10 Ways to Maximize Savings in 2020

You’re probably familiar with the annoying saying that “it takes money to make money.” There’s definitely some truth in it. The more money you stash away in investments that generate passive income, the more income you earn. The more capital you have to launch a business, the greater its odds of success.

What they don’t normally tell you is where to find the initial money to invest. That’s because it’s an answer no one really wants to hear: You have to live well below your means and save it. You have to maximize your savings rate, the percentage of your net income that you put toward savings and investments.

The price of building wealth is a high savings rate, which takes discipline. It’s not fun to drive a 5 to 10-year-old Honda while your colleagues and friends drive brand-new BMWs. But if you want to build true wealth, it’s time to get serious about your savings and start piling money into income-oriented investments that will make you truly rich, instead of just rich-looking to your friends.

How to Maximize Your Savings Rate

Boosting your savings rate is partially about budgeting but spending less is more a behavioral problem than it is a math problem.

Being able to use some of the tips below will help you spend less while achieving a similar quality of life. Some are about reducing wasted money, others about automating savings. All require a high priority toward accumulating wealth.

Remember, as you set about raising your savings rate, that it’s more about adopting a mindset than it is about any one tactic or action. If keeping up with the Joneses is a priority for you, don’t expect to ever save much money, because there’s always someone with a fancier lifestyle you compare yourself to, and try to keep up with.

A great book that goes deeper into this concept of keeping up with the Joneses is The Millionaire Next Door. Which is an excellent read and will make you realize how much you and those around you are hurting their long-term wealth generation for things that don’t actually make them happier. 

Start internalizing a desire to build real wealth. It takes patience, time, and discipline, none of which is sexy. But there’s no more effective way to build long-term wealth than by investing every possible cent in high-ROI investments and letting the returns compound.

Saving more money doesn’t have to be about cutting your daily coffee(my favorite coffee death wish for you kcup users), feeling guilty about spontaneous buys, or trying harder. Before you start slashing expenses left and right, start with these three steps to set yourself up for successful saving.

  1. Recognize that saving is not about more willpower. You may have tried and failed to save money in the past. If trying didn’t work then, don’t expect it to work now. Trying harder to save, or summoning more willpower to save, is not going to work. If you’re serious about saving money, putting systems in place that help take the emotion and effort needed to make it easier for you to save is the way to go.
  2. Be realistic. When planning on how to save or how much money to save, set realistic goals. For instance, if you eat out most nights or buy a daily morning coffee, you don’t have to go cold turkey in order to save money because your not as likely to stick to it. Making gradual changes over time to your habits will make it more likely that you’ll stick with them.
  3. Automate your savings. Automating your finances is the best step you can take to save money with ease. You can have your employer funnel your money to two accounts instead of one, have your bank automatically move a small amount into your savings account every month, or set a Goal specifically for saving with your simple account. Whichever you choose to do, the idea is that you have money you want to save monthly automatically funneled into a place separate from the rest of your money. Automating your savings makes it effortless to grow your savings and more difficult to spend the money you’ve saved.

3 comments

  1. The content is great, good job Kurt. I think the first point “set a target savings rate before setting your budget” combined with consistency are the keys to succeed with a savings plan.

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