When it comes to repaying debt, a lot of people will review their personal savings rate, or PSR. In plain English, your Personal Savings Rate is the amount of income that you do not consume. The average PSR in the United States has hovered around 4% but given the recent economic problems and depressed consumer confidence, that level has recently touched as high as 6%. With an increase to PSR, people are finding they are better able to repay debt and weather future economic crises.
When it comes to increasing our PSR percentage, there are several things we can do. For example, spending only 80% of what we normally spend on discretionary living expenses (that means spending just $800 for every $1,000 we spend now), we will not only become better money managers, but we will manage to save enough to lead to extravagant lifestyle in retirement. Here are some more steps that we can take to increase our PSR:
Start By Making a Focused Effort
The easiest starting point is starting a separate savings account. Beginning with a nominal amount, say $50 of every pay check, will increase the chances of success and allow you to adapt rather easily. With time, you can increase the amount, but starting small will allow you make the necessary adjustments to your budget. More importantly, simply setting up a separate savings account allows you to mentally prepare for becoming better off financially.
Create a Budget
Chalk down a budget. Don't go too stringent at first. Allow room for unexpected expenses so that you are ready for them when they arrive. Instead cut down on discretionary spending arenas like entertainment and going out to restaurants. Maintaining a budget that helps you save up to 20% of your monthly expenditure would be your first step towards increasing your personal savings rate.
Discipline and Persistence
Be disciplined all along. This is not something that you have to do for a month or two and then revert to your normal spending habits. Keep a long-term perspective in mind to gain maximum benefits.
Patience is a Virtue
Be patient. Refusing to spend on many things that you might not have thought about earlier is not going to be simple. Nevertheless, it isn't impossible either. Patience is an asset when it comes to adding to your personal savings.
Practice Self Control
Keep your flexible and open spending habits to the minimum. Now that you are on a budget, you cannot go out and buy the latest products in the market especially if you do not need them.
Monitor Progress
You would also require keeping a track of your spending habits. Remember to keep a close track so that you can work on it to improve it further and to stay focused on your long-term savings goal. This might mean recording every dime you spend or simply matching balances at the end of the month to your budget.
Allow for Adjustments
Lastly, you will want to leave room for adjustments. Every plan in life needs to incorporate flexibility if it is to succeed. If you find yourself behind plan, rely on flexibility to get yourself back on track. Flexibility is essential when it comes to maintaining a successful budget.
In conclusion, increasing your personal savings rate translates into longer-term financial independence. When financial crises strike next, you will be better equipped to handle them. Furthermore, establishing a plan early will reward you with greater financial control down the road, and when you reap the rewards in the future, you will wonder how you ever survived any other way.
When it comes to increasing our PSR percentage, there are several things we can do. For example, spending only 80% of what we normally spend on discretionary living expenses (that means spending just $800 for every $1,000 we spend now), we will not only become better money managers, but we will manage to save enough to lead to extravagant lifestyle in retirement. Here are some more steps that we can take to increase our PSR:
Start By Making a Focused Effort
The easiest starting point is starting a separate savings account. Beginning with a nominal amount, say $50 of every pay check, will increase the chances of success and allow you to adapt rather easily. With time, you can increase the amount, but starting small will allow you make the necessary adjustments to your budget. More importantly, simply setting up a separate savings account allows you to mentally prepare for becoming better off financially.
Create a Budget
Chalk down a budget. Don't go too stringent at first. Allow room for unexpected expenses so that you are ready for them when they arrive. Instead cut down on discretionary spending arenas like entertainment and going out to restaurants. Maintaining a budget that helps you save up to 20% of your monthly expenditure would be your first step towards increasing your personal savings rate.
Discipline and Persistence
Be disciplined all along. This is not something that you have to do for a month or two and then revert to your normal spending habits. Keep a long-term perspective in mind to gain maximum benefits.
Patience is a Virtue
Be patient. Refusing to spend on many things that you might not have thought about earlier is not going to be simple. Nevertheless, it isn't impossible either. Patience is an asset when it comes to adding to your personal savings.
Practice Self Control
Keep your flexible and open spending habits to the minimum. Now that you are on a budget, you cannot go out and buy the latest products in the market especially if you do not need them.
Monitor Progress
You would also require keeping a track of your spending habits. Remember to keep a close track so that you can work on it to improve it further and to stay focused on your long-term savings goal. This might mean recording every dime you spend or simply matching balances at the end of the month to your budget.
Allow for Adjustments
Lastly, you will want to leave room for adjustments. Every plan in life needs to incorporate flexibility if it is to succeed. If you find yourself behind plan, rely on flexibility to get yourself back on track. Flexibility is essential when it comes to maintaining a successful budget.
In conclusion, increasing your personal savings rate translates into longer-term financial independence. When financial crises strike next, you will be better equipped to handle them. Furthermore, establishing a plan early will reward you with greater financial control down the road, and when you reap the rewards in the future, you will wonder how you ever survived any other way.
About the Author:
With more than 16 years in the financial services industry, Chris Blanchet has helped thousands of people improve their financial lives. He is the author of Help Fix My Finances, a personal finance program of the same name. He maintains a Debt Free Blog at How to Repay Deb.com.
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