The Money Mustache Community
General Discussion => Throw Down the Gauntlet => Topic started by: MonkeyJenga on December 31, 2015, 11:52:35 AM
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My crazy stretch goal for 2016 is an 80% savings rate. This would require ridiculous stuff that's not going to happen... UNLESS I MAKE IT HAPPEN. What radical changes would you need to implement to hit an 80% savings rate?
Savings rate calculation used (http://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/). Short summary, courtesy of dandarc: use your take-home-pay + any retirement contributions that were deducted from your income as your after-tax-income. If you get a match, count it both as savings and income.
Options:
- Cheaper rent - would make the biggest impact
- Zero restaurant spending, minimal groceries
- Bring gas/electric costs down
- Go without internet for a few months
- Eliminate Metrocard spending and switch to 100% bike commuting
- Never take a cab, starting with NYE
- Get a raise
- Bring in substantial side income
- Receive cash gifts (Dear Hannukah Harry...)
- Eliminate health insurance costs and get stipend from work (ETA: I would still have health insurance at a negligible cost through a non-work option)
- If I take any trips, use points/card bonuses to keep costs negligible
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Maximising your savings rate can actually prolong your working career. In an example I posted earlier today (http://forum.mrmoneymustache.com/real-estate-and-landlording/the-price-of-housing-mortgages-!!/msg920427/#msg920427), the person who elects the 76% savings rate will be able to retire several years earlier than the person with the 88% savings rate. This is not a new observation and has been the subject of many past threads. It somewhat undermines the point of the present thread because there's no reason to strive for an 80% savings rate, or any arbitrary savings rate, if doing so will actually lengthen the time you need to work.
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Are you talking about giving up health insurance to increase your savings rate? If you get sick/injured the destruction of your stache could far outweigh a few % more in savings rate.
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Maximising your savings rate can actually prolong your working career. In an example I posted earlier today (http://forum.mrmoneymustache.com/real-estate-and-landlording/the-price-of-housing-mortgages-!!/msg920427/#msg920427), the person who elects the 76% savings rate will be able to retire several years earlier than the person with the 88% savings rate. This is not a new observation and has been the subject of many past threads. It somewhat undermines the point of the present thread because there's no reason to strive for an 80% savings rate, or any arbitrary savings rate, if doing so will actually lengthen the time you need to work.
You keep saying this without stating the underlying assumption - your retirement expenses are going to be the same whether you accumulate in high income / high expense or low income / low expense scenarios. For example, you'll retire to the LCOL area regardless of where you accumulate. To me, that's a big assumption.
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My savings rate was 69% this year, including one expensive (by my standards) international trip, but I'm not sure I could do 80% without impacting my quality of life.
Easy things I could do:
Calculate my savings rate differently. Right now I include my rental property income as income and expenses as expenses (except maintenance and repairs - long story). If I calculate my rental income as income - expenses my savings rate would go up.
Get a cheaper phone plan.
Bike more, bus less.
Travel hacking for flights.
Things I could do, but likely won't:
Get a second job.
Get a roommate for my spare room.
Cancel internet.
Get rid of pet. Never.
Sell car. I don't use my car to commute anymore, but if I didn't have it I would see my friends far less often. I would also be more dependent on others. The biggest downside is that I would not be able to visit my family as often. There is zero public transit that goes to my home town. The nearest airport and bus station is an hour away and someone would have to pick me up. I would also have to borrow a vehicle while I was there if I wanted to see my dad (or walk 16 miles). No taxi, no rental cars. In addition, flights are about $500. This year I went home 4 times (half the time driving with other people). Flights would add up. And if I fly I can't bring my dog and would be paying boarding costs in addition. Dog loves car rides. I could rent a car in my city for the entire trip. I haven't looked into costs for that.
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You keep saying this without stating the underlying assumption - your retirement expenses are going to be the same [regardless of the accumulation strategy].
You are correct that I have not been explicitly stating this assumption. That is a literary device to make people think about their choice of strategies carefully.
To me, that's a big assumption.
I think it's a reasonable assumption.
To be fair, some people might be subject to restrictions on their movement. For example, some people might be on supervised release after leaving jail and might be limited to living in a certain city or even in a particular area within that city. Those people have less flexibility in their choice of strategy. However, for those of us who are free to come and go as we please, there's no reason to think that accumulating money in a city with more expensive real estate will somehow force our retirement to be more expensive. There will be a one-time moving expense but that is negligible in the overall scheme of early retirement.
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Glad someone else questioned Cathy's logic. She's playing hide the ball with expense arbitrage.
All else being equal, increasing savings rate will push one to their target sooner. To the OP, good luck for you. I could move from 70 to 75% if I tried really really hard to hustle on the side at some expense to enjoyment of life.
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You keep saying this without stating the underlying assumption - your retirement expenses are going to be the same [regardless of the accumulation strategy].
You are correct that I have not been explicitly stating this assumption. This is a literary device to make people think about their choice of strategies carefully.
To me, that's a big assumption.
I think it's a reasonable assumption.
To be fair, some people might be subject to restrictions on their movement. For example, some people might be on supervised release after leaving jail and might be limited to living in a certain city or even in a particular area within that city. Those people have less flexibility in their choice of strategy. However, for those of us who are free to come and go as we please, there's no reason to think that accumulating money in a city with more expensive real estate will somehow cause our retirement to be more expensive. There will be a one-time moving expense but that is negligible in the overall scheme of early retirement.
Yeah - the choice is always there. Guess I was just trying to get at the value of the non-financial aspects that might convince you to stay.
At least for me, the one time I moved a long distance purely for money sucked. Bad. Like less than 2 years later I was seriously contemplating trying to go back to my old job / location for substantially less money, because I was so unhappy. Granted, I stuck it out, met my wife, and things have been way, way better since, but when I made the decision to make that move, I was very much under-valuing the non-financials.
Now you've got me itching to try and come up with an agreement with my wife that if I can find a job that pays $XXX, we'll move. So good on making me think about it. XXX might be so big it is more like a pipe-dream though.
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Maximising your savings rate can actually prolong your working career. In an example I posted earlier today (http://forum.mrmoneymustache.com/real-estate-and-landlording/the-price-of-housing-mortgages-!!/msg920427/#msg920427), the person who elects the 76% savings rate will be able to retire several years earlier than the person with the 88% savings rate. This is not a new observation and has been the subject of many past threads. It somewhat undermines the point of the present thread because there's no reason to strive for an 80% savings rate, or any arbitrary savings rate, if doing so will actually lengthen the time you need to work.
This is very flawed logic, or lack there of.
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Are you talking about giving up health insurance to increase your savings rate? If you get sick/injured the destruction of your stache could far outweigh a few % more in savings rate.
Should've clarified upfront - I would have virtually free health insurance through another avenue. For various complicated reasons, I haven't made that change. I wouldn't go without insurance completely.
Cookie78 - I like that you thought about ideas even if you know you're not going to do all of them! Are you going to try any of the easy options?
All else being equal, increasing savings rate will push one to their target sooner. To the OP, good luck for you. I could move from 70 to 75% if I tried really really hard to hustle on the side at some expense to enjoyment of life.
Thanks! I figure even if I don't hit 80% exactly, this might push me to make some changes I wouldn't otherwise. I am trying to do all this while still increasing my happiness, as many changes I made in 2015 did.
Cathy, I don't think your example applies to me, although I appreciate the attempt to challenge my assumptions. Is the argument that I could move to an expensive area, get a higher salary that outweighs the increased costs, save a higher dollar amount (but lower %), and retire back to a LCOL? I already live in an area with high rents, and I have the inflated salary to go along with it. Any increase in SR now will do one or all of the following:
Reduce my expenses, which will likely carry over into reduced retirement expenses (e.g., learning to cook more cheaply, biking instead of public transit)
Increase my salary, which will give me more money to save in the short-term
Push me to develop a side income that can continue in semi-retirement, allowing me to quit my day job sooner
Make me more of a badass
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Cathy, I don't think your example applies to me, although I appreciate the attempt to challenge my assumptions...
As with all of my posts, I was not commenting on your specific situation. My point is valid though. Oftentimes on these forums, people use savings rate as a proxy for length of time to retirement or "level of hardcoreness", and it is not a reliable indicator of either of those, in general. I don't claim this is a novel point, but it's worth repeating because it's so important to understand for people who don't benefit from the good fortune of having some form of committed relationship to propel them to retirement at the speed of light (http://forum.mrmoneymustache.com/ask-a-mustachian/reaching-fire-married-vs-single/msg913415/#msg913415).
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All else being equal, increasing savings rate will push one to their target sooner. To the OP, good luck for you. I could move from 70 to 75% if I tried really really hard to hustle on the side at some expense to enjoyment of life.
Thanks! I figure even if I don't hit 80% exactly, this might push me to make some changes I wouldn't otherwise. I am trying to do all this while still increasing my happiness, as many changes I made in 2015 did.
Cathy, I don't think your example applies to me, although I appreciate the attempt to challenge my assumptions. Is the argument that I could move to an expensive area, get a higher salary that outweighs the increased costs, save a higher dollar amount (but lower %), and retire back to a LCOL? I already live in an area with high rents, and I have the inflated salary to go along with it. Any increase in SR now will do one or all of the following:
Reduce my expenses, which will likely carry over into reduced retirement expenses (e.g., learning to cook more cheaply, biking instead of public transit)
Increase my salary, which will give me more money to save in the short-term
Push me to develop a side income that can continue in semi-retirement, allowing me to quit my day job sooner
Make me more of a badass
Defintely badass. I'm guess you already have a high base salary. Again, I couldn't if I tried unless I rip my lease and sleep in the office.
So, I'll try to find common ground with Cathy; if I understand what she is saying correctly. All else being equal, a higher SR is decrease time to FI. All else being equal, a higher decrease in expenses at retirement will decrease time to FI.
Teasing the two apart is very helpful. So per Cathy's examples, it is true that increasing income while decreasing savings rate will expedite time to FIRE, but only because it coincides with an increased reduction of expenses at retirement.
So in her examples, if you are in a LCOL area and have a high savings rate but move to a HCOL and have a low savings rate, the time spent in the HCOL with help you if you move back to a LCOL because expense at retirement falls. But if you continue to stay in the HCOL, the time spent in the LCOL with a high savings rate was actually a drag because expense at retirement rose. One should have just moved earlier to decrease time to fire.
Again, teasing the two apart is very imporant. That's why I really like Tyler's portfolio charts time to fire calc.
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Cookie78 - I like that you thought about ideas even if you know you're not going to do all of them! Are you going to try any of the easy options?
Absolutely. :)
I made lots of changes in 2015, but there are still some things I can do to improve in 2016.
Changing my banking situation to eliminate fees is another one I didn't already list.
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Cathy, I don't think your example applies to me, although I appreciate the attempt to challenge my assumptions...
As with all of my posts, I was not commenting on your specific situation.
I know, I read your tagline. :)
Should I have said "I appreciate the attempt to challenge people's assumptions"?
My counterpoint is valid for many people: increasing your SR now will generally help you get to FI faster, due to either more money saved or less money needed. Thinking about radical ways to do this can help challenge assumptions. If geographic arbitrage works for somebody who consciously chooses a lower SR, more power to them.
All else being equal, increasing savings rate will push one to their target sooner. To the OP, good luck for you. I could move from 70 to 75% if I tried really really hard to hustle on the side at some expense to enjoyment of life.
Thanks! I figure even if I don't hit 80% exactly, this might push me to make some changes I wouldn't otherwise. I am trying to do all this while still increasing my happiness, as many changes I made in 2015 did.
Cathy, I don't think your example applies to me, although I appreciate the attempt to challenge my assumptions. Is the argument that I could move to an expensive area, get a higher salary that outweighs the increased costs, save a higher dollar amount (but lower %), and retire back to a LCOL? I already live in an area with high rents, and I have the inflated salary to go along with it. Any increase in SR now will do one or all of the following:
Reduce my expenses, which will likely carry over into reduced retirement expenses (e.g., learning to cook more cheaply, biking instead of public transit)
Increase my salary, which will give me more money to save in the short-term
Push me to develop a side income that can continue in semi-retirement, allowing me to quit my day job sooner
Make me more of a badass
Defintely badass. I'm guess you already have a high base salary. Again, I couldn't if I tried unless I rip my lease and sleep in the office.
Yep, pretty high salary. And there's no harm in testing the comfort of a yoga mat under your desk! Hah.
What you said about Cathy's example lines up with my understanding. One of my RE options is moving to a LCOL, and my time saving buckets o' money in NY will make that more achievable.
Cookie78 - I like that you thought about ideas even if you know you're not going to do all of them! Are you going to try any of the easy options?
Absolutely. :)
I made lots of changes in 2015, but there are still some things I can do to improve in 2016.
Changing my banking situation to eliminate fees is another one I didn't already list.
I've actually been meaning to get a debit card that reimburses me for ATM fees. Thanks for the reminder. It's <$10 a year, but still. Pointless.
With your earlier "not likely" roommate option, have you considered testing out Airbnb? Low commitment, can see how it goes and stop if you hate it.
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Cathy, I don't think your example applies to me, although I appreciate the attempt to challenge my assumptions...
As with all of my posts, I was not commenting on your specific situation.
I know, I read your tagline. :)
Should I have said "I appreciate the attempt to challenge people's assumptions"?
My counterpoint is valid for many people: increasing your SR now will generally help you get to FI faster, due to either more money saved or less money needed. Thinking about radical ways to do this can help challenge assumptions. If geographic arbitrage works for somebody who consciously chooses a lower SR, more power to them.
All else being equal, increasing savings rate will push one to their target sooner. To the OP, good luck for you. I could move from 70 to 75% if I tried really really hard to hustle on the side at some expense to enjoyment of life.
Thanks! I figure even if I don't hit 80% exactly, this might push me to make some changes I wouldn't otherwise. I am trying to do all this while still increasing my happiness, as many changes I made in 2015 did.
Cathy, I don't think your example applies to me, although I appreciate the attempt to challenge my assumptions. Is the argument that I could move to an expensive area, get a higher salary that outweighs the increased costs, save a higher dollar amount (but lower %), and retire back to a LCOL? I already live in an area with high rents, and I have the inflated salary to go along with it. Any increase in SR now will do one or all of the following:
Reduce my expenses, which will likely carry over into reduced retirement expenses (e.g., learning to cook more cheaply, biking instead of public transit)
Increase my salary, which will give me more money to save in the short-term
Push me to develop a side income that can continue in semi-retirement, allowing me to quit my day job sooner
Make me more of a badass
Defintely badass. I'm guess you already have a high base salary. Again, I couldn't if I tried unless I rip my lease and sleep in the office.
Yep, pretty high salary. And there's no harm in testing the comfort of a yoga mat under your desk! Hah.
What you said about Cathy's example lines up with my understanding. One of my RE options is moving to a LCOL, and my time saving buckets o' money in NY will make that more achievable.
Cookie78 - I like that you thought about ideas even if you know you're not going to do all of them! Are you going to try any of the easy options?
Absolutely. :)
I made lots of changes in 2015, but there are still some things I can do to improve in 2016.
Changing my banking situation to eliminate fees is another one I didn't already list.
I've actually been meaning to get a debit card that reimburses me for ATM fees. Thanks for the reminder. It's <$10 a year, but still. Pointless.
With your earlier "not likely" roommate option, have you considered testing out Airbnb? Low commitment, can see how it goes and stop if you hate it.
I've considered it. I'd have to furnish it too, but that's certainly doable. The biggest concerns I have are the fact that I have only 1 bathroom, I have a dog who I'd worry about getting out of the house, and I like my quiet space. Lately I've been considering renting to a close and trusted enough friend that none of the above would matter.
At the moment though, I need to focus on getting a renter for my basement suite at the other house which is vacant as of tomorrow.
As for my getting rid of car example I'm curious if it sounds like a pile of excuses from an outside perspective, or do my reasons sound reasonable?
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Do you count the % after tax? I can't even legally save 80% because I still have to pay taxes.
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Do you count the % after tax? I can't even legally save 80% because I still have to pay taxes.
In this context, you generally take your take-home-pay + any retirement contributions that were deducted from your income as your after-tax-income. If you get a match, count it both as savings and in income.
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Do you count the % after tax? I can't even legally save 80% because I still have to pay taxes.
In this context, you generally take your take-home-pay + any retirement contributions that were deducted from your income as your after-tax-income. If you get a match, count it both as savings and in income.
Agreed. I added some explanation to the first post.
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As for my getting rid of car example I'm curious if it sounds like a pile of excuses from an outside perspective, or do my reasons sound reasonable?
Well it's certainly an intimidating pile of excuses, and not helped by the fact that my eyes glaze over when they encounter car-talk.
It does seem like a car is a good option for you unless you wanted to become a hermit. How much does it actually cost you, and are there other ways to mitigate the costs? Shop around for insurance, ride-sharing (which it sounds like you might do already?), something else I wouldn't know about because I hate cars? Any distances short enough to bike?
I made a conscious decision years ago to attend my friends' out-of-state weddings, so I've spent my share of non-optimized travel dollars in the name of staying connected to people.
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As for my getting rid of car example I'm curious if it sounds like a pile of excuses from an outside perspective, or do my reasons sound reasonable?
Well it's certainly an intimidating pile of excuses, and not helped by the fact that my eyes glaze over when they encounter car-talk.
It does seem like a car is a good option for you unless you wanted to become a hermit. How much does it actually cost you, and are there other ways to mitigate the costs? Shop around for insurance, ride-sharing (which it sounds like you might do already?), something else I wouldn't know about because I hate cars? Any distances short enough to bike?
I made a conscious decision years ago to attend my friends' out-of-state weddings, so I've spent my share of non-optimized travel dollars in the name of staying connected to people.
Per month this year
Insurance is $77.28
Registration is $7.04
Repairs and maintenance $6.11
Gas $39.96 (road trip gas is listed under that travel budget and an estimated additional $69)
Total $130.39 (or $199.39)CAD / month
My insurance is pretty low I think. Last time I shopped around I didn't find any better options, but I should look again. I am probably over insured given the age of the car now, and it's my highest car related expense. (Adding that to the list! thanks!) Repairs and maintenance can't get much lower than it did this year, but I should get the ramp thingies so I can do my own oil changes. I don't honestly know how my non travel gas costs are so high going back and forth to friend's houses and Spanish meetups, but part of it is my contribution to gas money for my brother and his SO driving me around for a hunting trip.
I started biking this year! Every day in the summer to work, rain or shine, but not in the winter. I normally walk to the grocery store. I do drive to the pet store for food every couple months, but try to combine that with other errands. I don't use my car much when I'm at home, maybe once or twice a week on average, but it sure is handy for visiting friends and far away family. I feel like without it I would quickly become depressed hermit. And right now, connecting with people is one of my top priorities and reasons for retiring early.
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I don't use my car much when I'm at home, maybe once or twice a week on average, but it sure is handy for visiting friends and far away family. I feel like without it I would quickly become depressed hermit. And right now, connecting with people is one of my top priorities and reasons for retiring early.
I'm married and we have 2 cars. I'm going to get rid of one of them this year but I think we need a car and I think your explanations are a good reason why you need a car as well. I think the trick is to minimise the use of cars and to try and minimise the cost of them.
In stating that could you just rent one when you need it. I'd like my wife to do this with the second car at some point but currently she doesn't agree with this.
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I don't use my car much when I'm at home, maybe once or twice a week on average, but it sure is handy for visiting friends and far away family. I feel like without it I would quickly become depressed hermit. And right now, connecting with people is one of my top priorities and reasons for retiring early.
I'm struggling with this very question. I don't have a car (expense, environment). However I know from past experience that, if I did have one, I'd have a more satisfying social life. (Note: I can't bike due to a disability.)
For example, if I had a car I'd:
- Go to weekly meditation meetings (area isn't safe in evening and is underserved by bus)
- Support/attend local cultural events (locations require two buses, buses on infrequent evening schedules)
- See my friends more (several live in areas underserved/not served by bus)
- Get out of town to go hiking (via carpooling, but I still have to get to meeting points rarely served by bus)
I've tried Zip Car which is good for once-in-awhile short errands, but not for most of the things I've listed above. Occasionally (when there's a good special discount) I've rented a car for the weekend and used that time to pack in out-of-town hikes, errands/shopping for heavy items, and socializing. However, my desire for the car is because it'd support me to become an ongoing part of communities that are important to me (weekly meditation and hiking groups, meditation retreats, Spanish-speaking community, volunteering, and going to friends' houses).
Of course, post-FIRE I could move to a place that made living without a car a bit easier (right now I rent a room near to where I work). However, if I stay in my current city, that'd entail moving to a more urban neighborhood which is a vibe I don't love and, also, the hiking and volunteering would still be difficult minus a car. So that brings me back to staying in the neighborhood I like, pushing out my FIRE date, and getting a car so I can build and maintain a strong community for myself. Lots to consider...
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We try to hit an 80% savings rate most months. We were first able to do that when I finished grad school and got one of those "job" things people are always talking about, so we went from a single income + stipend/pittance, to dual income family; maybe not the most generalizable situation. We also only reach 80% if you count the principal component of our mortgage payment as savings, so that's a little bit of a nice lie we tell ourselves. Now that we pay for daycare, I'm not sure if we make 80% anymore, will have to do a year end tally.
So to summarize, getting an 80% savings rate is easy if:
1) You have a lazy grad student spouse you can make work or some other way of doubling your household income
2) You are willing to play accounting tricks (if it's good enough for Enron, it's good enough for you!)
3) You don't have unprotected sex.
I don't think any of this is good advice, but I wanted to post to follow and pretend like I could contribute.
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Savings rate calculation used. Short summary, courtesy of dandarc: use your take-home-pay + any retirement contributions that were deducted from your income as your after-tax-income. If you get a match, count it both as savings and income.
Since I get an employer match on my pension plan deductions (9% each). I'm already super close, running 60% where I dont count my pension contributions as income, or count the match at all. Too lazy to adjust my current calcuation. Will report back in a few months to see if I can beat it.
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I like this thread (and secretly following MonkeyJenga for the awesome non-goal directed super accomplishment, sarcasm and excellent grammar). I discovered MMM in mid-June 2015 and interrupted our slow cruise to late retirement on around July 1. (How the fuck did I not figure out the simple math of early retirement sooner? All this to disclose that our 2015 year end saving rate for 2015 was 46% (wah wah waaaaaah).
In 2016, we will move this rate up to 62% by continuing what we have done in the second half of 2015. This will be a big accomplishment and I hope will incent my wife to continue making changes in how she spends. I am planning to retire October 1, 2018 when I will be eligible for a pension. If I left before that, I would be leaving the equivalent of $400K in savings behind. Thus I cannot really move up my timeline, but I can reduce waste and improve our nest egg going forward.
We have both stopped spending that was easy and we now have to make harder choices going forward. My easy spending that has stopped included lunches at work, skiing, buying prepared meals at the grocery store, purchasing espresso drinks and buying random crap. I have replaced fantasizing about purchases with fantasizing about retirement. (Who doesn't want to be GoCurryCracker? Have you seen their travel plans for 2016?)
Right now I am considering changes in these two domains:
In 2016, the easiest hard choices relate to my hobby activities - photography and woodworking (I don't think I could have chosen two more expensive hobbies). At this point, I have not bought any photo equipment in 8 months, but I took a woodworking class in the fall and made some supply purchases that were face-punch worthy. Spending on these hobbies must stop in 2016 and I need to sell off unused equipment. That will net about $3000 in savings vs. 2015. I would love to turn the woodworking into a mechanism for producing gifts for loved ones next year. If I replaced purchased gifts with created ones, I could save an additional $250 next year. I am going to commit to only spending $10 per month for my lightroom/photoshop license in 2016 - no equipment, no classes.
The hardest hard choice relates to my work commute. Presently I drive a 19 mpg minivan back and forth to work. It is 4 miles in each direction (head hung in shame). Reasons I have not switched to biking (1) price of gas is cheap (2) my bike is a heavy 1989 mountain bike (3) I like leaving work at lunch and coming home (note the extra miles I put on the car) (4) there is a mile-long hill on the way back from work (5) I was very ambivalent about bike purchases (including an e-bike) too many choices. (6) did I mention that I am lazy? OK - once the weather gets warm again, I will try biking at least 3 days per week with my heavy stupid bike to try it out. I will do this for two weeks and consider the results before further commitments. At $0.55 per mile, the savings potential of biking to work would be ~$2200 per year, but the reality would be more like 1/2 of that because I have days where I have to drive and there is bad weather that I am not going to bike in.
There are lots of other hard decisions to make in 2016 - but these are the two that may have biggest impact and that I have 100% autonomy over.
Thanks for the topic - got me to look at year-end savings rate and set a goal (sort of) and consider outside the box opportunities for savings.
Self examination is exhausting. It is time for breakfast and more coffee. Thanks -Ap.
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Aperture, you have a 8-16 mile commute. Good job! No shame allowed. Sure, ride your bike, but good job on the commute. 62% is impressive. Keep improving, of course, but you are doing great.
- MMM Cheerleader
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Sure you could have! Get a horse! Get a boat! Take up golf!
(all those "!"s - have I had too much caffeine?)
In 2016, the easiest hard choices relate to my hobby activities - photography and woodworking (I don't think I could have chosen two more expensive hobbies).
On topic, I am retired, so no huge savings goals, but without trying I am still saving about 20% of net. Some is really deferred spending (the joys of house ownership, big bucks are planned to be spent this summer), but still, it is effortless. Once you have a lifestyle that meets your emotional needs without blowing the money, it carries over into retirement.
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My crazy stretch goal for 2016 is an 80% savings rate. This would require ridiculous stuff that's not going to happen... UNLESS I MAKE IT HAPPEN. What radical changes would you need to implement to hit an 80% savings rate?
MonkeyJenga, you really got my thinking. I THINK I can make it happen for 2016. Thanks for the inspiration. Using back of the envelope calculations it didn't seem possible, but with a touch of tax optimization and some side income in 2016 from work done in 2015, it can definitely happen. I'm going to set up my retirement contributions which will receive all 80% of those savings!
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It'll be a stretch, but I think it's doable and I love a good challenge. Last year I ended at 74%, so not so far off... kind of.
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My crazy stretch goal for 2016 is an 80% savings rate. This would require ridiculous stuff that's not going to happen... UNLESS I MAKE IT HAPPEN. What radical changes would you need to implement to hit an 80% savings rate?
MonkeyJenga, you really got my thinking. I THINK I can make it happen for 2016. Thanks for the inspiration. Using back of the envelope calculations it didn't seem possible, but with a touch of tax optimization and some side income in 2016 from work done in 2015, it can definitely happen. I'm going to set up my retirement contributions which will receive all 80% of those savings!
That's great! And to think, you don't even have to sleep in your office.
It'll be a stretch, but I think it's doable and I love a good challenge. Last year I ended at 74%, so not so far off... kind of.
Good luck! I was at 74% as well, not including gifts, but to get to 80% will require a big income boost.
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I like this thread (and secretly following MonkeyJenga for the awesome non-goal directed super accomplishment, sarcasm and excellent grammar). I discovered MMM in mid-June 2015 and interrupted our slow cruise to late retirement on around July 1. (How the fuck did I not figure out the simple math of early retirement sooner? All this to disclose that our 2015 year end saving rate for 2015 was 46% (wah wah waaaaaah).
In 2016, we will move this rate up to 62% by continuing what we have done in the second half of 2015. This will be a big accomplishment and I hope will incent my wife to continue making changes in how she spends. I am planning to retire October 1, 2018 when I will be eligible for a pension. If I left before that, I would be leaving the equivalent of $400K in savings behind. Thus I cannot really move up my timeline, but I can reduce waste and improve our nest egg going forward.
We have both stopped spending that was easy and we now have to make harder choices going forward. My easy spending that has stopped included lunches at work, skiing, buying prepared meals at the grocery store, purchasing espresso drinks and buying random crap. I have replaced fantasizing about purchases with fantasizing about retirement. (Who doesn't want to be GoCurryCracker? Have you seen their travel plans for 2016?)
Right now I am considering changes in these two domains:
In 2016, the easiest hard choices relate to my hobby activities - photography and woodworking (I don't think I could have chosen two more expensive hobbies). At this point, I have not bought any photo equipment in 8 months, but I took a woodworking class in the fall and made some supply purchases that were face-punch worthy. Spending on these hobbies must stop in 2016 and I need to sell off unused equipment. That will net about $3000 in savings vs. 2015. I would love to turn the woodworking into a mechanism for producing gifts for loved ones next year. If I replaced purchased gifts with created ones, I could save an additional $250 next year. I am going to commit to only spending $10 per month for my lightroom/photoshop license in 2016 - no equipment, no classes.
The hardest hard choice relates to my work commute. Presently I drive a 19 mpg minivan back and forth to work. It is 4 miles in each direction (head hung in shame). Reasons I have not switched to biking (1) price of gas is cheap (2) my bike is a heavy 1989 mountain bike (3) I like leaving work at lunch and coming home (note the extra miles I put on the car) (4) there is a mile-long hill on the way back from work (5) I was very ambivalent about bike purchases (including an e-bike) too many choices. (6) did I mention that I am lazy? OK - once the weather gets warm again, I will try biking at least 3 days per week with my heavy stupid bike to try it out. I will do this for two weeks and consider the results before further commitments. At $0.55 per mile, the savings potential of biking to work would be ~$2200 per year, but the reality would be more like 1/2 of that because I have days where I have to drive and there is bad weather that I am not going to bike in.
There are lots of other hard decisions to make in 2016 - but these are the two that may have biggest impact and that I have 100% autonomy over.
Thanks for the topic - got me to look at year-end savings rate and set a goal (sort of) and consider outside the box opportunities for savings.
Self examination is exhausting. It is time for breakfast and more coffee. Thanks -Ap.
Good luck with the changes! We can go on this bike commuting journey together. Just think, if you can get a monthly 80% rate by the end of the year, you're all set for 2017.
I got into photography a couple of years ago, and I forced myself to do it as cheaply as possible. Refurbished DSLR, stuck with the kit lens despite an intense craving for more expensive upgrades, got a cheap Photoshop version, and resisted buying any other accessories except a Gorillapod. Even that was unnecessary. Maybe I should sell it this year.
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The higher your income, the easier to achieve an 80% savings rate. Of course it is a great achievement. However for someone making 36000 year, to save 80% would require them to live off of only around 550 a month. Of course that would be awesome and some do it, but generally only if they are subsidized by someone else or the government. If I had no mortgage, no car, no groceries, and no luxuries I am still not sure if I could live off so little.
Here is my hypothetical budget:
$210 taxes and insurance for house
$65 electric ( all- electric house with a well pump), never been cheaper
$45 animal feed (raising my own food)
$80 misc. Food stuffs to fill in the gaps. Food for 4 adults
$136. Home maintenance.
$4 Whatever else
Sent from my XT1526 using Tapatalk
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My crazy stretch goal for 2016 is an 80% savings rate. This would require ridiculous stuff that's not going to happen... UNLESS I MAKE IT HAPPEN. What radical changes would you need to implement to hit an 80% savings rate?
MonkeyJenga, you really got my thinking. I THINK I can make it happen for 2016. Thanks for the inspiration. Using back of the envelope calculations it didn't seem possible, but with a touch of tax optimization and some side income in 2016 from work done in 2015, it can definitely happen. I'm going to set up my retirement contributions which will receive all 80% of those savings!
That's great! And to think, you don't even have to sleep in your office.
Yeah alot of the workability of my plan is that I can whittle myself down to a 0% federal tax rate after the saver's credit and the boost from my employer's retirement contributions.
If I remember part way through the year I will post on here to let you know how it is going. It may not be sustainable over a span of several years but considering I spent about 14K in 2015 for all expenses, it surely could happen. If anything it will healthy to see what is possible.
Again, it is really inspiring to go from 'wow that guy is loony to 'wow that could be feasible'.
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The higher your income, the easier to achieve an 80% savings rate.
Absolutely.
However for someone making 36000 year, to save 80% would require them to live off of only around 550 a month.
Yes, it would be very challenging to save 80% on that amount. But spending isn't the only thing that can change! My own options include some form of side income. This hypothetical person who wants to save 80% of their salary would need some combination of the following:
1) finding alternative housing (ex: local version of WWOOF'ing, living out of a car, living with family) and food (ex: dumpster diving, extreme couponing, mystery shopping)
2) increasing their salary (ex: side jobs, aggressively pursuing raises/promotions)
3) taking advantage of every tax savings possible to increase their take-home
My crazy stretch goal for 2016 is an 80% savings rate. This would require ridiculous stuff that's not going to happen... UNLESS I MAKE IT HAPPEN. What radical changes would you need to implement to hit an 80% savings rate?
MonkeyJenga, you really got my thinking. I THINK I can make it happen for 2016. Thanks for the inspiration. Using back of the envelope calculations it didn't seem possible, but with a touch of tax optimization and some side income in 2016 from work done in 2015, it can definitely happen. I'm going to set up my retirement contributions which will receive all 80% of those savings!
That's great! And to think, you don't even have to sleep in your office.
Yeah alot of the workability of my plan is that I can whittle myself down to a 0% federal tax rate after the saver's credit and the boost from my employer's retirement contributions.
If I remember part way through the year I will post on here to let you know how it is going. It may not be sustainable over a span of several years but considering I spent about 14K in 2015 for all expenses, it surely could happen. If anything it will healthy to see what is possible.
Again, it is really inspiring to go from 'wow that guy is loony to 'wow that could be feasible'.
I'll PM you if you forget. Keep you honest. :)
Glad I could help get you thinking! And hey, my first instance of mistaken gender identity. I happen to be a delicate lady-flower.
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Ok, I have to admit that my first thought was complainypantsing can'tpossiblydoitiveness. However, it did make me think. Thank you for that :)
Of course, after thinking about it, I still can't do it without some combination of living in a cardboard box and a massive payraise.
But, the question has also made me even more determined to save as much as possible without hating life. So, to answer the question 'what would it take', I'll go over some of the numbers that prevent me from doing it, and what steps I can/will take to get as close as possible.
1) My total annual PITI payments are approximately 27% of my after tax income. I do have a roomate, so I've taken that money into account as income. If I impute principal payments as savings, it's still (just) over 20% by itself. And, before anyone suggests that I bought too much house, I bought a house that is about as cheap as it gets for the area, I've recently had to take a 5K paycut, and I am likely overestimating the amount of tax I'll be paying given the amount of pre-tax savings I intend to do, so the percentage isn't too whacky, IMO.
2) Ok, well, that's probably reason enough, but I currently have somewhat of a clown commute that includes tolls which save at least 20-30 minutes per day. My office location has moved twice already, is about to move again, and there's no guarantee that I won't be changing jobs in the near future as well, so moving to be in bike/walk distance is not a good option.
3) While my work does have a 401k, they don't match, and I'm not eligible to contribute until the end of March at the earliest (I might not be able to contribute until the following pay period, so it might be 1 April)
Ok, so those are the biggest challenges. I mean, I just don't make enough money as a single person in a HCOL area in a career field with a relative amount of volatility.
Things to consider (with varying degrees of likelihood):
1) New housing situation. So, if I move near the new office that I know we're moving to, I could potentially save a ton of money as I wouldn't need to take toll roads, wouldn't need to drive as much (hopefully no commute), and would hopefully be able to find a place that would be cheaper (though even if it is it probably wouldn't be by much). Unfortunately, this would mean that I would probably lose my roomate as it would add a good 20-30 minutes to his commute. So, it would have to save quite a lot to make up for that.
2) New job. I've been looking, but I really need to step it up. I have a potential opportunity that would require an international move, but it also pays more and would be a fantastic opportunity, but I can't sit around waiting to hear back on it. So, I will be working on that for sure, but there are no guarantees.
3) I don't think I'm going to be able to quite max my 401k, but I hope to get as close as possible. I've just set up my HSA and plan on maxing that, and I will max my Roth (I know it's not optimal, but I'm really bad at conventional emergency funds, so this will help ameliorate some concerns).
4) I have a number of...let's call it hobby supply related items that I need to sell. That will help considerably as I should be able to get at least 3-5k from them. If I can get off my butt and do that it will make me much more comfortable with maxing my 401k contributions. Any leftover funds from sales can go in my (super tiny) taxable account.
5) Paying off my car will help significantly with cash flow. I plan on doing this by the time that I start contributing to my 401k, so that I will hopefully not have to feel too much of a pinch there.
Well, it's a start. So, thank you very much for helping to get my brain parts working.
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Hope you guys are ready. I'm posting January numbers tomorrow and will be using this thread to diary my efforts.
edit: Oops used guy in a gender-neutral way again :)
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January 93%
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Average 93%
A good start! But also some things that artificially inflate the number like getting reimbursed for things from last month (inflated spending then, deflates it now) and I get a per diem from work when I travel that I don't use all of, but also don't count as income.
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We tallied our January numbers and it looks like we killed it: 83% savings rate, 86% counting mortgage principal as savings.
BUT I think our numbers are artificially inflated too. Neither wife nor I are entirely sure what we are going to do in terms of staying employed, so we decided to front-load the hell out of our 401k's this year. All the extra tax deferred savings in one month makes our net income look a lot higher due to reduced withholding, hence higher savings rate with same expenses. In reality, we are "borrowing savings" from some future month where we will end up having more taxes withheld when we have no more 401k room.
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I'm off to a crappy start :(
44% for January
I'm not sure if 80% will be in the cards for me this year. Too much extracurricular travel planned for this year.
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Ours was somewhere around 80% last year (
I need to go back and see how we accounted for the 2014 taxes that were paid in 2015, and then possibly also push the 2015 taxes we are about to pay back into 2015 and reduce income accordingly Did our tax returns, they pushed us into the high 70s. Wahhhh, poor us.). I think the biggest contributors for us have been earning two relatively high salaries with no kids to support (this is about to end, so there goes our time in the 80% club), and being very hard-assed about looking for the lowest possible rent whenever we move (we've now moved twice since 2013)--basically, when it comes to finding a place to live we pretend we're still grad students. So I would recommend looking into getting a raise, or reducing your rent/housing expenses as the steps that are likely to pay off most over time. When I look at our non-housing expenses, there are opportunities to cut back, but they are peanuts relative to the fact that we could easily be paying $200-1000 month more in rent than we currently are, for very little appreciable difference in quality of life. Also, most of the other stuff we could cut, we have to work at continuously month after month, so more effort and more opportunities to slack off. In contrast, once we sign a lease, we don't have to work at saving money on rent for at least another 12 months. The decision has been made for us. It's a similar deal with looking for a higher paying job--you don't do it that often, but once you put in the effort, it pays off for quite a while. I know for us, anytime we've gotten a raise in the past few years, the increase in take home pay has again been significantly more than we would save through cutting back on any of our non-housing expenses.
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To avoid any funny, gimmicky, accounting I will present a simple cash flow statement. I will use pre-tax numbers because taxes are an outflow. I may switch to numbers at some point but will report everything as a percentage of total inflow. FYI, my base w-2 annual inflow is around 50K.
Nothing is counted unless it is realized in that month. So for example, leave time is accrued but not realized for January since I didn't take any leave so it is not counted. Similarly, my front-load to my IRA is just a transfer and was "savings" from a previous month.
Savings rate is computed as 1-(total outflow/total inflow) and 2016's months will be carried forward.
January
Inflow
w-2 income: 59%
401(a) employer contribution: 6%
hsa employer contribution: 8%
misc income (sales, 1099 work, etc): 27%
Outflow
expenses (rent, food, discretionary, insurance, taxes, etc): 14%
Savings rate 86%
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I'm off to a crappy start :(
44% for January
I'm not sure if 80% will be in the cards for me this year. Too much extracurricular travel planned for this year.
Only here does someone consider a 44% savings rate as crappy. Hah. You can still push yourself to figure out additional efficiencies, even if you don't hit 80% on the nose!
cats: Impressive that you have already hit 80%! And congrats on the upcoming child.
JZinCO, CanuckExpat, and McStache: Way to go!
Well, it's a start. So, thank you very much for helping to get my brain parts working.
You're welcome, cautiouspessimist. I like forcing people to use their brain parts. :)
My own number is less impressive this month. I hit 70% even. I spent a couple hundred dollars hosting an annual party, but also received a couple hundred in gifts. The good news is I spent less and earned more than in January 2015. My yearly average will almost certainly be higher with extra paycheck months, a bonus, a small raise, and possible side income. I'm also going to get a bike this month, come hell or high water, which will reduce my transit spend.
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I'm off to a crappy start :(
44% for January
I'm not sure if 80% will be in the cards for me this year. Too much extracurricular travel planned for this year.
Only here does someone consider a 44% savings rate as crappy. Hah. You can still push yourself to figure out additional efficiencies, even if you don't hit 80% on the nose!
Hah! That does put things into perspective. Our "crappy" is a pipe dream for the masses.
I will certainly improve that %, In January I paid $1500 for a vacation that made up 55% of my spending for the month lol. Without the vacation I would have been @ 73-74% which I'll take for a non commission month.
We got this!
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Only here does someone consider a 44% savings rate as crappy. Hah.
Completely agree lol :)
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With an extra mortgage payment and a rental vacant suite I only saved 66.4% this month.
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Wow, you guys are really inspiring! I can't even wrap my head around how people can have such high savings rates. We are currently at about 56%. But every incremental increase in savings rate takes a much larger proportional chunk out of our budget. I am not done optimizing yet, though many of the low-hanging fruit have already been taken care of. We currently have two kids in daycare. Our rate should increase to 62% once the oldest starts kindergarten in September. But I will try for incremental increases before then as well.
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Wow, you guys are really inspiring! I can't even wrap my head around how people can have such high savings rates. We are currently at about 56%. But every incremental increase in savings rate takes a much larger proportional chunk out of our budget. I am not done optimizing yet, though many of the low-hanging fruit have already been taken care of. We currently have two kids in daycare. Our rate should increase to 62% once the oldest starts kindergarten in September. But I will try for incremental increases before then as well.
Well, as much as we like to disregard the role of circumstance here, some of it does stem from external factors. I'm a lazy shit by any standard, and I don't feel like I've even had to work that hard to get into the 70-75% range (see, I can't even be bothered to track it down to the tenth of a percent! WTF?) It mostly just took patience and incremental changes over time.
As DINKs in a LCOL, and with DW being a natural saver, we hit a high SR easily once I got into MMM. Numbers are useful but they don't tell the whole story.
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To avoid any funny, gimmicky, accounting I will present a simple cash flow statement. I will use pre-tax numbers because taxes are an outflow. I may switch to numbers at some point but will report everything as a percentage of total inflow. FYI, my base w-2 annual inflow is around 50K.
Nothing is counted unless it is realized in that month. So for example, leave time is accrued but not realized for January since I didn't take any leave so it is not counted. Similarly, my front-load to my IRA is just a transfer and was "savings" from a previous month.
Savings rate is computed as 1-(total outflow/total inflow) and 2016's months will be carried forward.
January
Inflow
w-2 income: 59%
401(a) employer contribution: 6%
hsa employer contribution: 8%
misc income (sales, 1099 work, etc): 27%
Outflow
expenses (rent, food, discretionary, insurance, taxes, etc): 14%
Savings rate 86%
February
Inflow (source/% of total inflow)
w-2 income: 84%
401(a) employer contribution: 9%
Promotions/Bonuses for banks, credit cards etc: 6%
misc income (sales, 1099 work, etc): <1%
Outflow (source/% of total inflow)
rent: 11%
bills: 3%
grocieries: 2%
discretionary spending: 6%
Savings rate 79%
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I broke down spending categories a little more.
Alot more discretionary spending this month, mostly due to a weekend in Denver and going out to bars or restaurants every weekend. But my bills were down.
My raise will kick in next month which will be nice and let me achieve 80% SR without the need for pulling in sources of income outside of my w2.
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I hit 80% SR for February which bring my YTD SR up to 66% :)
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Nicely done, 2B2S and JZinCO!
I'm at 73% for Feb. Spent $250 less than Feb last year.
I picked up a bike this weekend, so once the seat is fixed and I get comfortable commuting by bike, my transit expenses will inch down.
Also working on my group romance novels to bring in more cash. Hopefully that picks up once we develop more of a back catalog. We're putting out our second release this weekend, might be in the black within a couple months.
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I think we were around 63% in January (77% without the pets!). I don't really like the idea of calculating savings rate on a monthly basis though, as there are expenses that don't occur with a monthly frequency (e.g. car insurance). If I reach my goal of 70-75% savings rate I'm sure we'll have some select months at 80%.
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I've seen people amortize annual expenses to even out the monthly reporting. I don't have any annual costs, so my only variation comes in income: bonus and 3-paycheck months. (In the future also side income.)
I'm lazy, so I don't bother amortizing income. Since the goal is 80% for the year, I just know my regular months need to be around high- 70's. I am not there yet. But even occasional months with 80% is great!
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I've seen people amortize annual expenses to even out the monthly reporting. I don't have any annual costs, so my only variation comes in income: bonus and 3-paycheck months. (In the future also side income.)
I'm lazy, so I don't bother amortizing income. Since the goal is 80% for the year, I just know my regular months need to be around high- 70's. I am not there yet. But even occasional months with 80% is great!
At the very least I suppose it can be motivating.
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- Get a raise
- Bring in substantial side income
These two points can make the biggest difference to your savings rate, hands down.
If you doubled your income and your spending stayed constant, then you'd notice a huge jump in the savings rate. When I started my business I earned 4% of my fire rate annually. I spent the lot = 0% savings rate. Now my spend is about 5% of my fire target annually, but this year I brought in over 25% of my fire target. This equals 80% savings rate.
If you're happy to put the effort it, being in business is the fastest path to FI. Also business deductions such as costs for equipment and phones etc are a big help when offsetting taxes to be paid.
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That is very true, though as MMM has pointed out, arithmetically an existing dollar not spent increases one's saving rate moreso than an additional dollar earned and not spent.
In my case, while I am pursuing additional income fairly fervently, I realize that I can save a larger proportion of my income just by not spending it.
edit: I realize the italicized part sounds like a informationless tautology..
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- Get a raise
- Bring in substantial side income
These two points can make the biggest difference to your savings rate, hands down.
If you doubled your income and your spending stayed constant, then you'd notice a huge jump in the savings rate. When I started my business I earned 4% of my fire rate annually. I spent the lot = 0% savings rate. Now my spend is about 5% of my fire target annually, but this year I brought in over 25% of my fire target. This equals 80% savings rate.
If you're happy to put the effort it, being in business is the fastest path to FI. Also business deductions such as costs for equipment and phones etc are a big help when offsetting taxes to be paid.
If I doubled my income, yeah, that would help! I did rapidly increase my income over a period of five years. I went from about $12/hr as a temp to around $100k. At this point, to get a substantial raise in the office environment would require managing people, which I don't want to do again. I'm working on a professional cert which would line me up for a promotion in a year or so, but I'm not excited about it.
I have also read a few books about becoming a business owner and decided that route wasn't for me. Wouldn't fit my personality. My plans for side income are centered around writing. Romance novels, like I mentioned, and possibly other ebooks with a blog backing them up. If writing becomes a more serious money-maker, I will look into available deductions, like home office and internet.
And along the lines of what JZinCO said, cutting expenses would get me across the goal line much faster. Cutting my rent in half would have a bigger impact than adding the same amount of money to my salary.
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What about putting some more marketing behind your books. If they are already selling, then thats a great opportunity to be your own boss. In fact thats the dream for many entrepreneurs. Create once, sell often.
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What about putting some more marketing behind your books. If they are already selling, then thats a great opportunity to be your own boss. In fact thats the dream for many entrepreneurs. Create once, sell often.
That is the dream! I had started working on a financial coaching gig last year, but it was too labor intensive.
We only have one book up so far, so not many sales yet. Experienced writers have said you need a decent back catalog before you start making money.
Marketing is a must, and it's going to take some time. Right now we're testing different approaches and evaluating ROI. If you've got any good references on the topic, I'd love to check them out!
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January 93%
February 87%
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Average 90%
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January 93%
February 87%
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Average 90%
I am in awe of you! I was at 66% in February.
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January 93%
February 87%
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Average 90%
That is incredible!!
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January 93%
February 87%
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Average 90%
Wow, how is this even possible? Curious about how much you make/spend?
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January 93%
February 87%
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Average 90%
Wow, how is this even possible? Curious about how much you make/spend?
My net income is about $5,500 per month and I'm saving +/-$5,000 per month.
I'm currently living rent free, have no debt, and travel all of the time for work (on a per diem to cover those expenses). So while my numbers are really fantastic right now, they aren't indicative of what my FI date can be. Adding in rent and some of the expenses that are masked by travel, I would probably be in the high 70's.
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Nice going, McStache!
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McStache, you're doing too good. i'd tell you to make your own 90% thread but you'd be lonely there ;)
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Just calculated my 2015 savings rate to be 63%. 2016 should bring higher gross income but also higher expenses, so I'm not holding my breath for any huge [calendar year] improvements.
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I used the calculation in the OP. Savings rate is not so great (49%)....but, savings + student loan payments + charitable giving is 81%. Once the loans are gone, savings will improve drastically. (Although I'll never change the charitable giving.)
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If I could just maintain 75%+ I would be done working in 4.5 years ............damn you volatile and unpredictable income!!
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I used the calculation in the OP. Savings rate is not so great (49%)....but, savings + student loan payments + charitable giving is 81%. Once the loans are gone, savings will improve drastically. (Although I'll never change the charitable giving.)
I'm at 31% for 2016 according to my plan. This is up from 15% last year. Over the next 2.5 years I'll be debt free and will increase to 50%-60% very quickly and will continue to increase more slowly until 75%. 80% is an awesome goal maybe I'll get there someday.
Looking forward to working my plan and hopefully exceeding it!
I'm of the opinion that you should count debt principal repayment as part of your savings rate because it increases your net worth.
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I'm of the opinion that you should count debt principal repayment as part of your savings rate because it increases your net worth.
Ditto
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13k/month take home after 2500/m 401k w/match and deferred compensation. Live on 5331/ month. The rest goes to debt.
If we count debt payment as pseudo-savings as it increases net worth, I'm at a 65% savings rate.
Balancing need to get out of debt with need to stay married, and honestly she is more supportive than most.
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Okay, I just calculated for last year (doing taxes). Going to max out IRAs for both of us tomorrow, which will bring us to 70.1% of our pretax income into investments and retirement vehicles this year. Then we pay taxes, then we get to spend the rest.
Probably we are skimming about $3-$7k from 2014 and 2016 combined to make this work - a lump sum into taxable this summer may have included some from 2014, and the combined $11k into IRAs may include some money earned in Jan or Feb 2016. But not much. It's a pretty good deal, regardLess.
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Just calculated my 2015 savings rate to be 63%. 2016 should bring higher gross income but also higher expenses, so I'm not holding my breath for any huge [calendar year] improvements.
63% is great! Are any of the higher future expenses avoidable?
Kmiller and abhe8, good luck destroying those loans!
Rural, 70% pretax is incredible. Have you calculated the post-tax SR?
manonfire1007, good luck keeping the marriage going. ;)
I think I mentioned that I finally got a bike, so my transit costs will go down in a few months. I may also be getting a free helmet from the DOT this Friday!
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Just calculated my 2015 savings rate to be 63%. 2016 should bring higher gross income but also higher expenses, so I'm not holding my breath for any huge [calendar year] improvements.
63% is great! Are any of the higher future expenses avoidable?
Thanks. Well we're buying a house (our offer has already been accepted), so that is essentially unavoidable. Including one-time closing costs we're probably looking at $6-8k more for the year compared to our current rent. The other big expense is pills for one of our cats (see my journal)... That just jumped up to about $450+/month. But I've done some research and it looks like we can bring that down to around $100/month. This could also be halted if the cat dies. :(
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I've got lots of room for improvement, last year I was only 25% or so, but this year I'm hoping to get to around 40%, and break 50% in the near future. With my income and current financial needs/responsibilities my options to get to 80%+ would be some thing like
- Rob banks
- Win lottery
- Live under bridge
- Sell organs
But in all seriousness, I'm going to be hustling my ass off this year and continuing to lower expenses as much as I can.
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Just calculated my 2015 savings rate to be 63%. 2016 should bring higher gross income but also higher expenses, so I'm not holding my breath for any huge [calendar year] improvements.
Rural, 70% pretax is incredible. Have you calculated the post-tax SR?
Thanks; im pretty psyched even if some of it was snuck out of the other years. I'm actually not sure of a fair way to figure post-tax with so much going into pretax funds but then some post tax, and the standard IRAs on top. What we put away is twice what we actually brought home, but it's got to be more complicated than that, right?
We won't beat this in 2016; once we knew my husband would be leaving his job (starting with his March 2015 paycheck) we put 100% of his pay into his 457 so we could roll it over and buy vested status in his pension with pretax money. Now we're single income.
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I keep seeing this thread in recent replies, and finally got in for circumstantial reasons, as opposed to increased badassery. I'm not really sure what my SR is right now and it is a really tumultuous time financially - not in a bad way, just tons of moving parts. I know I crossed well above 50% and have flirted with 75%, probably held it for a couple months at a time, if not continuously, in the last year. This month is kind of a fluke, with almost $6K in nonrecurring income and no big spending, so I'm probably around 85%. And the coming months are shaping up nicely too, so 80% may not be the unsustainable dream I had imagined.
The biggest challenge for me will just be to get back on top of my accounting to ensure accurate evaluations.
I've got lots of room for improvement, last year I was only 25% or so, but this year I'm hoping to get to around 40%, and break 50% in the near future. With my income and current financial needs/responsibilities my options to get to 80%+ would be some thing like
- Rob banks
- Win lottery
- Live under bridge
- Sell organs
But in all seriousness, I'm going to be hustling my ass off this year and continuing to lower expenses as much as I can.
Hustling works man. Open doors and get your name out there.
I got my real estate license (a few months of early mornings and late nights) to represent my own investing partnership, and have put in plenty of time since then working our own deals. The incidental transactions outside of that, things that just came along because someone knew I was licensed and happened to ask me first, are snowballing, and will pass five figures this year. The most recent surprise referral was actually what got me into this thread. And there are any number of side gigs that could produce those kinds of happy surprises.
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January
Savings rate 86%
February
Savings rate 79%
March
Inflow (source/% of total inflow)
w-2 income: 64%
401(a) employer contribution: 7%
Promotions/Bonuses for banks, credit cards etc: 2%
misc income (private sales, side-work, etc): 3%
tax return: 22%
Outflow (source/% of total inflow)
rent: 7%
bills: 2%
groceries: 1%
taxes: 2%
discretionary spending: 4%
Savings rate 84%
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Made more this month than Jan or Feb due to tax return and raise at work. Also spent more.
When I did my taxes, I opted not to receive cash and got cash equivalent gift cards. Coupled with a promotion, I ended up making 4.6% (using XIRR) returns. I decided to set my allowances to 0 this month (and for the rest of the year) so that next year I can do the same, thus marginally lowering my savings rate for Feb (and withholding more I predict a 6% return). I know, it's silly but in a low yield environment....
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Made more this month than Jan or Feb due to tax return
So you essentially stole from your 2015 savings rate?
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Made more this month than Jan or Feb due to tax return
So you essentially stole from your 2015 savings rate?
I want to expand on this just a little bit. In my opinion your tax refund is like withdrawing money from a 0% interest savings account that you had been contributing to the previous year. So when I calculated my 2015 savings rate I used my actual tax liability instead of my tax withholding numbers.
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Made more this month than Jan or Feb due to tax return
So you essentially stole from your 2015 savings rate?
I want to expand on this just a little bit. In my opinion your tax refund is like withdrawing money from a 0% interest savings account that you had been contributing to the previous year. So when I calculated my 2015 savings rate I used my actual tax liability instead of my tax withholding numbers.
Yes that is EXACTLY what I did.
I'm using cash accounting that has strict time boundaries. So for example
time 1
inflow: $100
outflow: $50
Savings: $50
Let's say for time 2, I receive a refund of $25 from the $50. Time 1 savings does not change because it is strictly bounded.
time 2
inflow: 100+25=125
outflow: $25
Savings: $100
--
If the time step boundaries are expanded to incorporate both time 1 and time 2 then we end up with:
Total time
Total inflow: $225
Total outflow: $75
Savings: $150
As you can see, when we expand the temporal boundaries, it is a wash. However, the liquidity of having $50 in savings in time 1 and $100 in savings in time 2 is not the same as the liquidity of having $75 in savings in time 1 and $75 in savings in time 2. The liquidity matters because if I want to purchase something worth $75 in time 1, there is a cost related to holding debt which would not occurred had I had $75 in savings spread across time steps.
I do not use an accrual basis of accounting for myself or my business and the reason for that is I care about liquidity or 'What do I actually hold at any given point in time?'.
So per my example, the extra tax withheld is outflow incurred for those months in 2015 and the tax refund incurred in 2016 is an inflow. Over lower resolution time steps, it is a wash. side note: Though not really as per my XIRR calculations. Had I spent those dollars in 2015 they would have provided 100% of their value but by 'investing' them with the IRS and taking a promotional bonus, I end up with $105 or so of value. Of course I could have not spent the $100 in 2015, put them into a different investment and earned some other, higher or lower return.
edit: The really nice thing is that by using monthly cash flow statements, it lines up perfectly with net worth (minus investment earnings or losses, I don't count those as 'savings') and my holdings across my accounts at the end of every month. Also cleared words to make the msg for brevity.
Oh and sorry for the rant if you didn't need lecturing. I just want to be very transparent.
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Made more this month than Jan or Feb due to tax return
So you essentially stole from your 2015 savings rate?
I want to expand on this just a little bit. In my opinion your tax refund is like withdrawing money from a 0% interest savings account that you had been contributing to the previous year. So when I calculated my 2015 savings rate I used my actual tax liability instead of my tax withholding numbers.
Yes that is EXACTLY what I did.
I'm using cash flow accounting that has strict time boundaries. So for example
time 1
inflow: $100
outflow: $50
Savings: $50
Let's say for time 2, I receive a refund of $25 from the $50. Time 1 savings does not change because it is strictly bounded.
time 2
inflow: 100+25=125
outflow: $25
Savings: $100
--
If the time step boundaries are expanded to incorporate both time 1 and time 2 then we end up with:
Total time
Total inflow: $225
Total outflow: $75
Savings: $150
As you can see, when we expand the temporal boundaries, it is a wash. However, the liquidity of having $50 in savings in time 1 and $100 in savings in time 2 is not the same as the liquidity of having $75 in savings in time 1 and $75 in savings in time 2. The liquidity matters because if I want to purchase something worth $75 in time 1, there is a cost related to holding debt which would not occurred had I had $75 in savings spread across time steps.
I do not use a cash accrual basis of accounting for myself or my business and the reason for that is I care about liquidity or 'What do I actually hold at any given point in time?'.
So per my example, the extra tax withheld is outflow incurred for those months in 2015 and the tax refund incurred in 2016 is an inflow. Over lower resolution time steps, it is a wash. side note: Though not really as per my XIRR calculations. Had I spent those dollars in 2015 they would have provided 100% of their value but by 'investing' them with the IRS and taking a promotional bonus, I end up with $105 or so of value. Of course I could have not spent the $100 in 2015, put them into a different investment and earned some other, higher or lower return.
I'm very clear and consistent with my framework. For example, in January I did not double-count my IRA contributions because those $ were inflow during 2015 and the movement from cash to paper assets was not an additional inflow nor outflow but simply a transfer.
I do understand where you are coming from. I dislike when people refer to 'savings' as deferred spending and neglect to account for the spending when it occurs. My point is that it is impractical to carry forward on an accrual basis forever. For example, everything I am saving is for retirement which I intend to spend. Using an infinitely wide time step the actual savings is $0 because each $ earmarked for retirement will be spent or given away at death. So in my opinion it is very necessary to use clear and consistent boundaries of time during accounting.
edit: The really nice thing is that by using monthly cash flow statements, it lines up perfectly with net worth (mnus investment earnings or losses, I don't count those as 'savings') and my holdings across my accounts at the end of every month.
Oh and sorry for the rant if you didn't need lecturing. I just want to be very transparent.
Thanks for the explanation. This makes sense and works since you are consistent. You just end up with some outliers when looking at the higher resolution.
There are certainly practical merits to your method as well. I can't really know what my tax refund will be during the year so it can't be tracked as part of my net worth in real time. And with my method I have to retroactively calculate my savings rate after filing my taxes.
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Yup. To each their own.
Now if I had a planned, deferred expense on Dec 31, 2016 which would wipe out my accrued savings over 2015, I probably would use an accrual basis. It would be unfair for me to claim such a high savings rate for 364 days knowing that it would be liquidated on the 365th day :)
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I keep seeing this thread in recent replies, and finally got in for circumstantial reasons, as opposed to increased badassery. I'm not really sure what my SR is right now and it is a really tumultuous time financially - not in a bad way, just tons of moving parts. I know I crossed well above 50% and have flirted with 75%, probably held it for a couple months at a time, if not continuously, in the last year. This month is kind of a fluke, with almost $6K in nonrecurring income and no big spending, so I'm probably around 85%. And the coming months are shaping up nicely too, so 80% may not be the unsustainable dream I had imagined.
The biggest challenge for me will just be to get back on top of my accounting to ensure accurate evaluations.
Belated welcome to the thread, zephyr911! Awesome numbers, you and JZinCO both.
I'm at 79% for March, thanks to a small bonus at work. In April I'm going to be paying a whole lot in taxes... I also follow time-bound accounting, so only the 3-paycheck month may save me from having a negative savings rate.
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January 93%
February 87%
March 83%
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Average 87%
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January Savings rate 86%
FebruarySavings rate 79%
MarchSavings rate 84%
April
Inflow (source/% of total inflow)
w-2 income: 77%
401(a) employer contribution: 8%
Promotions/Bonuses for banks, credit cards etc: 7%
misc income (private sales, side-work, etc): 7%
Outflow (source/% of total inflow)
rent: 9%
bills: 2%
groceries: 2%
taxes: 4%
discretionary spending: 12%
Savings rate 71%
Would have been 80% but I bought a gift card in order to fulfill a CC bonus. Ideally, this should offset future spending so I am still on track. One quarter of the way though this experiment and I realized I can spend whatever I want to be fulfill needs and wants with a 60-70% saving rate. I will shoot for that next year because it makes me happiest and still is financially responsible.
In either case, things are always getting better.
January 93%
February 87%
March 83%
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Average 87%
Impressive!
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January 93%
February 87%
March 83%
April 73% <--- Taxes and medical bills
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Average 84%
Thanks, JZinCO! Same to you! Why not shoot for 60-70% for this rest of this year? When you look at the simple math, the difference in dates is two years, but a happy two years is way better than a miserly two years.
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I understand. Part of this is (1) to see if I can make it on a low cash flow and (2) pay 0% federal taxes not for any ideological reason but as an optimization challenge.
I mean I'm not missing out on much, it is more that I am avoiding blowing money on wants that I find fun but also wasteful (conflicting, ya).
Either way I don't feel miserly. I enjoy playing this money game!
Plus I don't want to retire early, just flexibility: the option to take a job for less pay, take time off or start a new business without having money related concerns. So two years doesn't mean that much.
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Saving rate last year was 66%. I think it will go downhill from there, unfortunately, as we feel we've made every compromise we can make without impacting my wife/kids every day activities, and are now dependent on inflation. Increasing to 80% would probably involve a divorce and forgetting that I have children :P
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This is the one and only month this year where I will have an 80%+ YTD savings rate.
This month will take me up to an ~82-83% YTD savings rate.....after which it will drop like a rock.
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Awesome job everyone!
I hit 83% in April, thanks to three paychecks and cashing in some credit card rewards. I decided not to count my tax bill, since that reflects lower investment returns from 2015, not underpaid income tax.
Saving rate last year was 66%. I think it will go downhill from there, unfortunately, as we feel we've made every compromise we can make without impacting my wife/kids every day activities, and are now dependent on inflation. Increasing to 80% would probably involve a divorce and forgetting that I have children :P
If I had children, my first order of business would be forgetting I had children. But that's why you're a better parent than I would be.
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Awesome job everyone!
I hit 83% in April, thanks to three paychecks and cashing in some credit card rewards. I decided not to count my tax bill, since that reflects lower investment returns from 2015, not underpaid income tax.
Saving rate last year was 66%. I think it will go downhill from there, unfortunately, as we feel we've made every compromise we can make without impacting my wife/kids every day activities, and are now dependent on inflation. Increasing to 80% would probably involve a divorce and forgetting that I have children :P
If I had children, my first order of business would be forgetting I had children. But that's why you're a better parent than I would be.
I would imagine if I had children like me, they would be pretty forgettable...
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I haven't calculated it out completely, but I think if I got married, the SR would jump through the roof.
Taxes would be generally brought down to the 15% federal, rent would stay the same, food costs might increase, transportation costs would definitely decrease.
Possibly transition from 2 cars to 1..
*cough* Not that I would get married solely based on income benefits... HaHa, that would just be crazy!....
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I'm running at ~ 65%; excluding contributions to defined benefit/deferred comp plan. I really hope to get that up closer to 80%.
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I haven't calculated it out completely, but I think if I got married, the SR would jump through the roof.
Taxes would be generally brought down to the 15% federal, rent would stay the same, food costs might increase, transportation costs would definitely decrease.
Possibly transition from 2 cars to 1..
*cough* Not that I would get married solely based on income benefits... HaHa, that would just be crazy!....
I wouldn't think finances would be any less of a reason to get married than any other. Certainly it may be better than some others.
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I have dreams about an 80% savings rate. They mostly involve making much larger amounts of money.
Expense justifications *cough, excuses, cough*
-I could cut more expenses if I forgot about the kids....not going to happen. After-school care costs are ridiculous they are my second biggest expense after rent. Rent is minimized given my constraints.
-I got rid of my car, which helped. Spending on the bike has gone up somewhat, especially now that it is mission critical - still cheaper than buying gas.
-The biggest thing I can do is pay off my debts so there are no longer the fucking interest costs every month. Working on it like there is a massive fire.
-There are small things around the margins that would move my SR a few %, but would likely lead to burnout and a lower SR longterm (further decrease in grocery bills, no dating).
SR for the year (Jan-Apr): 30% - I think this is the lowest in the thread!
Increasing income:
-My tack is making more money and keeping my costs fixed at their lowest, sustainable levels. I started my second job at the end of last month ($$), so the goal SR for the rest of the year is 50%. I could probably work a bit more at job2 - but that way lies extreme burnout.
-If I get the loan repayment grant (and counted it as income each month), then I could conceivably hit 75% for the second half of the year.
-80% would be a good goal for something like 2018....when I've transitioned to the next phase of my career.
*cough* Not that I would get married solely based on income benefits... HaHa, that would just be crazy!....
Ha! Being married is part of what got me into my mess in the first place...make sure you get married to someone on board with the high SR! :P
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Well for the select month of July we managed to save 82% of our post-tax income! So far for the year I calculate we are just over a 70% savings rate.
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I'm at 81% YTD as of August 1st.....but I am projected to drop to 76% by years end.
This is due to lack of commission for the remainder of the year, 1x a year payments coming up in September for insurance, and holiday season spending.
76% for the year still ain't bad =D
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Since my December spending is going to be fairly predictable and I am finished with my 2016 commission payouts the #'s are pretty certain.
I never thought this would be possible but I will be finishing 2016 with a 80.1% net savings rate!
$126,036 - Income
$25,000 - Spending (give or take a couple of dollars)
$101,036 - Saved/Invested
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Wow. Amazing work 2Birds! That's quite an accomplishment.
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Nov was the first month this year that we had an 80% SR.
Took home around $10K and save ~$8K. This month we will save close to 80% again.
Last year we saved $64K but this year will only be $52K. Took home around the same amount. Too many vacations this year.
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Looks like I won't hit 80% this year (unless a
minor miracle major accounting error happens). Between some big medical bills and moving this summer, I'll land at 75% for the year. Not 80%, but 75% is still exciting!
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My crazy stretch goal for 2016 is an 80% savings rate. This would require ridiculous stuff that's not going to happen... UNLESS I MAKE IT HAPPEN.
Did you hit your goal?
We hit a 71% savings rate for 2016. Contrary to my expectations, our expenses were lower in 2016 compared to 2015. Buying a house didn't make as big of an impact as I anticipated. Now I think we're on track for a ~75% 2017.
It's amazing how hard it is to increase a high savings rate by increasing income. To go from a 70% to 80% savings rate you would have to increase your post-tax income by 50%! By comparison, going from a 10% to 20% savings rate only requires a 12.5% increase in post-tax income.
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I did not hit 80% for the year, RWD. I actually stopped tracking over the summer so I don't know my exact number, but it's somewhere in the 70's.
In 2017, I'll either hit 80%, FIRE, or donate a ton of money to causes I care about. I'm hoping for a combo of 2 and 3.
Congrats on your SR and good luck increasing it this year! Agreed that increasing income is a slow way to increase SR once you're already killing it. I had to drastically reduce my expenses to bump up my SR.
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My SR for 2016 was 84.34%. If I can get anywhere close to the same rate this year (which is off to a good start), I'll be done with my day job by the end of the year.
~156 cubicle days left...
Awesome!
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As long as nothing extraordinary comes up, I'm able to do 79% and not really possible to beat that unless we move to a place with cheaper rent.
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I finished last year with 67%, this year I'm at 76%... I don't think this is sustainable! (I can't even hit 80% while not at home, and most expenses paid for by my work. Oh well, I'll have to wait for incremental SR increase due to salary changes)
I'd get rid of my car payment... but at .9%, I know it's more effective to invest rather than remove that line from my monthly payments.... but man I want it to leave.
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January 93%
February 87%
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Average 90%
Wow!
Glad I found this thread. I have been thinking about savings rates for a while.
I'm currently at a 71% savings rate, but I am not counting my employer's contribution to my pension. For the purpose of calculating my savings rate I'll include it, but I don't include it in my net worth calculation.
I have a few ways to increase my rate:
Switch to a high deductible health plan--savings of $60 per month. Walk to work, save $40 in gas (guessing). I'm a mile or so away from work. Those two items might save me close to $100 per month. I have already switched cell plans (from ATT to Google Fi), and am planning on quitting my health club at the end of the year. That will net me another $65.
I generally have $300 left over each month after I pay for everything--providing I stick to budget. I can sweep that into my brokerage account and put it toward next years ROTH contribution. MY 403(b) and 457(b) contributions are at the max right now.
Off to do some calculations . . .
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We hit a 71% savings rate for 2016.
Update for 2017. We hit a 77% savings rate. So close!
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Whoa, I forgot about this thread! Nice job, RWD.
In 2017, I'll either hit 80%, FIRE, or donate a ton of money to causes I care about. I'm hoping for a combo of 2 and 3.
I think I did all 3... I didn't track my spending, but it was around 15k. I FIRE'd. And I donated a lot of money. Not too bad.
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I'll be 72% YTD by end of Feb
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I'm in the 80+ so far... let's see if it stays.