Fancy a new challenge in 2015? Want to save more money and become wealthier?
If you do, Moneystepper.com may have just the thing for you. The Moneystepper 2015 Savings Challenge is a free community where participants in the challenge are working together to accelerate their climb up the steps to financial freedom.
So, how does it work? Well, the general idea is that each member of the challenge will work towards two annual goals:
- % Increase in Net Wealth
- Savings Rate %
Let’s have a look at these goals in a bit more detail.
% Increase in Net Wealth
Net wealth is one of the most important metrics in personal finance. Essentially, it tells you how much you are worth.
Technically, it is calculated as being the sum of all your assets (everything you own) less the sum of all your liabilities (everything you owe).
We set many financial goals in our lives, but 99% of them will be inextricably linked to your net wealth position. Therefore, by looking at this goal, the users in the challenge can all individually set their own individual goals, all whilst attempting to achieve an certain percentage increase in their net wealth during the year.
Savings Rate %
This is the other “biggie” in personal finance. It essentially measures how much money you are saving out of each month’s paycheck.
Most would have heard of the adage “pay yourself first” and general consensus is that this aim should be 10%. However, why stop at 10%. By maximizing your savings rate, your net wealth will increase exponentially and you’ll be in a position of financial independence much quicker than you would by not saving or only saving 10%.
The actual definition of “savings rate” varies, but the Moneystepper Savings Challenge has designed a specific formula to ensure that the savings rate is the same for everyone, independent of your current financial position. This is defined as:
Money put towards savings, investments, retirement/pensions and principal paid on loans
The important thing to note here is that if you are paying off debt, this challenge is just as relevant to you as someone building their savings. Any money that goes towards paying off your debt above and beyond the accrued interest each month is included in your savings rate %.
Why did Moneystepper start the challenge?
In the introduction to the challenge, Graham Clark (Founder of Moneystepper) explains the huge benefit the challenge has had on him personally in the past two years. Effectively, he was suffering from a fairly stagnant financial position, despite being fairly frugal and sensible with money.
When he started measuring himself against these two goals, everything changed and he recorded a 96% annual growth in 2013 followed by an even more impressive 84% annual growth in 2014 (given that 2014 started from a much higher base).
He states there were only two real things that he changed to reach these goals:
- Measuribility– In 2013, he recorded every aspect of his financial life and began treating himself like a business. Monthly budgets, forecasts, management accounts, analysis against budget, etc. He found ways to increase his revenue (income), methods to cut back on costs (expenses) and how to strengthen his balance sheet (net wealth).
- Accountability – However, he also found that he would sometimes slip up, miss a month-end recording or not worry about certain splash of cash. Therefore, at the start of 2014, he started to publish monthly updates of his results on the site.
Why should YOU join the challenge?
So, why would you want to join the challenge?
Well, effectively, to learn from Graham’s experience and reap the benefits he has. By participating in the challenge, you will receive a free downloadable spreadsheet where you can track your finances like a business. Furthermore, you will join a community of likeminded people, all striving towards the same goals, who will hold you accountable to the goals you set at the start of the year!
So, for more detail on the challenge, to see exactly how the challenge can help you, and for the free downloadable “treat your personal finances like a business tracker” spreadsheet, head on over to Moneystepper’s 2015 Savings Challenge and take on this challenge for yourself.
I’ll see you there!!