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Has the shame of never having “enough” to save prevented you from saving at all?

I feel your pain. In fact, if you and I went toe to toe in the Shame Olympics, you’d be lucky to get the bronze. I’m a guaranteed gold medalist in any shame game you’d care to play.

That’s why I got so excited when I discovered that there’s a different way to calculate how well you save, aside from just looking at your checking account at the end of each month in despair. It’s called the savings rate if you’re Trent Hamm and the saving rate if you’re J.D. Roth.

It’s a method of looking at your saving as a percentage of what you earn, instead of a lump sum.

For people like me (and maybe you), who are making but meager progress in saving, the revelation of measuring by proportion instead of amount is liberating.

There’s been something so great for me about watching my modest saving habit go from just about 3 percent at the beginning to more than 5 percent now.

The Saving Rate Explained

Investopedia defines the savings-with-an-s rate this way:

“A savings rate is the amount of money, expressed as a percentage or ratio, that a person deducts from his disposable personal income to set aside as a nest egg or for retirement.”

Over at Get Rich Slowly, J.D.’s definition is implicitly kinder: While he does not come out and say it, he implies that any saving you do can count toward your saving-with-no-s rate, not just long-term saving.

Saving Shouldn’t Bum You Out

Because I am still in the shallow end of saving, easily demoralized, I need some mental tricks to get me where I want to go. So I like the broader definition of savings, not just for retirement.

Bet you do, too.

I’m still saving only about $217 a month for retirement (taken out before taxes, so I can’t get my sticky fingers on it). That might not sound shabby to you, if you’re not 55 yet and there aren’t two adults in your house plus a kid-adult in college at Super-Expensive Liberal Arts College.

But I can tell you — because the retirement calculators tell me — that’s SHABBY SAVING FOR AN OLD PERSON. I also just started saving for the short term, at all, so…I have a long way to go, and not much time.

I am still in the shallow end of saving, easily demoralized, and I need some mental tricks to get me where I want to go.

Your Saving Rate: How to Figure It Out

Rather than wallow in shame, during these critical first months of debt detox, I am counting any saving I do toward my percentage.

Why? Because money isn’t just numbers, it’s mental, even philosophical.

If I walk around with a number in my head that tells me I suck worse than I already thought I sucked? Game over. Gold medal in the Shame Olympics. Let’s go home.

So, at this point in the Debt Rinse Cycle, I’m counting all savings toward my percentage, and if you are as desperate as me, I suggest you do the same.

In fact, there are several budgeting systems that count debt payments as saving, too. So if that works for you, go on with your bad self. Here are a few types of savings to consider:

  • 401K at work
  • Reserve savings to cover shortfalls each month
  • Medium-term growth savings
  • Investment in IRA
  • Micro-investing through Acorns “round-ups” from your checking account
  • Payments toward reducing debts, if you wish to count them

Your Profit Margin for Saving: a Quick Guide

Ready for an advanced step? Find out how much you could be saving each month by calculating your profit margin:

  • Use the method recommended by J.D. Roth: count up all your expenses and subtract them from your income. (If your income is negative, it’s time for a side gig).
  • The difference is your profit.
  • Divide your profit by your income to get your profit margin. This is how much — in theory — you can save each month.

I need to use our annual income for this one, because my husband only gets his teaching stipend 9 months out of the year, and we literally have to live beyond our means 3 months a year, just covering basic bills. Yeah, that’s where we are right now. Nonetheless, I’m game to try.

And guess what?

If we take our annual income and subtract our rough annual expenses, we come up with a deficit of $4,776.

Not inspiring.

Of course, those expenses include money we’re paying toward credit cards. So that money can become savings when we nuke our debt.

But you know what? I’m gonna start small. I’m happy with my little 5.25 percent saving rate at the moment, looking to work some side gigs to grab up what I can, and maybe — just maybe — get to a better place.

The One Percent Rule for Amping Up Your Saving Rate

Next step, once you’ve saved at a certain percentage rate, is to see whether you can set aside 1 percent more of your take-home pay each month —and keep building. It’s kind of amazing what can happen if you increase your saving by just that much.

Want more ideas? Check out Elizabeth Blessing’s insights for starting and maintaining a rainy day fund.

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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