Savings Rate Example

Person A makes $200,000 per year but is wants to impress their friends so they spend all their money on designer clothes. They save just $10,000, for a 5% Savings Rate.

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The technical term for this scenario is Lifestyle Creep. Try to prevent your spending from "creeping" higher as your income increases. 

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Person B makes $60,000/year but is smarter with their money. They are willing to cook at home, live with roommates, and take public transportation. They save $20,000/year for a 33% savings rate.

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Even though Person A has a higher income, Person B is able to save twice as much money per year!

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Conclusion: To build wealth, you need to save as much money as possible. This can only be achieved in two ways: Make more money, or typically the easier option, Spend Less Money