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– Think About Saving 20%

My rule of thumb for a savings as a percent of your income has always been to save 10%. That, of course, varied depending where people were in their life and financial situations. I always run scenarios to determine if this will allow them to meet their goals.

Recently, however, I’m beginning to suggest to people that they consider saving more (or more precisely that they consider spending less). There are several reasons for this:

1. Freedom of Choice: As I work with more and more clients, I find that as they near the age of 50 (for some it’s earlier, for some it’s later, for some it never happens), freedom of choice in their life and careers is more important to them than it was when they were younger. However, at a 10% savings rate, they generally have not accumulated enough assets to be able to comfortably exercise the freedom to make changes in their lives (without having to change their standard of living).

2. Unexpected Job Changes: Job security, which once was fairly common in America, is no longer common. Across the country, workforce reduction is becoming fairly common. Even “excellent job performance” is sometimes not enough to make you safe. If this happens, the combination of more savings and less expensive life style makes it easier to handle these situations.

3. Enjoy Life: Simplicity in itself is a reward. I believe that Simplicity is one of the three cornerstones of a good life (the other two are Integrity & Philanthropy. One of my favorite quotes comes from Richard Stine, who said “Is there not more to life than getting stuff? And getting more of it, Bigger of it, Faster of it, and then stuffing what you can’t use now somewhere so you can use it later. If this is so… what a sad routine. How really very, very sad. ON THE OTHER HAND… .know for sure that you are rich, when your hunt for alternatives becomes sincere.” When we get caught up in getting “more, bigger and faster”, we lose track of life’s simple pleasures – reading, relaxing, time with family and friends.

4. Peace of Mind: When you have lower expenses and more money saved, financial worries are reduced and you experience more peace of Mind – which I think it should be all about anyway.

I recommend that you seriously consider spending less and saving more.

If done right and handled correctly from a tax perspective, an increase in savings of $200 a month does usually means a reduction in spending money of less than $200.

AND – you will have more peace of mind and more enjoyment of life!

I’d love to hear your comments.

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