Four Opportunities to Boost Your Rate of Saving

Most people experience many opportunities in their lifetime to boost their rate of saving dramatically if they are prepared for them and take the proper action. Unfortunately, many of these opportunities are missed because saving is not a priority. Instead, material acquisition, that list in their heads of the things they want to buy and the places they want to go when they get their hands on extra money, controls their thinking. Opportunities to boost their rate of saving are perceived as opportunities increase their standard of living.

If you desire to get ahead financially and accumulate the wealth necessary to become financially secure and independent, watch for these four opportunities to increase your rate of saving. When they appear, have a plan in place to save a large portion, if not all, of the new money you receive. Defer increasing your standard of living until your level of wealth can support it. Base your standard of living on your level of accumulated wealth rather than on your income.

Full-time employment before marriage

The current median age in the United States for the first marriage for men is 29.5 years of age and 27.5 for women. Depending on the level of education you pursue after high school, you could have potentially six to ten years of full-time earnings before your first marriage.

These are years when frugal living can yield critical savings with which to build a foundation of accumulated wealth for the rest of your life. You have been used to having very little money while you were getting your education. You won’t miss the extra money you save from full-time earnings if you pay yourself first with automatic withdrawals from your paycheck or checking account. Resist the temptation to spend on a new car, trendy electronic gadgets, and exotic travel. Restrain spending on dates, nightlife, clothing, and travel with the use of a budget. Share rent and utilities with a roommate or mates. Keep living like you did when you were in school for a while longer and save the difference.

Improve your job skills, network, have fun and enjoy life, but start laying the foundation for your financial and professional future by saving during this period of your life when you have the fewest responsibilities.

At the beginning of a marriage of two full-time wage earners

You and your new spouse both earn full-time incomes. Now is the time to create a budget that is based on one full-time income. That’s right, live on the equivalent of one income and save the other. Each of you is used to living on one income already. You won’t miss the second income if you save it from the beginning of your marriage. By doing this, your savings will skyrocket. You will avoid debt. You will have the financial flexibility for one of you to quit his or her job or maybe work part-time while he or she gets an advanced degree or training, starts a business, or changes careers. If one of you experiences a decrease or interruption in income, your finances will not suffer; you will just save less for a while.

A substantial increase in pay as a result of a promotion, job change, or change of careers

Suddenly, your income increases by a third, or a half, or maybe it doubles. You are on easy street with lots of extra cash. Save it. If you can’t bring yourself to save all of it, save most of it. You are used to doing without it. Continue to do without it until your accumulated savings supports an increase in your standard of living.

An increase in income of this magnitude is rare; it may only happen once in a person’s work life, and it usually happens in the early years of one’s career. Be ready for it and have a plan to save all or most of the increase.


Chunks of unexpected income will come your way throughout your life. Bonuses, income tax withholding refunds, settlements, inheritances, prize winnings, and such are considered windfalls. You can’t predict when they will appear; you can’t count on receiving them, but they come your way nevertheless. They can amount to tens of thousands of dollars over a lifetime.

Have a plan to save all or most of any windfall you receive, no matter how small. You were not expecting to get this money, so pretend it doesn’t exist and put it into savings.

Saving requires a plan

Saving does not occur without a plan to do so. Spending is the default behavior, especially when dealing with new money. Make a plan to take advantage of these four opportunities to boost your rate of saving, and you will smooth the path to financial security and independence. It is much easier to forgo spending than it is to cut back. You cannot make a mistake by saving. If later on, you have reservations about your decision to save, you can always spend some or all of the money you put away. The same cannot be said about a decision to spend; once the money is spent, it is gone. Make a plan to save and stick to it.

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages

It’s Not the Latte or the Avocado Toast; It’s Spending Priorities

Some personal finance writers have given the impression that the only thing standing in the way of successful wealth accumulation is a daily latte, or more recently, avocado toast: quit wasting money on these extravagances, and you can achieve your financial goals. While these examples use trends in popular culture to reveal how small daily savings can add up to a lot of money when compounded over thirty or forty years, successful money management is more than the elimination of a daily indulgence. It requires planning, prioritizing, and budgeting.

Abstaining from daily treats is not a financial plan

Giving up a daily treat does not help you decide what to do with an increase in income, a bonus, income tax refunds, or other windfalls. It will not repurpose the money that is now used to make payments on debt when debt is paid off. It does not allocate the money you save to a retirement account, an emergency fund; targeted savings to pay for vacations, a mortgage down payment, home improvements and such; or budget accounts for quarterly, semi-annual, and annual insurance premiums, home and auto maintenance and repairs, appliance repair and replacement, and medical co-pays and deductibles. These tasks require a financial plan.

Abstinence from daily lattes or avocado toast does not guarantee accumulation of wealth

Giving up a daily treat does not guarantee the money saved will find its way into a savings account. Without a plan or a budget, the savings realized by abstaining will likely be spent on something else.

Spending priorities identify expenses to be cut

Giving up that daily latte or avocado toast might not even be the right choice if spending priorities have not been established first. You might find that there are other lower priority expenses that can be cut, or you might find that cutting back on rather than eliminating lattes or avocado toast along with other expense reductions will allow you to meet your goals.

Cutting expenses comes after the creation of a financial goal, a plan, and a budget, not before

Don’t get me wrong; cutting back on spending has its place. Saving happens when you spend less than you earn. But cutting expenses is not where you start. You start with a goal. What do you want? When do you want it? How much will it take to get it? Answer these questions and you have your financial goal.

How you get there from here is the plan. How much can be saved now? How can the rate of saving be increased in the future? How will salary increases, bonuses, and other windfalls be used? How will other financial needs be funded?

A budget is used to implement the plan. But before a budget can be created, spending must be prioritized based on the demands of the financial plan and your values. Obviously, housing, food, utilities, payments on debt, transportation, and insurance premiums are high priority expenditures, but the highest priority should be saving. Treat the amount of monthly saving targeted in your financial plan like an expense and pay it first. Then allocate money for the rest of your expenses based on their ranking with the highest priority expenses getting funded first. Those expenses that remain unfunded when you run out of monthly income are the expenses you cut. If a daily latte or avocado toast falls into the unfunded category, then out it goes. You have decided there are more important things on which to spend your money. The money freed up by eliminating the low priority expenses is automatically captured. That happens when you pay the saving expense first!

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages

Are You Afraid of Missing Out On Something?

Losing something valuable is bad, but missing out on something we could have had is even worse. We can often replace a valuable, and even if it can’t be replaced, we had the opportunity to enjoy it, but we cannot retrieve a missed opportunity. Regrets, that’s what it is. Oh, what could have been if only we hadn’t missed out.

Marketers use fear of missing out to manipulate us

Marketers know how strongly we abhor regrets, how we hate to miss out on something. That is why sales events are of a limited duration. That is why there are limited editions, sneak previews, and the like. Marketers want to create a sense of scarcity to trigger the fear of missing out in order to motivate us to take the action they want us to take.

Fear of missing out used by the financial services industry

The financial services industry is no different. You have probably been hearing that most Americans are not saving enough or have not saved enough for retirement, and those that are on track to reach their saving goals have investment portfolios that are either too conservative or too risky. Those that have already retired are in danger of not having enough income to last until they die.

Now we have the CEO of a financial services company speculating that some retirees are not spending enough in retirement. Retirees are cutting back on spending because their investment portfolios are too conservative. They are afraid of running out of money and this fear is causing them to miss out on a higher standard of living in retirement.

Then there are the financial experts claiming that some people are saving too much for retirement too early in their lives. They are missing out on the opportunity to live a higher standard of living while they are young.

It appears that everybody is in danger of missing out on the retirement they had planned or a higher standard of living, and by inference, you are in danger of missing out, too. Are you sure you are saving enough for the retirement you desire? Will your investment portfolio deliver the growth you need to reach your goals and provide adequate income for the length of your retirement without taking on too much risk? Financial planners have the answers, or at least that is what they want you to believe. And if you are afraid of missing out on your retirement, or missing out on a higher standard of living, or if you are afraid of running out of money before you run out of time, you will believe them.

Missing out is part of life

It seems we just can’t avoid missing out on something, and we can’t. No matter what we do, we will miss out on something; actually, we will miss out on a lot of somethings. When we make a decision to take one course of action, we miss out on all of the other options under consideration. Missing out is part of life, so don’t let the marketers get into your head. Use common sense instead.

Saving aggressively for retirement early in your work life is not a mistake

Saving as much as you can for retirement as early as you can makes perfect sense. You cannot save too much unless you are sacrificing your health and well-being to do so. Money saved early has more time to compound. In the long run, saving a lot early means you will have to save less overall due to this added compounding.

In our world of rapid change, you do not know what the future holds. You cannot assume you will be able to save aggressively for retirement later in life. You cannot assume your wages will increase year over year into your late fifties or early sixties. Your early years might be the only time you have to aggressively save for retirement.

Living frugally in retirement is just good common sense

The same reasoning holds for living frugally in retirement. Nobody knows how much money you will need over the course of your retirement because nobody knows how long you will live or what the circumstances of your death will be. The day you die is the only time you will know how much income and wealth you needed for retirement. Medical expenses, in-home custodial care, and nursing home costs can decimate an otherwise adequate income and wipe out a substantial nest egg in a short time. And these expenses usually occur at the very end of a person’s life.

Wealth gives us choices. The more wealth we have, the more choices that are available to us. Having choices is freedom. If you run out of money before you run out of time, you won’t be left on the street to die. Your family or the government will take care of you, but you will not have any choices or much say in the matter. It will be their way.

Living and dying with dignity means having choices. Most people value freedom over a higher standard of living if they understand the choice. As we grow older, we come to understand that having more or better things is not that important to us. The lure of an increased standard of living is less attractive. So it is no wonder that retirees want to protect what income and wealth they have by living frugally.

Financial planners offer information and opinion, not guarantees

Use a financial planner if you feel you can benefit from their expertise, but don’t go to them in a panic out of fear that you will miss out on something. Financial planners can estimate life expectancy, average medical costs in retirement, the effect of inflation on the cost of living, and the costs of an average length of stay in a nursing home. They can come up with investment strategies that are expected to produce a certain amount of income and growth. They can give you information and opinion based on statistics and mathematical formulas. But realize, none of it is about your life and your money. They know no more about how the future will treat you or your money than you do. They do not give you a guarantee. If things don’t work out, they will suggest other strategies. They will do their best, but they are not God.

Life is about trade-offs

Financial planner or no financial planner, you are going to miss out on something: you will either accept more risk in hopes of a higher rate of return, or you will settle for a lower rate of return in exchange for taking less risk. The former could mean you lose some of your savings and have to replace it. The latter could mean either a lower standard of living now so you can save more for the future or a lower standard of living in the future.

Let your values drive your decisions, not fear of missing out

Missing out isn’t so bad if you know what is important to you. For example, which is more important, the security of your savings or a higher rate of return on your investments? If a higher rate of return is more important, you will not mind putting your savings at a greater risk of loss because you will have what is important to you.

Fear of missing out is for those who do not know what they want, so they want everything. Know what you want, and more importantly, what you need. You can afford to miss out on the other stuff.

K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages