A recent personal finance article in The New York Times features the real-life stories of "supersavers" who heavily focus on wealth creation at almost every opportunity – yet without sacrificing an occasional indulgence.
One of these supersavers, for instance, is an IT security specialist who set himself a goal at 29 of having US$1 million in an investment account by his 35th birthday.
Much discipline would be necessary to achieve his goal as he was earning US$75,000 at the time and had relatively modest investment savings. He reached his target by saving hard, cutting costs and investing successfully.
Financial advisers interviewed for this article say supersavers typically set their goals and then work towards those goals in a highly-disciplined way. And interesting, it seems a common characteristic among supersavers is a willingness to be coached by advisers into developing good savings habits.
Particularly given the inadequacy of Australia’s retirement savings supercharged savers can set a much-needed excellent example to the rest of us.
The latest Retirement Savings Gap report, compiled by Rice Warner Actuaries, calculates that Australia had a retirement savings gap of $768 billion at June last year (taking into account the Age Pension) or an average $70,100 per person. (When the Age Pension is removed from the calculations, Australia’s retirement savings gap is much, much higher.)
This savings gap is defined as the amount of extra money needed to provide a "reasonable" retirement lifestyle for the life expectancies of Australians. The reality is that half of us will live beyond our life expectancy.
For someone wanting to supercharge their savings, a helpful starting point may be Vanguard’s Principles for Investing Success. This core publication for Vanguard emphasises the importance of setting a clear and appropriate investment/savings goal, setting and monitoring a regular savings target, and taking a disciplined approach to savings and investing.
Clever budgeting is, of course, critical to any efforts to boost your saving. ASIC’s personal finance website, MoneySmart, provides practical budgeting tips and a useful budget planner.
It should be recognised that our capacity to save more in the future depends on personal circumstances including our financial obligations at different stages of our lives. Nevertheless, regularly saving even a little more can make a big difference over the long haul.
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Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment. |
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