One of the best financial hacks is to save your raise.
It’s difficult to increase saving today because more savings means
cutting something that we have grown used to consuming. But if you
commit today to save a large fraction of your raise, say 50%, you can
increase consumption and savings at the same time.
For
example, I tell my students that after they get their first job their
income will increase by a lot.
But instead of buying a new car I tell
them to continue to live like a student for another year or two and put
the money they save into a 401k! Living like a student for another year
or two isn’t that hard—they are used to it! And it’s much easier to live
like a student for another year or two today than it is to try cut
consumption 10 years from now when kids and mortgages become pressing.
In
short, it’s painful to cut consumption but it’s often easy to delay
consuming more so hack your willpower by delaying consumption rather
than cutting consumption.