“I’m scrounging dollars to fill my gas tank. I don’t make enough money to save. At the end of the month, there’s nothing left.”
If this feels like you, gear up for a radical shift that will change your life.
Last month I announced the One Percent Challenge, a quest for Afford Anything Rebels that can turbocharge your financial life.
The concept is simple: save one percent more than usual. Regardless of how much you’re currently stashing, boost this number by one extra percent.
How much is that? Picture your monthly income and move the decimal point two spaces left.
| If You Earn | One Percent |
|---|---|
| $2000/mo | $20 |
| $4000/mo | $40 |
| $6000/mo | $60 |
| $8000/mo | $80 |
| $10000/mo | $100 |
Repeat this every month. By the end of the year, you’ll boost your savings by an extra 12 percent.
Fail-Proof Saving Tips
To fuel the rebellion and help you turbocharge your savings, I’ve created an ultra-awesome One Percent Challenge Facebook Group where rebels can swap stories, tips and ideas about how to spur your savings. Join the party!
It’s filled with savings tips. Some are actionable, some motivational, and some provide a new mental framework to understand money.
Here are some tidbits I hope you’ll enjoy:
Here’s a “quick win”:
Most grocery stores will show how much money you “saved” by having a loyalty card and/or buying discounted products.
But it’s not savings until you save it.
Make a note of the savings balance printed on your receipt. Move that money into a savings account. (Transfer this money instantly through your phone or by sticking cash in an envelope.)
This tactic helps you save your savings — rather than buying an impulse latte.
Want motivation to save? Figure out how little you’re making.
The results might be sobering. (Literally. You can’t afford booze anymore.)
Here’s how:
Annual Income: Duh. This is printed on your paystub, unless you’re an entrepreneur, successful side hustler or passive income ninja. In that case, use last year’s tax figures.
For bonus points, figure out your after-tax income. That’s the only income that matters, anyway.
Annual Costs: Subtract work-related costs. If you’re a 9-to-5-er, these include:
- Commuting: Gasoline, maintenance, wear-and-tear, or if you’re a big-city-slicker, bus/train/subway passes
- Fancy Clothes: Suits, ties, belts, heels, wingtip loafers or trophy handbags that you’re expected to carry to the boardroom, and dry cleaning for the whole shebang
- Convenience Foods: No matter how carefully you plan, you’ll still grab the occasional lunch/coffee on-the-go
- Daycare/Childcare: $$$$
- Fast Travel: How much extra do you spend on expedient vacations because you don’t have the luxury to enjoy slow travel? #HiddenCostofWorking
If you’re an entrepreneur you’ll have a weird gamut of other business expenses, which I know you’re judiciously tracking through your bookkeeping software. Right? (Ahem.)
Subtract B from A, and you’re left with your net income for the year. Yes, even traditional employees experience a gap between “gross” and “net” earnings. This gap can be substantial.
Divide this by the number of hours you spend on all work-related activities, including:
- Commuting
- Ironing your shirts
- Hauling your damn suits to the dry cleaners again
- Suffering through an interminable dinner with your boss
- Traveling to that conference that zapped 3 days from you life
Your work-related hours might look like:
- Work: 40 hrs/week, 50 weeks/year
- Commute: 30 min/day, 5 days/week, 50 weeks/year
- Prep Time: Same as commute
What’s your “real” hourly income? Here’s an example:
Income: $52,250 (U.S. median household income in 2013, according to the Census Bureau. We’ll pretend this is after-tax for the sake of example.)
Work Expenses: $5,000 (gasoline, vehicle wear-and-tear, lunches out, work clothes, childcare)
Net Income: $47,250 per year
Hours: 2,250 hrs/year
Net Income/Hours = $21 per hour
Your “real” hourly rate is a sharp weapon in your Rebel arsenal. It helps you resist the tempting lure of an impulse buy that’s “only $20, what’s the big deal?”
You’ll know it’s a “big deal” because it represents an hour of your life.
This leads to the next tidbit:
If you’re tempted to drop $1,000 on a big-ticket item, like a new sound system or a slick new TV, remind yourself of how much of your life that represents. If your “real” hourly rate comes to $20/hr, that upgrade represents two weeks of your life.
By the way, I know I’m harping on this trading-time-for-money equation. And while it might seem like the takeaway lesson is “spend less,” that’s too simplistic.
First, I don’t object to spending — I object to wasting. Spend lavishly. Spend your time and money on high-value projects, whether that’s traveling, hanging out with your friends and family, or working on a cool new business venture.
Don’t waste money on useless plastic junk, any more than you should waste time on low-value unproductive tasks that won’t get you closer to your wealth and freedom goals.
Second, look for the sustainable escape:
Break the time-for-money cycle. Create passive income through rental properties, stock investments, royalties and hands-off businesses, so you can stop selling off the hours of your life.
If there’s one cornerstone value that anchors the Rebellion, it’s that freedom equals shattering the time-for-money hamster wheel. I’ll repeat this credo for as long as the internet will allow me.
So … The One Percent Challenge?
Back to the challenge at hand —
As you embark on the One Percent Challenge, don’t force yourself to suffer by giving up the things you love.
If you LOVE dining out every Friday night, embrace it.
If you feel alive every time you drive to the beach to surf and paddleboard, stay beach-bound. Don’t cut corners depriving yourself from that tank of fuel.
If happiness comes from travel or snowboarding or hot yoga or Crossfit or your annual family trip to the water park, don’t cut these expenses.
Cut the crap.
- Cut the excessive bank fees.
- Cut the excessive auto/car/home/health/life insurance premiums.
- Cut high trading costs from your investments.
- Cut high expense ratios from your mutual funds.
- Cut high taxes legally by learning tax law and capitalizing on every exemption you qualify for. (This is one of the best uses of your time — FAR better than clipping coupons or mowing your lawn.)
- Cut the unauthorized charges that the phone/cable/internet company mysteriously tacks onto your bill.
- Refinance your mortgage if it makes sense.
None of these sacrifice your quality of life. But taken together, they could save one percent of your income (or more) every month.
***
Don’t forget to join the uber-awesome One Percent Challenge Facebook Group!
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Love this whole idea. I’m all about conscious spending and I actually consider every dollar I spend to be a debit against my future.
When I view purchases in that framework, I find that it’s vastly easier to not buy things. I’ve also taken myself off of auto-purchase–instead of automatically replacing something that breaks or runs out, I wait a week and see how life is without it. More often than not, I never actually end up buying it. All that to say, I think this challenge is awesome!
I like the “fast travel” expense. That’s not something I ever considered when I looked at my “hidden” work-related expenses, and it is totally true. We use domestic flights for every country we have been on vacation to since graduating university, simply because cheap travel is slow.
Thanks for sharing.
Paula,
This one percent idea of yours works great in reverse too. I already pay more than the minimum on my credit card debt. I know I shouldn’t have ANY credit card debt, so no need to chastise me, lol. In addition to upping my savings by one percent a month, I’m going to increase my payments by at least one percent each month. Just seems like a useful strategy to me. Thought I’d share.
That’s awesome!! That’s a fantastic way to pay off your debt!! I love it. 🙂
Cutting out the crap is a good mantra all by itself. I do really like the time it takes of working to afford something concept. People just don’t see that $1,000 big screen as 2 weeks of wages. If you want o retire early, you have to see it through a different lens.
Great post Paula. I’ve always loved to work out how much things cost per hour of work, such a great barometer of want vs need.
Just on the fast travel versus slow travel – my sister in law took her family on vacation to Spain last year for a fortnight. It cost her 6000euros ($6950USD). On the flipside we (me, husband and toddler) have just moved to the same area in Spain and rented a local apartment for four months. We have budgeted our costs to be 1400euro per month – so we get well over 4 months for less than what they spent on a 2 week vacation.
Love love love this blog! been reading for a while, and love your attitude and advice as well. Keep it up, and blog more please! 😉
I wanted to get your thoughts on one of your statements about saving 1% per month and “Repeat this every month. By the end of the year, you’ll boost your savings by an extra 12 percent.”
I think it’s easy for people to confuse this and think that they saved 12% this year. If you save 1% per month, after one year, you will still have saved only 1% (1% of your monthly income, and 1% of your annual income).
…Unless my math is off. Ha!
In any event, I love your writing style and humor. I would give you more compliments, but I need the time to go clip some coupons. Have a great weekend!
@Mark — Thank you so much for the compliment!!
The idea is to increase your savings by an extra 1 percent every month. Let’s imagine that you make $4,000 per month, so 1 percent of your income is $40.
Month 1: Save $40
Month 2: Save $40 + $40 = $80
Month 3: Save $40 + $40 + $40 = $120
… repeat for 12 months.
Boosting your savings by an extra 12 percent in a single month can be a huge shock to the system. But dipping your toes into the water gradually can help you get accustomed to it.
I came up with the idea after reading advice on Zen Habits about exercise. The author, Leo Babuta, advised that you start with one push-up. That’s it. Just one single push-up. It takes a few seconds. Everyone has the time for that.
Do it everyday, until it becomes a habit.
The following week, do two push-ups. The week after, do three push-ups. And so forth. After a year, you’re doing 52 push-ups everyday.
I loved that advice — and that method for developing habits — so I started applying it to all facets of my life, including saving money (one percent at a time, incrementally, until you reach 12 percent.)
Thanks for writing! I’m glad I had the chance to clarify that for anyone else who might have also been thinking the same thing. Have a great weekend!!
Another strategy to employ is financial punishment. Yesterday, I almost gave a co-worker $2.50 so she could buy me a cookie when she went on her coffee run. It didn’t seem like a big deal until I reminded myself that we’re broke, in debt and have very little in savings. Right then I promised myself that with every wasteful purchase I made I would also have to put $10 towards a goal we are not yet ready to fund. So, instead of rewarding my cookie habit with $10 extra to debt re-payment or retirement, I will have to skip steps 1-2-3 and put that $10 in our house fund – and never touch it.
Paula, I’m a new fan and love your work! I was introduced to you by the Mad Fientist’s podcast. Keep spreading your wisdom girl!
Brilliant article! Wish I’d discovered your site years ago. I just had a pile of expenses, so can’t go for 1% extra for the next couple of months, but made it a firm goal to increase by 2% before the end of the year.
your blog has increase my inspiration for saving money but first i have to earn more that much i still earn in a month but your blog is really helpful and informative for everyone.
Hi Paula love this challenge on helping us save more. I am saving 30% right now for investing only and am ramping up my other savings accounts to 12% with your cool strategy! One thing I would like to note is that I like to save my percentage from my GROSS income so I feel like am paying myself first b4 the tax man gets it. I think it a cool way to save even more and kinda change your mind set like Robert Kiyosaki says.
Very uniue and original idea. I like this one percent challenge. It seems to me that it is a eye-opener to how much someone can save, and how to get in the habit of saving.
Just found this article, love the idea of this challenge! Really shows you how saving a little every month will add up to a substantial amount!
Love this approach to savings. In the rut of daily life, consciously spending and saving can sometimes come across as a challenge. Taking it in bite-sized chunks of 1% increase is a fantastic way to start.