Tranisitions

Personal Finance and Personal Development, from one 30-something to another

The 10% Savings Myth

The Motley Fool says you need to suck it up, and I agree. 10% is a bare minimum, and most of us need to be saving more. Especially in the past few years, the real estate run-up has caused many people to discount the need for savings and view capital gains as a means to ensuring your retirement income. The plateau (and in some places, precipitous decline) in real estate prices caused by a glut of inventory on the market, coupled with the slowdown in sales may have opened some eyes, but I still worry that some folks view it as a temporary speed bump on the highway of home appreciation.

So, what can we do to free up some cash flow for savings?  The usual: cancel your cable, don’t eat out as much, quit drinking lattes, blah blah blah.  All good advice, but it seems to me that, unless you’re actually redirecting that money into some type of investment vehicle (your emergency fund stashed in an ING Orange Savings account, some index funds, or the like), you’re not really improving your financial future.

My counsel to myself was to learn to live on 75% of my income.  Honest confession:  I’m not there yet.  I’m only at 80%, but I’m working my way to 75%.  I believe (especially if you didn’t do what you should have been doing in your 20’s and started with the 10% savings from your first post-school paycheck) that I probably want to put away 15% of my pay every pay check.  I don’t plan on spending my raises, either.  Those go right off the top (as do bonuses) into savings.  And, I give 10% to a charity I believe in.  Every pay check, without fail.  The tax deduction is great, but the intangible benefit I get by sharing a part of my income with those less fortunate than I goes far beyond the reduction in my Adjusted Gross Income.

Later on, I’ll be explaining how I got to where I am today financially, and where I’m going from here.

22 June, 2007 Posted by | giving, living below your means, savings | Leave a comment