6 simple strategies to save 10% of your income — no matter how much you make
The best financial book I’ve ever read was The Richest Man in Babylon. I don’t have a finance background, so this book resonated with me because it kept it simple with relatable stories.
If you haven’t already, I would highly recommend reading it! I also wrote a more in-depth review of the book here.
Before we dive into the six strategies, what’s the point of saving 10%?
Pay yourself first!
Everyone with an income should aim to save at least 10% of it. Of course, more is better if you can afford it.
As Tony Robbins puts it, we should “pay ourselves first”.
Most people pay a landlord, the supermarket and the local pub owner. But not everyone makes sure to save some money for themselves.
As I’m currently reviewing my personal finances, I thought I’d focus this post on the six strategies I found to help me save more than 10% of my income.
Strategy 1. Track your spending
We all have our own habits when it comes to money.
It’s easy to get lost in the motions, but it’s important to look at our finances each month to understand where our money went.
In 2019, I created a Google Sheet to help me review my costs. I split it into weekly purchases like groceries, transport, entertainment, drinks at the pub, etc.
Tracking your spending is important for 2 reasons.
First, it helps you understand how much money you spend on different habits.
Becoming aware of these activities helps us find alternatives to our most expensive habits. For example, we might trade in an evening at the pub for a dinner party with friends or grabbing a few drinks in the park in the summer.
It also makes you more conscious of how you spend your money.
This helps you take a step back in the moment and ask if you really want that desert at the restaurant. Maybe you’d rather have that yogurt you still have in the back of the fridge.
Of course, there’s nothing wrong with ordering a three course meal if that makes you happy.
But it’s always helpful to be conscious of how you spend your money. Because sometimes our ingrained habits are more expensive than we might realize.
Strategy 2. Make a budget
After you’ve been tracking your spending, you can take a moment to understand what your monthly budget should look like.
After paying rent and bills each month, you have X disposable income. How do you plan to split these up?
Maybe you decide to spend fewer evenings at the pub and have a dinner party instead.
Maybe you decide to save money on transport by cycling to work or working from home more often.
The budget should give you an idea of how much you can spend in each category throughout the month.
Making benchmarks
You can calculate the budget with a few rough numbers.
For example, you might regularly spend £50 on dinner dates. If you assign £200 to the restaurant category for the month, that means you can go out roughly once a week.
This type of benchmark helps because it makes your actions specific.
Strategy 3. Increase your earnings
While this is a simple strategy, it’s not exactly easy. There are many ways you could try to increase your earnings:
- Negotiate a higher salary with your employer
- Interview for jobs with higher salaries
- Start a side hustle
- Build passive income assets
The first two points are obvious enough.
And if you have a full-time job that leaves you with energy at the end of the day, you might consider starting a side hustle.
You can use your current skill set to freelance a few hours a week. Or you could start a niche blog and try to monetize it through affiliate marketing or display ads.
Of course, you could always create an online course or write an e-book.
There are lots of platforms to sell digital assets such as GumRoad, Audible, Amazon, Podia. The list goes on.
Strategy 4. Live below your means
Ultimately we want to spend less than we earn.
Of course we want to try to earn more money as we progress in our careers.
But it also means we don’t instantly level up our spending after we get a raise or a higher-paying job.
We shouldn’t eat out more often just because we have more disposable income. We should find activities that we love that we can enjoy guilt-free.
For example, I love nature and will take a walk or jog through London’s parks whenever the weather is nice. On warm weekends, I love going for hikes in nature and bring a pre-packed picnic with me.
Part of making a budget is figuring out how much we can realistically save each month.
The more we save now, the more our portfolio will be worth in a few years. Compound interest is our route to a rich future.
Strategy 5. Start investing
There are two big reasons you should start investing now.
- Compound interest will make your investments more valuable in 10 years than just holding onto inflationary currency.
- When you invest, it’s easier to treat this money like you don’t have it.
My crypto portfolio
I’m personally into crypto, but in the future I plan to diversify my portfolio into more stable assets.
I just personally enjoy the volatility of the crypto market.
I could lose everything, but I could also 100x my returns in 2 years. I feel I’m still early enough in my career to be willing to take that risk.
Strategy 6. Imagine your “rich life”
The final strategy is an idea I hear Ramit Sethi talk about regularly.
In the podcast I will teach you to be rich, Sethi talks to couples about their financial issues. One of the common phrases that comes up is imagining your rich life.
If you had all the money you needed to live your dream life, what would that look like?
This is your motivation to save and invest.
With a clear image of where we want to go, we can reverse-engineer how much money we need to get there.
When we have this clear number, our dream lives seem much more achievable. After all, there’s a reason we’re not eating out 3 times a week.
Why we save…
There’s a reason we don’t spend all our disposable money on new clothes. That’s because $1,000 dollars saved now can be worth $40,000 in 30 years.
All we need is the discipline to put the money away and have it working for us in our investments.
Whether our dream is to retire early or become a multi-millionaire, it’s often more realistic than we think.
All we need is the discipline to plan and make it happen.
Then we’ll be rewarded with our rich lives 😎💸
