Increasing Your Personal Savings Rate | Savings

by ChrisBlanchet

One of the ways to determine how much you can repay toward your debt is to consider your Personal Savings Rate, or PSR. The way to figure out your PSR is to take a look at what you do not consume at the end of the month and divide it into your personal income. The resulting percentage reflects your Personal Savings Rate. In the United States, the average PSR typically hovers around the 4% mark, but given the current economic troubles has reached as high as 6% recently. By increasing your PSR, you can not only weather extended periods of economic strain, but you are better positioned to repay consumer debt.

When it comes to increasing our PSR percentage, there are several things we can do. For example, spending only 80% of what we normally spend on discretionary living expenses (that means spending just $800 for every $1,000 we spend now), we will not only become better money managers, but we will manage to save enough to lead to extravagant lifestyle in retirement. Here are some more steps that we can take to increase our PSR:

Start By Making a Focused Effort

An obvious starting point would be to make a focused effort to set aside money in an actual savings account. The easiest way to find success with this method is start with a small amount (say $50 of every pay check), and gradually increase the amount as you adjust to your new budget. As well, the act of establishing a savings plan will allow you to become better off financially.

Create a Budget

Chalk down a budget. Don't go too stringent at first. Allow room for unexpected expenses so that you are ready for them when they arrive. Instead cut down on discretionary spending arenas like entertainment and going out to restaurants. Maintaining a budget that helps you save up to 20% of your monthly expenditure would be your first step towards increasing your personal savings rate.

It Takes Time, Be Patience

Be disciplined all along. This is not something that you have to do for a month or two and then revert to your normal spending habits. Keep a long-term perspective in mind to gain maximum benefits.

Remember Patience

Remember that long-term goals often require the benefits of time before you start seeing tangible results. As such, you will need to practice patience. When it comes to improving your personal savings, remember to be patient and the results will present themselves seemingly suddenly. Patience is key.

Don't Forget Flexibility

Keep your flexible and open spending habits to the minimum. Now that you are on a budget, you cannot go out and buy the latest products in the market especially if you do not need them.

Monitor Your Progress

You will also want to track your progress as you go. This could be as simple as matching your month-end balances to what you planned in the initial budgeting process, or it could involve tracking every cent that passes through your wallet.

Make Adjustments

As a final note, you will want to allow flexibility in your plan. This essential ingredient is often lacking in budgeting plans and is one of the leading reasons why most of them fail. So, if you find yourself behind plan after a month, a quarter, or even a year, don't sweat it. Incorporate flexibility in your plan and make the necessary adjustments to get back on track or change the budget altogether.

In conclusion, increasing your personal savings rate translates into longer-term financial independence. When financial crises strike next, you will be better equipped to handle them. Furthermore, establishing a plan early will reward you with greater financial control down the road, and when you reap the rewards in the future, you will wonder how you ever survived any other way.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

With more than 16 years in the financial services industry, Chris Blanchet has helped thousands of people improve their financial lives. He is the author of Help Fix My Finances, a personal finance program of the same name. He maintains a Debt Free Blog at How to Repay Deb.com.