is as powerful as it is small. The change with this strategy is gradual and doesn’t require you to make any sudden big changes in your lifestyle.
It is a commitment you won’t go back from
With only a minute change in your savings strategy, there is a relatively lower chance of you going back on your commitment to yourself. If you don’t feel the huge change in your lifestyle, you won’t mind this steady increase in your monthly income.
It is a super flexible strategy
While I gave an example of a monthly increase, it is more relevant for people who are looking at retirement very soon. There is no hard and fast rule for this strategy.
For others, who have time before retirement, you can make a 1% increase, every 2 months, or 3 months, 6 months, or whatever suits you. Just don’t forget to calculate the percentage increase in your savings and compare it with your retirement goals.
More savings mean more interest
The gradual increase in savings will also fetch you more interest over time as your savings pool grows. A bit more interest doesn’t hurt, right?
1% strategy is a fuss-proof and relaxed way of changing your savings style. It is helpful to not just people who want to save more for retirement but an easy transition for people who wish to increase their investment size too. It is a hassle-free way to slowly increase your savings pool.
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Frequently asked questions
1. What strategy is most effective for saving money?
Here are some general tips for saving money:
- Have an emergency fund
- Make a budget and stick to it
- Start small with savings
- Choose low-risk investment instruments or high interest-paying banks to park your savings
- Start saving for retirement as early as possible
2. What are the benefits of saving money?
- Saving money comes with a plethora of benefits. It can help you in an emergency, help you pay off your debt, be your cushion in times of crisis like job loss and give you financial freedom.
3. How much should you save monthly?
- The recommended value of savings each month is 20% of your monthly income. This comes from the 50-30-20 budgeting rule where you spend 50% of your income on essentials, 30% is on your discretion and 20% goes into savings.
4. Why saving early is important?
- If you start saving early, you have a longer period to gradually increase your savings. Moreover, the earlier you start, the more your money can grow.
5. How can I increase my savings fast?
Here are some tips for increasing your savings fast
- Automate your spendings and savings
- Make a weekly or monthly budget
- Track your spending
- Cut down on non-essential spendings
- Get out of debt
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