3. Own Your Savings Rate
10 Steps to Save More
The Problem at Hand
As Americans, we are born and bred into a culture unbelievably backwards when it comes to the idealization of material possessions over almost anything. I see it in how I go about my daily life. Learned behavior placed so many judgments into my head that I sometimes catch myself practicing to this day. We all live our lives making subtle judgments, because in America we were presented with a standard from an early age of the “correct” way to grow up, to live, to have, and to be.
Misconceptions are only the first step of America’s financial problems.
Consider a few of my favorite stats that hammer down to the core of the problem-
Via Bloomberg — “The personal savings rate was 3.6% in the fourth quarter of 2016… That’s the lowest reading since a 2.8% rate in the final three months of 2007.” *More recent data points to a 10-year low of 2.4%.*
The Motley Fool — “Last year, GoBankingRates surveyed more than 5,000 Americans only to uncover that 62% of them had less than $1,000 in savings”… “15% have more than $10,000 saved.”
Whether or not the savings rate is the reported low in 2016 of 3.6%, or the most recent figure of 2.4%, publications point to a plain and simple problem with American finances. Collectively, Americans do not save a significant amount of money.
What can you control? Control is an interesting word in as society when almost everything is labeled “out of your control.” The scope of what you can control has to be broadened. I started my journey, on a Co-Op hourly wage, in the summer of 2016, by repeatedly asking myself the question: “What can I control in my finances?” Posing this question, aided in the shifting of my mindset. What I can really control was simple… My savings rate.
Think of your savings potential as the percentage of your income leftover once your outflows are subtracted from your inflows. Your savings rate is the final tally against your savings potential at month’s end.
10 Steps to Owning Your Savings Rate
1. Pay Yourself First
One of my all-time favorite personal finance publications, is “Rich Dad, Poor Dad” by Robert Kiyosaki. Kiyosaki uses the battle cry “Pay Yourself First” as a reminder to maximize assets and minimize liabilities. The biggest mindset shift I had was to stop considering how much “room” was in my budget, what I could purchase, etc, and instead focus on other questions, including: “How much money can I keep for myself per month?” Through my current practices, my monthly savings potential/savings rate fluctuates between 50% and 55%.
2. Stop Looking Around
It is no secret we live in a “look at me” society in which everyone from college students to parents in the workforce have taken to various social media sites to compare vacations, cars, kids’ accomplishments, etc. Coupled with the increased downward pressure to spend more and more from marketing schemes, people are stretched to keep up. In the summer of 2016 I made the conscious decision to put my blinders on to American Materialism and unspoken social media comparisons. Understanding how skewed my perception of reality was becoming and deciding to put the “blinders” on has allowed me to control my savings rate.
3. You Are Your Habits
The old adage “you are what you eat”, had me thinking, you really are your habits. If you build sloppy habits in any area of your life, the sloppiness will more than likely bleed into another area of your life, and before you know it, your personal finances will be run less like a corporation, and more like a payday loan operation founded on the house of credit cards you built it with. To tighten up financially, it is imperative you are constantly bettering yourself:
Spiritually - Physically - Mentally
If you strive to better yourself in these 3 crucial areas, you will form the foundation of a person who can repeatedly make smart financial decisions.
4. A Reward, Not the Norm
To increase your savings percentage one must begin to view life’s luxuries as rewards, and not the norm. Nothing goes together like Personal Finance and coffee examples, but I will spare you all on one of those. Everything from vacations to meal purchases I began to ask myself the simple question: “Have I earned this?” If it was a Monday and the question was directed over a pizza, the answer is probably no. I have not yet grinded hard enough this week, by performing 4 work days in a row, bettering myself spiritually in some capacity, and completing 4 grueling workout sessions. On Friday, I might be able to rightfully answer yes to the question and go buy a pizza.
5. Dial In
Purchase decisions I cut out completely or minimized:
Unnecessary bills/fees (i.e. car payment, various finance plans, venmo or cash app instant transfers),purchasing clothes (I “froze” my closet and did not buy a single item other than a few pairs of workout shorts and shoes in 2017), plane tickets (While living in Wisconsin in 2017, I drove home 4 out of 5 times to save cash-My parents paid for one of the plane tickets), airport parking (always uber to the airport), water bottles (always keep a water drinking receptacle on you, this adds up), work day lunch and dinner (early 2017 analysis showed this was my biggest problem area, so I meal prepped all of 2017 and ate it for lunch and dinner), unnecessary memberships (cancelled Netflix, kept Spotify), renting below means (Never paid over $415/month for rent, lived with parents and roommates)
Things I did not cut out —
Health-related expenses, experiences, charitable giving, and hobbies.
6. Protect Your Energy
After altering your mindset, you will find a level of clarity which can only be achieved by chasing down the best version of yourself. The end result is an overwhelming sense of clarity.
The other side of basking in clarity, is to protect your energy. This will drive your personal business forward and allow it to continuing functioning at a high-level. Whatever feeds you energy, protect it.
7. Take Someone With You
Once you develop a system and way of life that is pushing you forward at a faster than expected pace towards financial flexibility at a unusual age, take someone with you. Through conversations and demonstrations, I was able to help a few good friends (and family, what’s up Taylor) to decide not to purchase brand new vehicles, to begin meal prepping, and to change their respective workout regimens to one more similar to mine. Both are now a few steps away from achieving a net worth of over $20,000 in their first year out of school.
8. Don’t forget Where You Came From
I am from Northwest Arkansas, home Walmart’s Global Headquarters, and a recently-turned vibrant business community people from all over the country move to. Much like NWA, I grew up developing a “show and prove” chip on my shoulder. Naturally, the situation and place you come from has great impact on your outlook. Seeing Northwest Arkansas grow so rapidly has led me to believe and practice that the sky is the limit. No one owes you anything, so wake up every day with a mind to go take it.
9. Practice Full Attention
I have found a lot of life in my savings battle by constantly challenging myself to be better. One of the ways I have done this is my adopting the “AMRAP” philosophy I heard from CrossFit Games Competitor Jason Kalipa on a podcast interview. Jason spoke of a philosophy that is painfully simple but helps one to find life when others would typically feel deprived in the savings grind. Jason speaks on the “AMRAP” philosophy, which to non-cross fitters means nothing, but to me, clearly means “focus on the task at hand, and go as hard as possible”. He talks on compartmentalizing. When you are at work, work. When you are with your family, be engaged. When you are working out, work out hard. When you are in church, worship the lights out. When you are running, focus on the next step. AMRAP (As many reps as possible) everything.
10. Strive Towards Minimalism
“Striving towards minimalism”, and claiming to be a practicing minimalist are 2 completely different things. I dabbled in minimalist thought and practices after listening to interviews with “The Minimalists” and reading the “Mr. Money Mustache” blog. Ultimately, I decided I like driving a mid-sized SUV, and having pictures on my wall. I was not in a position to officially settle on minimalism as a practice. But I did adopt the school of thought of a would-be minimalist, and it is one I will seek to carry throughout my journey. Less is more.
There you have it. The 10 simple thought processes/steps are the culmination of 17–18 months of practice. People swim in circles wondering what the “key” to financial success is. The key is a mindset shift to “Own Your Savings Rate”. Control what you can control. If you adopt the same philosophies you will find an unlimited ceiling.
STTP. Happy Friday
Drake Breshears
“Own Your Savings Rate” is the third in a ten article series on optimization.
Graphics by Will Echols.
