The basic equation of financial independence is quite simple. Earn more than you spend and invest the difference. With this in mind you can decide what percentages work for you. Are you going to invest 30% of your income? 50%? Personally, I aim to invest as much as possible, because that is what makes the most difference in being financially free.

Regardless of your how much money you make, if you want to be financially independent your goal should be to increase the gap between earning and spending. It should not be only spending less or earning more, but both.

Here I share with you a few ways to shift your thinking to increase your savings rate. These are some perspectives to help you increase the gap, but keep in mind that they don’t address the biggest needle movers – earning more and controlling your everyday expenses.

This is something that works really well. When comparing products to purchase, don’t look simply at the dollar amount, but consider percentages. If one item costs $1.00 and another one costs $1.10, the difference is not only $0.10, but it is 10%.

If you can buy something 10% cheaper, this automatically means 10% more money in your pocket. Are you getting 10% returns on any of your investments? Thinking in percentages can have a big impact on your choices and make a big difference in your savings.

  Know you savings rate and increase it by 1%

How much do you save and invest each month? Is it $100.00? Maybe $1000? Know your numbers and increase it by 1%.

1% is not much, and it shouldn’t be too hard to free up this percentage to invest. Do you earn $1000? It shouldn’t be hard to save $10. 1% is not a negligible amount, but it is still low enough to repurpose in your budget.

The purpose is to challenge yourself and keep building your savings habit. Once that is easy and done, you can work on the next 1%.

If you are like most people you probably have a lot of “stuff” lying around the house. Remember that “stuff” is money. You paid for them (and now they are lying around, were they good purchases?) and you can convert them back into cash by selling them.

Look through your belongings and sell what you don’t need anymore. Money sitting at home in the form of “stuff” that you don’t use will be much better used if invested.

Of course “stuff” depreciates and the cash you will receive will reflect this. A good way to reduce depreciation is to buy items used in the first place, as they won’t depreciate as much as when you buy new.

Along the same lines as thinking in percentages, this strategy is to use 1% less. I’m not advocating to cut down on basic needs, what I am doing is suggesting you make an effort to reduce waste. This is good for your pocket and for the environment as well.

Can you make you shower 1% quicker? Can you use you heater 1% less? Can you buy 1% less? If you use something 1% less, you are automatically saving 1% extra. You can build it up over time. If you use 50% less of something, you are also saving an extra 50%.

Just like increasing your savings by 1%, the goal here is to challenge yourself and build the habit of reducing waste. You might notice that there are a lot of things you can reduce that won’t make much of a difference on your lifestyle and happiness.

I hope you enjoyed these strategies. Remember, these things will help you increase the gap. They don’t replace working on increasing your income and controlling your expenses.

What else do you do increase the gap? Let me know in the comments.

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