Why Saving Matters

I don’t know who said the phase “It’s not what you earn, it’s what you keep” first but they deserve a literary medal.

What does the phrase mean exactly?  

If you currently make $50k a year and are in debt like the average consumer, what would happen if your income doubled?  Would you suddenly payoff all your debt and become a powerful investor?  Or would you spend twice what you do now and end up in an even worse position?  Most of us would probably be ashamed to admit it but the latter is probably more likely.  I don’t know why the human brain works this way but if you are comfortable with a $300/mo car payment, then $350 isn’t so bad.  Fast forward 10-20 years and you are smiling while paying $600/mo.  The same goes for everything you buy thus the cost of living people often mention.

Don’t Be Like Everyone Else

What’s the average person do when they get a raise?  Spend it all?  Maybe bump up their car payment to get into a nicer car?

If you are saving 10-20% of your income today and you received a big raise what would you do?  Perhaps save 10-20% of it?  I challenge you to save at least 50% of that raise since you didn’t have it yesterday.  Continue with this method over your working career and you will end up with a very high saving percentage while never missing anything.

What Else Does “Keeping” Apply To?

It’s what you keep also applies to taxes.  The more that you can save on taxes then the more you keep and the more you can invest.  Don’t forget to treat that refund check like a bonus and save a large portion of it as well.

Can you think of other ways in which you can keep more of what you earn?