Author Topic: Increasing Savings Rate. Just do it or Budget and Track Spending First?  (Read 1514 times)


  • 5 O'Clock Shadow
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1.  For people who want to up their savings rate, do you generally just increase it until you hit a pain point and figure it out, or track expenses for a couple of months and then budget your way to a higher rate?

I have been investing ~%50 net for the past year+ , and just recently decided to buy a house.  Once I close and all the associated costs change (insurance coverage and rates changing, change of mortgage + interest versus rent, etc....), I'd like to up my investment rate.

I just wasn't sure what the ideal way to do it was.  Do I track everything for a few months and see that I can cut categories X, Y, and Z or do I just do the math to invest 60% (or whatever amount) and work backwards?  I guess either could work, but I always welcome insights from those further along the path than I. 

2.  When looking at charts that show things like saving 50% gets you to FI in 17 years, how does one do the math if they already have money saved but it has been at a varying rate?  For example, starting at 60% today puts me at 12.5 years to FI if going from scratch.  What is the best calculator to sort out how 60% starting now + whatever my current stache is works out to time to FI?
« Last Edit: May 16, 2019, 07:46:47 PM by desert_phoenix »


  • Magnum Stache
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I think the easiest way to increase your savings rate is to just cut back on your discretionary spending - whatever it is you spend money on that's not housing, basic groceries, basic bills, and getting to and from work. Just stop/reduce those things. You're probably making it a lot more complicated than you need to. If I wanted to increase my savings rate, for example, I would just take a hatchet to the "international travel" category, and boom, I'd be close to 80% savings rate.

For calculators, I'm a fan of the Mad Fientist stuff, particularly the FI laboratory.


  • Senior Mustachian
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The easy way to up your savings rate is to look at how much money you have available at the end of the month for three months and then change your savings rate accordingly. This assumes that you're in a static situation, where you have normalized your spending. Since you already have extra money (the amount that was left over in the three months you were tracking), if you accidently set the savings rate too high, you will still be OK.


When you buy a house, your situation changes dramatically. You are no longer in a normalized situation. You may find that the roof leaks, and all sorts of other things need money thrown at them. Some of these you can live with, and some need to be altered straight away. Try to keep your savings at the same level for a while after you buy your house, and then start saving more.


  • Walrus Stache
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I hate tracking little expenses, so I work backwards. I have a general idea of major expenses (rent, food, transportation, phone, internet) each month, and then I set a savings amount based on whatís left over. Part of increasing savings rate is also through optimizing major expenses. For example, next month, we found a way to get our rent down to $0 for the next three years, so that will automatically increase our savings rate.


  • Senior Mustachian
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I don't bother tracking, I just pay attention to what I spend and adjust accordingly.


  • Magnum Stache
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Do both.  Set up a budget based on what you think will work for you and your desired savings rate.  Then track everything you spend and compare it to the budget -- not necessarily daily/weekly, but keep track over time to see how it feels.  Does it feel too tight so that you feel stressed or deprived?  Is there a particular category you're always struggling to meet?  Does the budget feel like a good constraint on impulsive purchases?  Then adjust your budget to better suit you -- and check your new savings rate against the chart to see if you are still happy with the time to FIRE.

The idea isn't to hit some artificial savings rate, it's to find a budget and lifestyle that will make both Current You and Future You happy -- not blowing so much now that Future You will curse Current You because you spent so much that he needs to work forever, but also not living like a monk to hit a specified savings rate if that doesn't make you happy and you don't want to live that lifestyle forever.  Budgeting and tracking make you conscious of the limits you have imposed on yourself, so that you can weigh the current benefits of each purchase against the future costs in terms of time at work.

Personally, I account for current savings just by knocking the number of years that equates to off the projection.  So say your projected FI budget is $30K/yr, and you have $100K saved.  If you save 60%, that says 12.5 years if you started from scratch.  But since you have $100K saved already, you've got your first 3+ years covered.  So really, that takes you down to 9-9.5 years.  That's conservative, because it ignores the growth you'll get over that 9-ish years, but the whole savings % is just a ballpark anyway.

The key distinction is that savings % can give you a sense of your time to FI and a good target, but that assumes that you maintain the same income and same future retirement budget as you currently have -- because, as you noted, when you made less money in the past, you might have saved 60% back then, but if your desired lifestyle has inflated, you're not as far along that 12.5-year path as you thought.  So if your planned future RE budget is higher than the percent you are currently spending, you will need to save more than what the chart says to hit that target in the same period of time. 

If you want more targeted projections, you should look at one of the more detailed calculators people have posted here.


  • Pencil Stache
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Save first, bills next, spend the rest.  And then any money left at the end of the months gets swepted into savings.  So spend the rest= making prudent choices and buying stuff we either actually need at the lowest price possible or things we want, also at the lowest price, that will bring true long term happiness.  Our savings is on automatic.  Really our bills should be too but I like doing it myself.  I basically just pay everything the same day whether it's due or not--I just like getting everything paid to see what I have left.  Then we spend as little as possible, but if we run out of money we just have to wait until next pay day.  Whic h is fine bc the savings is already saved and the bills are already paid.

Buffaloski Boris

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I think the answer depends on whether you have a SO. If so, are they frugal by nature?  Are you? If one or both isnít, you need a budget in my opinion. A budget isnít magic, itís just a way of holding yourselves accountable.


  • Stubble
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I do like tracking every single expense. I think it keeps you more aware of where your money goes and, more importantly, whether it was worth it or not.


  • Walrus Stache
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What's ideal depends on you.

Since you're seeking a method, I'd just do it, but also track. Mint works for a lot of people and is free. You Need A Budget costs money but is supposed to be super for those who actually need an efficient disciplined budget technique.

I never did any of that. I still don't. I make decisions on major items to be efficient. After year end, I try to record the balance changes in my spending accounts, perhaps in a spreadsheet, to calculate what i spent for the year and compare it with expected long term income (am FIREd). If I were saving aka in the accumulation phase, I'd compare to after tax income and calculate savings %.

I walk through savings scenarios for fun though, just reading people's cases. The way I like to calculate time to FIRE completion is:
1. Calculate savings rate (savings amount for year / after tax income amount for year).
2. Measure net worth.
3. Using 5% annual investment returns, calculate how many years of current savings amount would have been needed to generate net worth. That's years to date.
4. Look up years from zero to FI in the table ("total years").
5. Years remaining = total years - years to date.