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Mind the Gap

by Pete on April 22, 2013

The most important feature of your personal finance is the GAP. The gap is the space between your earnings and your expenditures, your surplus. You can increase the gap by increasing income, or decreasing expenditures. Everyone knows this, but few actually keep tabs on themselves. Do you know what your surplus percentage from 2012 was? How much of your income did you save?

Now that your taxes are certainly done, let’s look back at your return to figure out how much you saved. You can do this with your gross income (pre-tax) or your net income (post-tax.) I use gross income because it’s easier to track of. Take the amount of money you’ve saved in the past year and divide it by your gross income. That’s your savings percentage, your gap.

Savings percentage = amount saved/gross income x 100

2012 is done and you % gap from last year is whatever it is. Give yourself the fiscal year resolution to increase the percentage from last year. Start now. Don’t wait for your boss to give you a raise. Many studies have shown that people don’t save money as their incomes increase. Instead they tend to increase their expenditures at the same rate as their income increase. No matter what level of income, most people will stay at their savings levels for the rest of their lives. There are rich people who are stuck at 2% and lower income people who live comfortably with a 30% gap. It’s all relative.

The other way to increase your gap is increasing your income. The charity commercials often say “a few dollars a day can make a lifetime of difference for…whatever the charity is.” The same is true for you. An extra few dollars every day can translate to thousands more in the bank account later. One of the easiest ways to earn more is with paid surveys. If you don’t have a Get Paid to Try account, go get one and increase your gap!

Make a concerned effort to mind the gap. Minding the gap is the difference between stress and happiness in retirement. Start now. Spend less, get paid more. Live more happily with a bigger gap!

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