It Doesn’t Matter How Much You Make, It Matters How Much You Save


Today, I want to share with you why it doesn’t matter how much you make, but that it matters how much you save.  I could make $1 million dollars in a year, but at the end of the year, if I’ve spent it all, it doesn’t matter. It matters so much more how much you save, and I’m sure you will be convinced by the end of this post.

Saver Sally vs. Spender Sam

I want to share with you a story. I have 2 friends, Saver Sally, and Spender Sam.

Saver Sally makes $60,000 a year at her corporate job. She has a husband and a family, lives in a nice neighborhood, and drives a dependable car. She saves $10,000 a year in her retirement accounts.

Spender Sam makes $150,000 a year through his entrepreneurial efforts. He’s single and loves going to the bar to show off his most recent Rolex. Driving his new BMW to work, and hitting the clubs each weekend, he believes he will be able to save once he cashes out of his equity holdings, and only puts $1,000 a year towards his retirement.

Who is Wealthier: Saver Sally or Spender Sam?

Compound interest 8th wonderIf you saw Sally and Sam at the same time, you’d guess Sam was the wealthier one. With a nice car and great taste in the way he dresses, he has to be the wealthier one… right?


After one year, Sally has $9,000 more than Sam. But, Sam has a nice Rolex and a sweet BMW!

Yes, that is true, but does it really matter? With $150,000 in income, that’s great, and I’m sure he is having a lot of fun. What happens if his business goes belly up? That BMW won’t feel as nice to ride in without his paychecks rolling in!

The Power of Compounding

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein

Compound interest is an multiplier of wealth. Let’s see the impact if Sally keeps saving $10,000 a year, and Sam saves only $1,000 a year. In 30 years, the results are shocking. Sally will be nearly $900,000 richer than Sam. Take a look at the calculations below:

how much you save matters

Still not convinced? Who do you think is wealthier now?

Practicing What I Preach – How I Saved 48% of My Income in 2017

I track every dollar I earn and spend. Last year, I made just over $107,000, I saved roughly $51,000, I spent about 33,000 and paid roughly 23,000 in taxes.

While my taxes will be adjusted up a little bit because of my withholding’s on my W2, I can safely say my pre-tax savings rate was roughly 61% and post-tax savings rate was roughly 48%.

Of the $51,000 saved, I was able to put $36,000 of that towards retirement and various other investments (business and taxable account). $18,000 of that went towards paying down various debts of mine (my mortgage). I had a decrease of cash by $3,000 throughout the year.

Breaking Down My Savings into 3 Buckets: Cash Savings, Debt Reduction and Investments

I consider there to be 3 ways to save: reducing my debt, putting money into a checking or savings account, and investing in my retirement accounts, investing in my taxable account, and my business.

Last year, I reduced my mortgage by a little nearly $18,000. This was above and beyond the roughly $6,000 I would have eliminated through the monthly principal pay down. Last February, I thought it would be a great idea to pay an extra $25,000 of my mortgage and get rid of PMI. After starting a business, and putting my money to work elsewhere, I’ve put this goal to the side. I have a 2.625% interest rate, and while $144 in private mortgage insurance adds up, I’m still about $13,000 shy of getting rid of private mortgage insurance. We will see if I get rid of it this year.

Putting Money to Work For the Future

Last year, I ended up putting about $36,000 to work for the future through my investments in my retirement, business, and taxable account.

I ended up doing my Roth IRA contributions in full, and as well as contributing a decent amount to my 401k.

With overall savings of nearly 50% of my income, I’m very pleased with my performance. Obviously, this can be improved, and I’m going to look to save at least 40% of my income in this year. I’ve already maxed out my Roth IRA for this year, and will be looking to max out my 401k. We will see if I can get there!

My Tips for You to Increase Your Savings

There are 3 tips I have for you to increase your savings:

  1. Look at your expenses and identify any areas of weakness you could work on
  2. If you are employed, set up your retirement account and increase your contribution
    • At the end of last year, I was saving roughly 6% of my pre-tax income in my 401k. Bumping it up to 20% only resulted in a decrease of cash to me of $300. I was able to up my investment amount by over $500, while only losing out on $300 in cash, for a net gain of $200 in the long run (ignoring taxes in 34 years).
    • Try bumping your contribution up by 1%. I know you can do it.
  3. Look for Unique Ways to Save Money Every Day
    • There are many different ways you can save money just by being opportunistic or doing something yourself. For example, if you are planning a birthday party, there are many ways you could save money. One possibility is filling helium balloons yourself. If you have a lot of balloons, you could save a decent amount of money.
    • Just by considering different options, you could save a bunch of money!
  4. Destroy Your Debt!
    • Debt is typically the biggest deterrent of saving cold hard cash. That being said, I consider debt reduction to be savings, even if it’s technically paying back your lenders for previous purchases.
    • Use your identified savings from step 1 to up your debt payment over time.

Two final resources would be to read my article for other ideas, 9 Ways to Save Thousands Each Year. There are so many ways to save money. Hopefully this article provides you some ideas to implement in your life.

It Doesn’t Matter How Much You Make, It Matters How Much You Save

At the end of the day, end of the year, the true winners are the savers, not the spenders.

I hope this article has inspired you to save more. It’s very possible to improve your financial situation through income creation, but also expense reduction and paying down debt.

It doesn’t matter how much you make. It matters how much you save.

Readers: how much were you able to save last year? Do you have any savings goals? Do you have any super saving tips?