Ramit Sethi explains how to build serious wealth without pain: increase your savings rate by 1 percentage point each year. If you save 5% now, bump it to 6% this year, then 7% next year. Over time, these tiny increments compound into hundreds of thousands of dollars.
1% (one percentage point) per year.
Starting rate: 5% of take-home pay; after first increase: 6%.
If you increase your savings rate 1% per year, and if you increase your investment rate 1% per year, that will be worth hundreds of thousands of dollars to you. For example, if you currently save 5% of your take home pay, and you go, okay, that's all I can afford right now. But December of this year, I'm setting up a calendar reminder and I'm going to add 1% to make it 6%. If you do that every single year, you will have hundreds of thousands of dollars more, and you will not even feel it because 1% is so gradual. Do the same for investing. That is how you gradually accumulate massive amounts of money. And you blink your eyes and you realize, oh, my gosh, it's been three, four, five years. And look at how much is in this account. That's a $300,000 question.
