★ Rich Habit #9: Saving At Least 10% of Your Income

Posted February 2, 2017 6:00 am by with 6 comments

save 10 percent

This is part of our Rich Habits series, by best-selling author Tom Corley.
Be sure to check out all previous habits we’ve covered!

Before any bills get paid, successful people pay themselves first. They set aside at least 10 percent of their income into some savings, investment or retirement vehicle. They invest their money wisely, watch over their investments regularly and set realistic goals for their investment returns.

Successful people have high credit scores, know their net worth and monitor their personal balance sheet. They employ the services of experts like certified public accountants, certified financial planners or attorneys, and use these professionals to help maximize their returns and minimize their taxes.

Successful people have a retirement plan.

They participate to the fullest extent permitted by law in retirement plans. Many of these retirement plans allow individuals to put away, in a tax-deferred manner, a large portion of their income each year. If their company does not have a retirement plan, they create their own retirement plan by funding individual retirement accounts (IRAs).

They add to these accounts with every pay check. They have retirement goals. They monitor their retirement plan regularly and make course corrections in an effort to reach their retirement goal.

Unsuccessful people pay themselves last and have little saved for retirement.

They live pay day to pay day, spending every penny to support their lifestyle. They are poor savers and carry excessive amounts of debt. They have home equity loans and credit cards maxed out, and they can barely make the monthly minimum payments. They also have poor credit scores.

Unsuccessful people do not contribute to retirement plans. Some gamble excessively and view the lottery as their retirement plan. They take risks, which are either unnecessary or not well thought out. They don’t set aside 10 percent of their income and, consequently, when they reach retirement age, they do not have enough retirement savings to allow them to retire with security.

They rationalize that they cannot afford to set aside 10 percent of their earnings. They are unwilling to alter their lifestyle in order to save adequately. More often than not, unsuccessful people have no choice but to continue working well into their retirement years or rely on family or the government.

In Summary

Save at least 10 percent of all your income, and live off the rest.

*******
[EDITOR’S NOTE: While 10% is a great staring point, I’d push yourself to go even further to 20% or even 30% as time goes on. Any dreams you have of retiring early or traveling the world/etc will require much more than 10%. Though it will probably set you up just fine for a normal retirement age/life.]

[Photo cred: Marcin Wichary]

Tom is a CPA and the author of the best-selling book, "Rich Habits: The Daily Success Habits of Wealthy Individuals." He will be sharing a new habit with us every Thursday as part of our Rich Habits Series, and can be found online at RichHabits.net.

6 responses to ★ Rich Habit #9: Saving At Least 10% of Your Income

  1. Ty @dividend money February 2nd, 2017 at 9:19 am

    Tom,
    I really like these bit sized articles.
    They are simple and direct to the point. Often, financial bloggers get caught up in ‘preaching to the converted’. Articles like these are the ones that are realistic and simple enough to get people started down the right path.
    While I like the articles that push the limits – “Save 70% of your income” etc. It really just isn’t something that the majority of people will believe is possible.
    Cheers!

    Reply

    • Tom Corley February 2nd, 2017 at 10:48 am

      Tks TY. Glad you are getting some value from them.

      Reply

  2. Mrs. Picky Pincher February 2nd, 2017 at 9:40 am

    10% is a fantastic starting point if you aren’t sure what to do. However, it’s important to challenge yourself and really stretch the limits. Over two years we’ve increased our savings rate to over 50%, and we live like freakin’ royalty. It can be done as long as you cut unnecessary crap from your life, find substitutions for spendy things, and focus on what’s important in your life.

    Reply

  3. Crystal February 2nd, 2017 at 3:04 pm

    This resonates with the teaching in “The Richest Man in Babylon” – pay thyself first theory. Personally, I think if you can do more, do so…after all, it serves two purposes – any pretax dollar you put aside reduces your taxable income (aka, paying government less) and saving it for retirement (so you have it when you no longer making money) – win-win.

    Reply

  4. GetRichBrothers February 2nd, 2017 at 7:34 pm

    To Crystal’s point regarding “The Richest Man in Babylon”… a part of everything you earn is yours to keep. I’ve always loved that line.

    Thanks for the article.

    – Ryan

    Reply

    • TOM CORLEY February 2nd, 2017 at 8:11 pm

      When you pay yourself first, you are paying homage to the future you.

      Reply

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