Personal Finance, for all the subcategories and complexity, boils down to: “Increase your savings rate”.

The standard advice is to save 10% of our income. Most Americans struggle to meet this recommendation.

In today’s high consumerist world, I’m convinced everyone has the ability to not only maintain a minimum of 10%, but also increase the amount of money they keep by at least another 1% each year. If you’re struggling to implement large changes in your life then the perfect place to start is with 1% improvements. The question you might be asking yourself is, “Why bother with increasing my savings rate by 1%? What’s the actual benefit of 1% changes?”

The amazing concept is that this number will predict how long you will need to work before you have the option to retire. The dollar amount of your income does not matter because your savings rate only considers your living expenses and your income. These two factors determine the exact amount of years and months you have left until you can support yourself with your invested funds — until you reach financial independence.

So how big of a benefit can 1% be if you’re already saving the recommended 10%?

Someone with a savings rate of 11% per year instead of 10% will be able to retire two years earlier.



Credit here due to another financial blogger, Mr. Money Mustache, for introducing me to this view. Here’s a link to the original article discussing these rates


Continuing with our example – if you’re able to boost your savings rate from 10% to 20%, then you’ll effectively have reduced your working career by another 15 years.

If you’re familiar with our goal for 2016, then you’ll know we’ve started this year by living a lifestyle that puts us on track to achieve our ambitious goal of doubling our savings rate from 23% to 50%. Our goal is to make wise, well-thought out decisions while still enjoying a comfortable lifestyle. After all, it is damn comforting to know my future wife and I are working as a team and on track to retire (if we want) in our late 30s.

Once you begin identifying the areas in your life where you can tack on saving an extra 1%, you can tap out of the rat race before your first grey hair — or in my case, before I’m completely bald. 

Saving our dollars is the only way we can truly earn our dollars. If we earn money to simply spend it on bills and recurring expenses, then that money was not truly ours to begin with. It was earmarked as soon as we received it. Once we have money, it begins to work for us, even while we sleep.

In 2015, I committed to a few 1% changes in my own life that continue to help improve my financial discipline in 2016. In 2016, I’m searching for ways I can boost my savings by that extra 1% because I know exactly what that translates into down the road.

What are some of the 1% improvements you’ve made recently or that you’re planning to make?

-Matt
Master Distiller

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