People who save more than 3 times as much as the rest of us are making 4 smart choices with their money

PBNJ Productions/GettySaving more income starts here.

When you compare people who save a ton of their income with the rest of us, the decisions that led them there become pretty clear.

In a recent survey, TD Ameritrade asked 1,500 Americans with investable assets of at least $US250,000 about their saving strategies. About 20% of this group are “supersavers” who save or invest an average of 29% of their income, while everyone else saves an average of just 6%.

Three in four supersavers are either financially independent – meaning they don’t need to work to live – or are on their way, the survey found. Some even retired early.

As it turns out, supersavers prioritise four key decisions others are less likely to: They avoid high-interest debt, stick to a budget, invest in the stock market, and max out their retirement savings.

Here’s a bit more about each:

Avoid high-interest debt

The TD Ameritrade survey found that 65% of supersavers avoid high-interest debt, compared with 56% of others.

Living above your means and overspending is a way to ensure you’ll never build wealth. Debt isn’t all bad, but the kind that comes with interest rates above 10%, such as debt owed on most credit cards, is best avoided.

People who build their own wealth, the financial planner Eric Roberge wrote, “don’t spend money they don’t have, period.”

Stick to a budget

Keeping track of your cash flow, whether you call it a budget or not, is critical to getting your savings rate where you want it.

TD Ameritrade found 60% of supersavers adhere to a budget, while 49% of others do the same. Perhaps more importantly, the supersavers allocate less of their budget toward housing, spending nearly 10% less than the average person.

Interestingly, supersavers and average savers spend the same amount of their budget, about 7%, on travel.

Invest in the stock market

Fifty-eight per cent of supersavers invest in the stock market, compared with 34% of others, and they got in early. More than half (54%) of supersavers who invest started before age 30, the survey found, while only 40% of others did the same.

Supersavers are far more likely than non-supersavers to invest in the stock market through brokerage accounts (65% vs. 35%) and retirement accounts (90% vs. 65%). The key to making these investments worthwhile is ensuring they’re low cost and diversified.

Max out retirement savings

According to TD Ameritrade’s survey, the best savers make use of both tax-advantaged and non-tax-advantaged retirement accounts. More than half of the best savers have money invested in a 401(k), a traditional IRA, and a Roth IRA.

Money funneled into 401(k)s and IRAs can result in significant tax savings. These accounts take contributions pretax, so they effectively reduce a person’s taxable income. Plus, they will grow tax-free for years before retirement. In 2019, you can contribute up to $US19,000 to a 401(k) and $US6,000 (plus another $US1,000 if you’re over 50) to IRAs.

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