A simple but powerful mindset shift has personally changed how I view money on a day-to-day basis. I have been able to save more money and make better investments because of it. Whenever I compare two products or two prices, I always think about the percentage differences before the dollar amount. I have been able to make more informed decisions and save money.
It is easier to assess the actual savings or growth between two dollar amounts if you look at the percentage difference. Organizations can make more informed decisions by using the percentage difference. The 1% early retirement strategy is based on thinking in terms of percentages. If you want to retire early, your savings rate should be at least 50%.
The quicker you can retire, the higher your investing percentage is. By regularly contributing to your retirement fund, you can take advantage of compounding interest over time, which will help you get closer to achieving financial independence. Increasing your investing/savings rate by 1% can help you retire up to 2 years earlier. How quickly you reach your financial goals can be affected by starting small and taking consistent steps to invest or save more of your income.
If you save 5% more when you are young, you can retire up to 10 years earlier. You can accumulate more wealth and retire sooner if you save more money.
Is it possible to save 5% more to retire or reach financial independence 10 years earlier? Saving 5% more can help you retire or reach financial independence 10 years earlier, and it can also give you greater financial security in the future.
The Impact of 1% Increases
I have become a spreadsheet and calculator nerd over the past few years. I went so far as to create my own spreadsheets and formulas to maximize efficiency. You can use personal finance to run different saving and investing scenarios that will help you make better financial decisions. Taking the time to research and learn more about personal finance is the best way to understand it.
The impact of saving 1% and escalating it every 3 months for someone making $50,000, $100,000 and $200,000 is shown. By the end of the first year, regardless of salary, an individual could be saving 9% of their annual salary. If you start at 5% of your income and follow a version of the 1% early retirement strategy, you will be saving 25% of your income in 5 years. Financial independence and reaching retirement goals can be achieved with this tool.
You can retire earlier if you push it more. Over the course of 20 years, the saving rate peaked at 65%. The 1% increase every 3 months really adds up. Your budget can be impacted by small increases over time.
I built a calculator that you can use to run your own scenarios. It is easy to use and will help you quickly determine the best course of action.
| Year | Savings Rate | Total Savings | Total Savings (with returns) |
|---|---|---|---|
| 0 | 15 % | $ 8,250.00 | $ 8,250.00 |
| 1 | 16 % | $ 16,250.00 | $ 17,875.00 |
| 2 | 17 % | $ 26,375.00 | $ 29,012.50 |
| 3 | 18 % | $ 35,375.00 | $ 38,912.50 |
| 4 | 19 % | $ 44,875.00 | $ 49,362.50 |
| 5 | 20 % | $ 54,875.00 | $ 60,362.50 |
| 6 | 21 % | $ 65,375.00 | $ 71,912.50 |
| 7 | 22 % | $ 76,375.00 | $ 84,012.50 |
| 8 | 23 % | $ 87,875.00 | $ 96,662.50 |
| 9 | 24 % | $ 99,875.00 | $ 109,862.50 |
| 10 | 25 % | $ 112,375.00 | $ 123,612.50 |
| 11 | 26 % | $ 125,375.00 | $ 137,912.50 |
| 12 | 27 % | $ 138,875.00 | $ 152,762.50 |
| 13 | 28 % | $ 152,875.00 | $ 168,162.50 |
| 14 | 29 % | $ 167,375.00 | $ 184,112.50 |
| 15 | 30 % | $ 182,375.00 | $ 200,612.50 |
| 16 | 31 % | $ 197,875.00 | $ 217,662.50 |
| 17 | 32 % | $ 213,875.00 | $ 235,262.50 |
| 18 | 33 % | $ 230,375.00 | $ 253,412.50 |
| 19 | 34 % | $ 247,375.00 | $ 272,112.50 |
| 20 | 35 % | $ 264,875.00 | $ 291,362.50 |
The “Percentage” Mindset Shift
Thinking about money as a percentage, instead of a dollar amount, will help you save more, make more money, and retire earlier.
Most people aren’t saving anything or aren’t saving enough. The popular belief is that if you save 10% of your income for retirement you will be fine. It is important to have a retirement plan that includes more than just saving, such as an investment strategy and an understanding of the potential risks involved. Saving 5-10% per year of a $50,000 salary will not be enough to retire given the increase of inflation.
Assuming an 8% contribution rate and an average 6% compounding interest per year, you would have $379,479, but you would only have $180,000 of today’s purchasing power. If you want to learn more check out my post on how much money you should save.
A lot of readers say they don’t have enough money to start saving for retirement because they don’t make enough money. When you don’t have a lot of money, there are many low-cost options that can help you start investing. While there are many early retirement calculators and strategies I recommend, including the early retirement strategy, the 1% saving strategy is the easiest one to implement due to the simple fact that you can automate it and most people don’t feel any impact reducing their spending or increasing their savings by 1%.
The 1% Savings Strategy
The 1% strategy uses the mindset shift of thinking about money in percentages to help you save more money, make better purchase decisions, and make more money. By using the 1% strategy, you can take control of your finances and build a strong financial foundation for yourself. You can shift your mindset to save and make more money by following these guidelines. You will be taking an important step towards financial freedom and security by committing to these guidelines.
1. Start Where You Are Comfortable
Whatever you are comfortable with, is the best amount to save. You can increase your savings over time if you start small. It shouldn’t take away from your day-to-day life, but you should push yourself because the more 1% increases you have the faster you can retire. It was 5% of my income when I started saving. By making small lifestyle changes, I was able to save more than 5% of my income.
When you get your paycheck, I recommend saving immediately. Setting aside money for retirement or other long-term savings goals is a good idea. Saving first will allow you to spend the rest of your paycheck without guilt. By putting away a certain amount each month, you can build a substantial savings cushion that will help you feel secure and in control of your finances. It takes away some of the anxiety around money when you know you have saved your target amount. It can give you peace of mind knowing that you have achieved your financial goals.
2. Increase Your Investing Rate in 1% Increments
I recommend you increase your savings percentage by 1% every 3-4 months until you hit an investing rate of 25%+), no matter what percentage of your income or side hustle money you are saving. You can either use your investment accounts or automate it. If you would like, you can increase your savings rate in percentage intervals. It’s easy to change your savings rate as your finances change. You can escalate your contributions manually, but doing it automatically is easier and you won’t even notice the difference in your paycheck. You can rest easy knowing that your savings are growing over time. You will be saving 25% of your income in 5 years if you start with a 5% savings rate. You will be able to reach your financial goals faster if you save more of your income. This is the easiest way to increase your savings rate. The higher your savings rate, the more money you will have in the future. If you start to feel it, scale back 1% and wait 6 months to try another escalation. It’s important to go at a pace that works for you and your body; listen to what it tells you and adjust accordingly.
If you get a salary increase, you should increase your savings percentage so that your take home pay is the same pre-bonus. You can use the bonus for a special purchase or treat if your savings continue to grow. You can reach early retirement if you invest your salary increases and bonuses. If you invest small amounts of money each month and build up slowly as your income increases, you will be able to take advantage of compounding interest.
3. Shopping or Product Comparison by Percentage
You will save more when you calculate savings as a percentage.
If you go to the grocery store, convenience store, or any store where a product is on sale, calculate the sale price as a percentage and don’t just rely on the dollar amount. The percentage difference between the price and the product’s price is calculated when you compare multiple products. It’s important to understand the pros and cons of each product before making a decision.
The store brand of mouthwash is $3 while the name brand is $4. The quality of the product could be vastly different because of the $1 difference in price. It might not seem like much, but a $1 difference in price is a 25% savings. Changes in pricing can have a big impact on your budget. You can make a 25% return on your money if you buy the store brand. It’s a great way to save money. That’s insane. It is easier to make a value judgment when you focus on the percentage difference between two products. This can help you determine which product is the best value for your money. For me personally, a product needs to be A It’s better for me to pay 25% more. It is not worth it for most basic products. It’s important to know your audience and understand what they need in order to create a successful product. Correct, mouthwash is mouthwash. There are many different types of mouthwash, each with its own benefits and ingredients.
I use the same strategy when I am trying to save money eating out and evaluate a restaurant’s menu to determine whether visiting a nicer restaurant is worth the often insane premium. If I were to buy the same cut of meat at the grocery store, it would cost me almost 400% more. I still go because of the great atmosphere and quality of service even though I’m not sure it’s worth the extra cost. I have definitely been making more steaks at home since I did that calculation. I took the time to do the math and figure out how much money I could save by buying in bulk. 400% is hard to swallow, but sometimes it is worth it. It’s important to think about the cost-benefit of the increase.
It is like making a percentage return on your money when you compare purchase options. Don’t spend it is the easiest way to make money. When it comes to making money, the less you spend, the more you have in your pocket. In this case, 25% more for the brand name product is a better value than the percentage difference between the two products. It’s important to compare the cost and quality of each product before making a decision. 25% is a ton, but $1 is just a $1. It may not seem like much, but it matters when it comes to savings.
4. Make More Money with Percentages
When you are figuring out how to make more money, focusing on percentages and linking your compensation to increased revenue, as opposed to a flat fee or salary, can make you a ton more money. If you want to maximize your earnings potential, you can explore additional sources of income such as passive streams, investments, or starting a business. The more revenue my digital marketing campaigns drive for clients, the more money I make.
Consultants and employees leave money on the table. There are significant money-making opportunities when you negotiate what’s known as “revenue sharing” or a “revenue compensation deal.” The more money you make, the more money you make. The better the outcome for your company, the more money you make. The limit is the sky. Anything is possible with hard work and dedication.
I made $200,000 in 6 months linking my side hustle fee to revenue
I was able to directly attribute my campaigns to sales because I worked with a company that sold headsets and I set up and managed campaigns for them. I monitored the performance of my campaigns to make sure they met their goals. The more headsets I sold, the more money I made for myself and the client. The deal allowed me to get paid for my hard work and the client to maximize their sales, which was a win-win for everyone. I made $200,000 in 6 months by working on the campaigns. It was a win-win.
Many consultants or employees don’t consider this option, either because they don’t know it exists, they are afraid of the risk of not driving revenue, or they think their client won’t buy it. If you aren’t able to drive revenue, then you probably won’t be providing much value to your client. If you want to be successful in the business, you need to understand how to drive revenue for your client. The rewards come from taking the risk. The potential rewards are far greater if you take the leap of faith. It is a no-brainer for your client to do it since they only pay you when they make money. It’s a low-risk option for any business looking to increase profits. It doesn’t hurt to ask. You can move on if you get a no.
Getting a raise
The same logic applies when you are figuring out how to get a raise, since your boss is unlikely to give you a salary increase over 5-20% of your current salary, no matter how well you make your case – unless of course, like the above example, you are able to attribute revenue increases to your work.
If you want to make $80,000, it will be difficult to get a raise larger than $10,000 unless you have made a significant impact on the bottom line. If you want to make more money at your current company, it might take a while. If you want to make more money in the short-term, you might need to look for a new job with a higher salary. Equity, more time off, or additional benefits are possibilities for other forms of compensation. It’s important to consider what type of compensation is best for both employees and employers. There is a monetary value to any additional benefit. Knowing the monetary value of any benefit can help you make an informed decision.
$50,000 (with 1% escalations every 3 months, peaking at 65% savings rate) = $474,199.66 saved!
$100,000 (with 1% escalations every 3 months, peaking at 65% savings rate) = $948,399 saved!
$200,000 (with 1% escalations every 3 months, peaking at 65% savings rate) = $1,896,798 saved!
How much do you save?
