I am uber-inspired by all the other bloggers and FIRE community members wo are banking ridiculous amounts of income each month. I have seen people reporting saving around 60-80% of their incomes.
That’s so awesome!
I would love to save that much money, but I also believe in a balance of saving money and enjoying life now. If I wanted to save 70-80% of my income (at this point in time), I would have to give up going to music concerts and movies, traveling, girls’ nights out, family dinner nights and other hobbies. I know I would not be happy if I had to give everything up in order to save more money.
There always has to be a balance.
It’s not always about saving as much money as possible. It has to also be about finding a good balance and happiness as well.
And, it may take a little bit of time and discipline to work your mentality and budget to reach your savings goal.
A good starting goal is to save 10-20% of your take-home income. 30-40% is great, and anything over 50% is superb.
That being said, I am able to save over 50% of my income on a regular basis.
Here’s where I found places in my budget to cut expenses and save more money:
I cancelled my monthly gym and yoga memberships. This saves me $168/month. I cancelled the expensive, unlimited yoga membership last year, and my gym membership this year.
I cancelled cable and got an Amazon Fire Stick and Mohu Leaf Antenna. See how much money I cut out of my budget with this alone.
I only eat out only once a week. The rest of the week I meal-plan and take both breakfast and lunch to work. I also try to stick with a vegetarian/pescatarian diet. Cutting out meat from my diet as drastically reduced my grocery bill.
I stopped going to Starbuck’s and started making my own coffee at home. (Has anybody else tried cinnamon in their coffee? It’s absolutely delicious!)
I embrace a minimalist lifestyle and I now question every purchase I make, so that I surround myself with what’s important to me, and nothing extra. For more insight, read my post “Minimalism is Good for Your Soul…and Your Wallet”.
As part of #5, I stopped using shopping as a pleasurable past-time to relieve boredom or stress. Unless there is something I need, I stay away from department stores, malls and retail outlets. I even try to limit grocery trips to once a week and to Sprouts (a local farmer’s market store) because it’s a smaller grocery store with less temptations (ie stuff) than Target, Walmart or even King Soopers.
Last, but not certainly not least, I always pay myself first. I have automatic transfers set up every 2 weeks for when I get paid to transfer money directly into my savings, retirement and investments accounts. This way I don’t have a chance of spending any of it beforehand.
So, what can you do to start saving more money?
First, Start Tracking Your Money.
You should first have a way to track and review your spending and expenses every month. This is the first step you have to take in building a healthy financial life. You ABSOLUTELY MUST know how and where your money is going each and every single month. Without this essential knowledge, it’s impossible to create goals, know how much to save in your emergency fund, or calculate your savings rate. I use and recommend both Mint and Personal Capital for tracking money because they are free and easy to use.
Autopay Your Bills.
Secondly, set up automated payments for all your reoccurring bills. This is a simple process where your bank automatically deducts from your checking account in order to pay such bills as electricity, gas, mortgage, internet, cell phone, and even credit cards. Autopay ensures that you never miss a payment, never late with a payment, and don’t have to waste time writing checks and mailing it in. It’s a simple way to remove human error (because mistakes do happen) from your money management. You will never have to worry about missing a payment and incurring a late fee/penalty.
Pay off All Debt (except your mortgage).
Mathematically, the smartest and fastest way to pay down debt is to start with the highest interest debt first, and then move on to the next highest interest debt, and so on until the debt is gone. This is known as “debt stacking” or the “avalanche method”. This saves you the most money in the long run because you are knocking out the highest interest rates first. “Snow balling” is also a good alternative if you find knocking out the smallest balances a more psychological advantage to debt repayment. The point is, get rid of debt ASAP so you can start building a solid financial future.
Build Your Emergency Fund.
An emergency fund should be able to cover your monthly expenses. The main idea is that if you lost your job tomorrow, this money would tide you over until you could find another job. It’s your insurance against incurring debt and possible financial ruin. A good general rule of thumb is to have six months of living expenses saved up. Some recommend as little as 3 months, some recommend as much as 12 months. This is more so dependent on what you are comfortable with.
Fully Fund Your Retirement Accounts (401k, 403b, Roth/Traditional IRA).
If your employer offers a 401k or a 403b and if they match your contributions, you should at least be contributing the maximum amount they’ll match. Otherwise, you are leaving “free” money on the table. A 401k/403b is a tax-deferred retirement savings account offered through most employers. You don’t pay income taxes on the money you put into your 401k, but you will pay income taxes when you start withdrawing your money in retirement. For 2017, you’re allowed to put a maximum of $18,000 per year into your 401k.
If you are wondering about opening and funding a Roth or Traditional IRA, check out this post on them.
Your Turn: How do you save money each month?