50 Ways To Save Money On A Low Income

Flower growing out of pennies

Saving money is challenging for the vast majority of people, but finding ways to save money on a low income is exceptionally harder making it more important they start somewhere. Let’s learn some ways to save money when it seems like we don’t have much to begin with. Ways to Save Money on Food It …

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Our Adjusted Budget Can Make Us $30,000 Richer

COVID-19 initially sent our investments plummeting by $100,000. I am glad we held strong, but I spent more time thinking about timing the market than I would like to. To strengthen the resolve of my investment strategy, I created my kick-ass investment policy statement which serves as a great reference whenever I need to make …

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Why Fall is the Most Important Season for Your Personal Finances

Leaves are falling, sweaters are out, and pumpkin spice – beloved or bemoaned – has made its seasonal appearance. And while the best parts of summer have become little more than memories, many Americans are still feeling the financial effects of the warmer months. According to a LendEDU seasonal spending survey, summer, as it turns …

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How to Calculate Your Effective Savings Rate

The majority of people aren’t born as mathematicians. Luckily, it doesn’t take a genius to understand how important it is to save your money and calculating your savings rate can be just as easy.

Why should you know your savings rate?

If you’re reading this article, you already know the answer to this question, but for the folks who may have been forced onto this page by some unknown power, I will explain it simply.

The more you save, the earlier you can retire.

Duh. Pretty obvious right? 

However, financial advisors and big firms these days recommend saving at least 15% of your earnings towards your retirement fund starting in your 20’s.

The idea is that with each pay raise, you should adjust your savings to maintain that 15% contribution rate.

The problem with a 15% savings rate is that it puts you on track for retiring in 35.3 years. 

You heard me right, 35.3 YEARS!

That is assuming you invested your savings in a retirement fund that you anticipate will provide a 7% average annualized return and plan to go with a 4% withdrawal rate while in retirement.

If you only save 15% of your income toward retirement and spend the rest, you will either retire broke or work until you’re an old wrinkle sack of bones.

Some rare species of people don’t mind decades of mandatory work, but many others would rather cut down or start a business of their own.

Now, what happens if you can increase your savings rate from 15% to 25%?

You will be able to retire in 27.1 years with the same assumptions as above.

Want more numbers?

  • Save 50%, retire 15.0 years
  • Save 75%, retire 6.8 years

Want to play around with your own values? Check out this early retirement calculator at Networthify.

Related: How we saved 72% of our income in 2018

Time For Some Math

Effective Savings Rate = (Net Income + Tax-Deferred Contributions) – Expenses / Gross Income)

Net income: What you take home from each paycheck

Tax-deferred Contributions: These are typically your traditional 401k, 403b, 457s, Thrift-savings plan, Traditional IRAs and Health Savings Plan. 

Expenses: All the cash and credit that comes out of your pocket

Everything can be found on your paystubs except for expenses.

The easiest way to track your expenses is through an app. 

I use personal capital which does everything for you. It is also a tool for budgeting, tracking your asset allocation, net worth, and so much more. 

If you sign up through this link will give both me and you $20. 

Step 1: Sign-up
Step 2: Link your investment/bank accounts with a balance of $1000 or more (No worries, they use the same security as your bank)
Step 3: Wait up to 6 weeks for a $20 Amazon gift-card to arrive in your email inbox.

Even if you are not actively managing your finances, using personal capital will give you a greater understanding of your finances. So give it a whirl. Take control of your finances today!

MARVEL at Lifestyle Inflation: Dr. Strange

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Lifestyle Inflation: Save Yourself From The Rat Race

Lifestyle Inflation, also known as lifestyle creep, occurs when individuals increase their standard of living as their discretionary income rises. It becomes a problem when people prioritize luxuries instead of paying off debt, building an emergency fund, or saving for retirement. Ultimately, it prevents them from building wealth and makes their lifestyle increasingly expensive to …

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