How to Keep More of Your Income

Align your savings habits with your spending habits

So, in personal finance, the right amount of savings is when it feels like it’s a little too much. It should feel excessive; it should make you wince a little. - Morgan Housel

Ever get to the end of the year, collect your W2s and 1099s and ask yourself, “where the f*** did all of my money go?”

It’s demoralizing. Taxes certainly play a large role in lowering your take home pay but the gap between the amount you “earned” and what’s left can be significant.

Now, 99% of people will just complain that they don’t make enough or how much more expensive everything has become.

Valid points. But, I don’t play that game.

Instead of focusing on what we can’t control, it’s time to shift the focus to where we can take action— our savings methodology.

If you’re struggling to save consistently or want to keep more of your income, then you need to line up your savings habits with your spending habits.

Think about how often you spend money. Every day, right?

Now, how often are you saving?

For most, it’s far less frequent. Most people only save when it’s forced, like through a 401(k) or other retirement plans at work—where money is automatically taken out before you get a chance to spend it.

That is one reason why the number of 401k millionaires is hitting new highs:

It’s crazy what assets can do when you just let them compound…

People often sit on large cash balances with the intention of investing or saving. But when the moment comes to commit, they hesitate—thinking of all the other expenses they could use that money for.

That’s why I’m a huge proponent of establishing systematic savings.

Once you begin saving 10-20% of your income, you are building good habits. Even if you can’t manage that high of a savings rate to start, you need to start somewhere.

The important part is consistency. It’s much easier for someone to put away $200 a week rather than commit a lump sum of say $10,000 at once.

Recently receive a raise? Great, increase your savings accordingly.

The beauty of a high savings rate is twofold: you learn to live on less even as you build up your net worth.

After you’ve saved and paid your bills, whatever is left I want you to spend it ruthlessly.

Jocko Willink wrote his book, “Discipline Equal Freedom”, which explains how discipline applies to all areas of life.

Once you’ve become disciplined by saving regularly, this will allow you to enjoy your money without the constant fear of overspending.

It’s easy to get discouraged with your savings.

But if you are able to establish systematic savings habits, align your savings with your spending, and prioritize consistent action over haphazard decisions, you’ll be able to keep more of your income and set yourself up for long-term success and more peace of mind.

Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

All indices are unmanaged and may not be invested into directly.

All investing includes risks, including fluctuating prices and loss of principal.