Save By Percentage, Not Dollar Amount, To Avoid Lifestyle Inflation

Save By Percentage, Not Dollar Amount, To Avoid Lifestyle Inflation

We’ve told you before it’s a good idea to treat your savings like a bill. You can do this with a 401(k) by automatically saving a portion of your paycheck on payday. And if you have the option of automatically contributing a dollar amount or a percentage, go with a percentage.

Photo by pefertig

Over at GOBankingRates, Charlie Shipman of Blue Keel Financial Planning recommends automatically saving a percentage of your paycheck, rather than a dollar amount, to your 401(k). This way, when you get a raise, your retirement contribution automatically increases.

It’s a simple tip, but a useful one. It’s all too easy to spend your raise on things you don’t need at the expense of your savings goals, which is lifestyle inflation in a nutshell. With percentage-based savings, your lifestyle inflates proportionally to your retirement savings.

They offer more savings tips in the full post, so be sure to check it out at the link below.

The Procrastinator’s Guide to Retiring Rich [GOBankingRates]

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