Super savers are a rare breed of person. They are unique individuals who manage to save huge sums of money. You can almost think of them as cash hoarders. Where you might be focused on upsizing your house or buying a new SUV, super savers have one goal in mind – putting money aside and investing it for their future.
The general definition of a “super saver” is someone who saves 15% or more of their income for retirement. That’s a significant amount when you consider that, according to the Economic Policy Institute, the average retirement savings for an American family is $5,000 or less.
So how do these super savers do it? How do they manage to stash away so much of their income for retirement? Here are five things that super savers do religiously. If the rest of us followed the same discipline, we could all be super savers too.
Live (Well) Below Your Means
A lot has been made of the mindset of a super saver. Google the term “super saver” and you’re likely to get as much information about their psychology as you are their spending habits. This is because super savers have a different mentality than most people. The main difference is that they are willing to sacrifice to meet their savings goals. By that, we mean that they live well below their means.
Most super savers drive only one car (even if they are a couple). That’s if they own a vehicle at all. Even if they do, you can bet the car is an older model that they are planning to drive into the ground. Super savers also tend to live in more modest houses, shop at thrift stores, and clip coupons. Anything to save a buck, which will be immediately invested for their future security.
The first step to saving money is to simply not spend as much. Sure, it sounds obvious, but it’s not as easy as it sounds. Super savers understand this concept and accept it wholly. If you’re intent on becoming a super saver, then you too will need to learn how to live below your means and invest the surplus money.
It’s not easy. It involves a lot of sacrifices and delayed gratification. No, you don’t need that new TV. Yes, you should cook dinner instead of ordering out — even after a long day. The key is to stay focused on the long-term goal of retirement rather than short-term needs and wants.
Make More Money (And Save It)
This is the age of the gig economy and the side hustle. Plenty of people now earn extra money in addition to having a regular full-time job. Whether driving for Uber, walking dogs, or testing products and writing online reviews about them, there are plenty of ways to earn extra money. The key is to save that extra money instead of using it to splurge.
Many people use the cash earned from side hustles merely to help cover their daily living expenses. Or to save up for a special expense, like a vacation or a car. However, if you’re truly living below your means like we already suggested, you could be investing 100% of your secondary income.
It doesn’t matter if it’s one dollar or $1,000. Super savers scrimp, save, hoard, and invest. They see the accumulation of money simply as more investment funds. If you really want to sock large sums of money away for retirement, then the key is to spend less and earn more. Then save the surplus. This combination will help you along the path to a very comfortable retirement. You must avoid the temptation to spend more money as you make it, whether through a career advancement or a side gig. Stay focused on the big picture.
Have A Strict Budget (And Stick To It)
Having a personal (or household) budget is extremely important. Yet, most Americans do not keep close track of their finances. A Gallup poll found that only one in three U.S. households use a monthly budget to track their income and spending. That means most of you aren’t keeping a close enough eye on your money. That’s a problem.
Tracking your income and, more importantly, your spending ensures that you don’t live beyond your means or blow cash that could be put towards savings. Talk to a super saver and you’ll find that every single dollar is accounted for. They live by strict budgets and stick to them no matter what. They know exactly how much money they have each month and where it is going – especially funds directed to savings.
In order to become a super saver yourself, you will need to begin carefully budgeting. Draw-up a smart budget, check it often, and stick with it. This is the best way to stay on track towards meeting your financial goals. If you’re unsure how to create a budget, there are numerous tools, apps, and websites available online that can help.
Know The Rules (And Take Advantage)
Studies show that many Americans are unsure how tax deferred and tax-exempt accounts such as a 401k or Roth IRA work. Not super savers, though. They know exactly how these retirement vehicles work and use them to their favor. They know precisely how much money they can contribute every year without running afoul of the Internal Revenue Service (IRS). Most importantly, they also understand how investing money through a 401k and Roth IRA can lower their taxes. You can bet that they take full advantage of any retirement plan offered by their employers too – whether a traditional defined benefit pension plan or 401k matching program.
Super savers educate themselves and know the rules. They take a vested interest in personal finance and stay current, always with an eye towards how to maximize their savings. Being opportunistic is key to bolstering your return on investment and reaching your ultimate financial goals. If you want to become a super saver, then you will need to get familiar with the retirement vehicles available to you. Learn how they work and then try to maximize their utility for both reduced taxes and higher returns.
Invest Consistently (And Never Touch The Money)
The most successful investors of all-time – folks such as Warren Buffet and Peter Lynch – preach the importance of consistent investing. Regularly investing money over a long period is the best way to accumulate a large nest egg, according to the experts. Super savers understand this.
They don’t just invest some money for retirement on rare occasions. Rather, they do it consistently. They are often putting money into a retirement account on a daily, weekly, or monthly basis. They may even contribute an annual lump sum, like a holiday bonus or tax return. This is the best way to take advantage of both dollar cost averaging (regularly buying an investment whether the price is high or low) and compound interest (interest that is applied on top of interest or reinvested interest).
Be a consistent investor and you will be surprised at how quickly your money grows. Equally important, super savers never touch their invested savings. Most super savers would rather go hungry than withdraw money from their savings which would incur tax penalties. If you are serious about becoming a super saver, the most important step is to begin investing your money consistently. Then protect that investment like your future depends on it. Because it does.