The average Chinese citizen saves an average of 50% a month. In numerous articles that I’ve read online the American savings rate seems to be around 4.2%. That difference in savings rates is telling. Americans have never been prodigious savers, but, this is pretty bad and really scary.
American citizens can freak out about the United State’s level of borrowing but I can’t figure out why they don’t look at their own borrowing, spending, and saving?
Kathleen from Frugal Portland and LaTisha from Young Finances are leading the effort to try and get us to save 50% of our income. The only reason I can believe I can do this is because of the amount of debt I’ve paid off. I’ve also eliminated a number of monthly payments. Even though I still have student loans and a credit card I can now save 50%. Here is how I will get there.
- My current retirement savings + the match=12%
- My mortgage payments. I am paying down the mortgage and increasing my equity. My mortgage is very, very small so my mortgage is starting to get even smaller. My mortgage payments =20% of the 50% savings rate. Btw, I made the mistake of purchasing this property zero down. However, I was very lucky as it has appreciated the entire 7 years I’ve owned it. I would make a nice amount if I sold it.
- Saving at least 18% more on top of that
- Total=50%
This will be difficult initially because I’ve been super lax with saving because, duh, I’ve had a lot of debt. Each month as I’ve paid down more debts there has been more money at the end of each month. This spring I won’t be traveling and will be focusing on my side hustles to increase my income. My focus this spring will be:
- Debt repayment
- Make more money
- Save more money
- Lose weight
- Love
- Family and Friends
In order to create extra money in budget from the money that I currently earn I’ve decreased my outgoing payments and I’ve lowered the amounts I’m paying for monthly services. I have a post coming up in a couple of weeks about that.
When I think of the Chinese 50% savings rate I ask myself two questions: Why, are they saving so much? and How are they doing it?
Why?
- I could be wrong but it seems like the system of loaning money doesn’t not exist in the same way that it does in the U.S. and that it is incredibly difficult to get loaned money. ***Readers-if you have input about this please pipe up!!***
- In order to pay for the things that Americans may charge part or all of the cost, the Chinese save cash. Think: Weddings, school, travel, purchasing homes, and retirement.
How are they doing this?
- Focused saving and practiced contentment
- Keeping an eye on the prize
- Squeezing every Yuan until it hurts!
- Reviewing all financial transactions
- ***Pipe up if you have personal experience or knowledge on the how***
How do I translate Chinese style personal savings to an American lifestyle?
- Pay off my Credit Cards-Almost done. I should be finished paying off credit card debt by July.
- Evaluate all monthly expenses: electric, groceries, transportation, and phone. And cut them down ruthlessly without cutting quality of life.
- Don’t be preachy
- Switch to paying for what I need with cash.
- Learn how to wait. There are a couple of issues in my home right now that I could deal with by charging them. Instead, I am waiting to get them taken care and will pay with cash. This is really, really hard to do because these issues are VERY annoying. But, this is the cost of owning your own home. You have to pay when things come up.
- Continue to downsize the crap in my house. It’s kind of addicting. I’m really enjoying getting rid of unnecessary items in the home. The more I do it, the lighter I feel. I love downsizing 🙂
Finally, I will continue to live in my tiny place for another two years…or until I move in with someone?? LOL! I have been thinking about moving a lot lately and purchasing a new home while renting out my little place. I need to resist this because my current mortgage will be well under $60,000 by the end of this year. I will be paying off my student loans aggressively for the next 3 years so keeping my housing costs low is key to that. There is no way that I could find housing in Denver for the amount that I’m currently paying.
The past year has been preparation for this next step. When I began cleaning up my financial house I thought about being debt free and saving more. I didn’t really have an amount to quantify “more.”
Why 50%? Why not?
Are you saving enough? For retirement? For your family? For your piece of mind? Do you think that 10-12% is more than enough? What do you think of a 50% savings rate? Is it crazy? Or, crazy smart?
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Oh man, that is great! It’s awesome that you can save that much, and also that you’ve paid off so much debt. When we are out of debt, saving 50% would be amazing!!
It’s time for me to step it up and make up for the lost years dealing with all of my debt. I will still be throwing a lot of money towards my debts but at this point I can’t continue underfunding my future. I will be doing my side hustles to help balance everything out.
I’m not familiar with how things work in China but I do believe the US is fairly unprecedented in regards to access to cheap consumer credit.
It’s really ridiculous that we are able to borrow in the way that we do-without impunity!
“American citizens can freak out about the United State’s level of borrowing but I can’t figure out why they don’t look at their own borrowing, spending, and saving?”… aint that the truth
Confronting our own financial truths is a painful experience for the best of us. I think we like being in the dark about our finances…
I’d still rather live here than China! 🙂 I love downsizing too-it is rather addicting. I’d say if it doesn’t make you absolutely miserable than why not go for as much as you can. There is no real downside with the exception of going to crazy that you end up splurging. As long as you catch yourself before that. I’m looking forward to a more frugal February and feeling like I can get back to a more balance routine after this 1/2 is over. I love your attitude about everything!
I agree! But, I do prefer their savings rate. I think that we can do better and HAVE done better with our finances prior to the introduction of credit in the 50’s. I want people to have power over their destiny. I’m trying to be positive about everything because being negative didn’t work!
I really like the idea of the 50% savings movement. I can probably hit that if I include debt payments as savings, which they aren’t, but they are increasing my net worth so that kinda counts right?
Good luck saving 50%, Michelle!
Yes! Pay down debt, increase your net worth! We’re going to be rich…or at least ok 🙂 This is a big challenge but i’m up for it. It’s time to change my life.
“I can’t continue underfunding my future” — THIS, Michelle. So very much this.
I have more than enough time to correct the course I’ve been on. I won’t gamble away this second chance.
I think saving 50% of your income is a wonderful goal. If Americans in general spent less and saved more we’d be in a much better places financially as a country. I don’t know how much I’m currently saving. It’s not 50% (cost of living here is really high), but I’d guess it’s at least 30% over the course of the year (varies month to month).
At least you’re saving 30% !! I’m in awe of anyone who is saving over 10%, it’s so hard to not consume.
That’s our goal, to put $4k $5k in the bank each month. Which is possible if you have two incomes and no debt. We are getting closer, but need a little more discipline to get closer to the higher end of that. I’m glad to see others attempting this too!
hi, interesting article, have you finally managed to achieve your goal? saving 50% is very hard, the best I can reach is 20-40%, my average saving in the past few years was 30% something. Managed to make about $16,000, but I gave it to my parents for some reason. Now I am restarting life again, I feel so insecure because I am already 30.
Sadly Michel, I’m not there yet but I’m going to keep working at it until I am. Your only 30, the oldest guy in the world is 145 years old (in Indonesia) you’ll be fine LOL!