Increase Savings Rate By 1%

Jim Blankenship at Getting Your Financial Ducks In A Row has asked financial bloggers to encourage Americans to increase their savings rate by 1%.  This is important because the nation faces a looming retirement crisis.  Simply, Americans in the red zone of retirement, 10 - 15 years away, have inadequate savings to support themselves when they exit the work force.

There are numerous "tricks" one can use to increase savings that even the frugally challenged can easily adopt, and some of these are detailed by Jim and his contributors.  The one I offer may be a bit challenging; but, if you try it for a while, it will very likely become a habit, and your mid-60ish self one day will surely appreciate your meeting the challenge.

My Ideal Client

Recently I had lunch with an ideal client at the *Eichenkranz restaurant in Baltimore.  Ed insisted on paying.  But this isn't why he is an ideal client.  The reason is that when the check came, he pulled out a small, spiral notebook along with his glasses from his shirt pocket and carefully scanned the bill.  He then picked up a pen and carefully entered the amount in his notebook.

Surely I have to go no further to convince you that Ed has a really good handle on where his money goes.  This goes a long way towards making him an ideal client.  When we sit down and talk about spending and saving, Ed has the figures at hand and I know they are reliable.

I know all of this is old school, and most people today can more easily do all this with tablets and smart phones and whatnot.  Whatever works is fine.  Knowing where your money goes is the crucial first step in managing finances.

The Challenge

But how can this help increase saving and where is the challenge?  Simply, do the following for 30 days:  when you eat out, note the cost of soft drinks and record it in a notebook, like Ed, but order water.  In other words, record how much you are saving each time you eat out by not ordering a Coke or a Pepsi.

I know - this is a huge challenge for most people.  If, like many Americans, you eat out often and with your family, you'll find you save a decent amount; and you'll be surprised at how much you spend on soft drinks - and your dentist will commend you!

You might consider giving the kids the choice between a soft drink and receiving $1 in spending money.

All is for naught, of course, unless you bank the amount saved each month!  It isn't money for spending elsewhere!

Admittedly this isn't easy.  And, 30 days is obviously arbitrary.  To me, it is long enough to make it a challenge and get most people to turn the behavior into a habit.

Addendum

*If you are in Baltimore and interested in the ethnic experience along with really good, reasonably priced food, visit the Eichenkranz .  The drive there will take you through an area that will give you a strong flavor of industrial America.