Author Topic: Savings by a thousand cuts  (Read 6031 times)

EhMerman

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Savings by a thousand cuts
« on: May 27, 2014, 04:07:48 PM »
Current and future Early Retirees,

I want to thank all of you for giving me the strategies to pursue being financially independent. I am a 25 year old that lives in Austin, Tx. I make about 65k USD working in Software Management.

Here are the steps Iíve taken over the last year and how it has impacted my savings rate while improving my overall quality of life:
Stopped renting big house in the suburbs, started renting a small house downtown. It is the same rent but now I can bike everywhere.
Cook more at home
Eat at restaurants less frequently
Work out outside or from home
Cancelled gym membership
Generally be outside more often
Planted a garden on my porch
Got cheaper car insurance
Bike wherever I can
Homebrew my own beer and cider
Got a raise at work, used all of it to increase savings. No lifestyle creep
Got a library card
Have a cheap media center pc hooked up to TV for movies/tv/games
Buy clothes less frequently
Patch holes in clothes for minor rips
Stopped going out for lunch
Use more fans and blankets and less air conditioning
Insulated the doors and windows in the house
Track spending every month in Mint
Reduce taxes by utilizing more tax advantaged accounts
Occasional sublet in an extra room
Immediately sell vested ESPP shares instead of holding on to them, reinvest in index funds in IRA or taxable account
Hang out with grad student friends over work friends. Grad student friends drink cheap drinks, play board games, and host house parties. Work friends go to expensive restaurants and events.
Go on cheaper, more fun dates like going dancing instead of sitting at the movies
Get a cheaper cell phone plan
Increased 401k contribution to maximum of 17.5k USD
Opened IRA and Roth IRA with Vanguard
Opened a taxable account with Vanguard
Maxed out 2013 IRA 5.5k USD
Maxed out 2014 IRA 5.5k USD

Next Steps:
Sell my car if I can live as if I did not have a car for a few months. I currently only drive for groceries and going to work.
Switch over to a High Deductible Health Plan so I can utilize a HSA

Results
Before (as percent of salary)
6% 401k contribution
15% ESPP contribution (treated as savings)
19% total taxes
60% expenses (~$3200 a month)
3% employer 401k match (Free money)
2.5% bonus from ESPP discount (Free money)
total: 105.5% of base salary

After (as percent of salary)
27% 401k contribution
15% ESPP contribution (sold as soon as they vest and reinvested in index funds)
5% Additional savings in taxable account
15% total taxes
38% expenses (~$2000 a month)
3% employer 401k match
2.5% bonus from ESPP discount
total: 105.5% of base salary

TLDR: Over the last year thanks to reddit.com/r/financialindependence and MMM I have:
Boosted Savings from 26.5% to 52.5% of my pre-tax salary
Cut Taxes from 19% to 15% of my pre-tax salary
Cut Spending from 60% to 38% of my pre-tax salary

juanofthesedays

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Re: Savings by a thousand cuts
« Reply #1 on: May 27, 2014, 04:34:38 PM »
Awesome work! The proof is in the pudding, saving over 50% of your pretax income will get you results in a remarkably short time. Keep it up!

retirein5yrs

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Re: Savings by a thousand cuts
« Reply #2 on: May 27, 2014, 05:07:02 PM »
That's awesome! You seem to really be doing the big stuff but finding extra little things that make a huge difference overall!

I like the fact that you sublet occasionally as we also have a spare room and find it a great way to earn a little extra cash!

Keep it up and congrats again!

EhMerman

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Re: Savings by a thousand cuts
« Reply #3 on: May 27, 2014, 05:55:57 PM »
Thanks, it's exciting seeing the savings creep up every two weeks.

frugally

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Re: Savings by a thousand cuts
« Reply #4 on: May 27, 2014, 07:10:45 PM »
Excellent job!  When talking to people about financial independence I always tell them to focus one thing at a time instead of being daunted by the bigger picture.  It really adds up.

One quick thing - I noticed your numbers add up to 105.5%.  May want to check that. :)

ToughMother

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Re: Savings by a thousand cuts
« Reply #5 on: May 27, 2014, 08:15:26 PM »
Quote
author=frugally link=topic=18445.msg301924#msg301924 date
One quick thing - I noticed your numbers add up to 105.5%.  May want to check that. :)

OP is getting 5.5% employer matching (of pre-tax salary) so salary + match = 105.5% of salary. 

Nice job making those changes!  Now the goal is to stay steady and save save save. 
« Last Edit: May 27, 2014, 08:17:15 PM by ToughMother »

Emg03063

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Re: Savings by a thousand cuts
« Reply #6 on: May 27, 2014, 09:08:19 PM »
Nice work!  Keep it up!

trailrated

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Re: Savings by a thousand cuts
« Reply #7 on: May 28, 2014, 05:23:58 PM »
I am making right around the same as you and only saving around 30% I need to get it in gear! Thank you for the inspiring post.

Dezrah

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Re: Savings by a thousand cuts
« Reply #8 on: May 29, 2014, 01:10:44 PM »

Increased 401k contribution to maximum of 17.5k USD


This is the part that most impresses me.

You know how some people fantasize about fancy cars or tropical vacations?  Thatís how I feel about someday maxing out my 401k.  Iíll be there soon enough, just 14.3 more months to pay off our loans and then 4 more months for a downpayment on a house.

I bet your dreams are way more exciting after reaching all these milestones.

Rpesek6904

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Re: Savings by a thousand cuts
« Reply #9 on: June 01, 2014, 08:23:18 PM »
Great job.

ToughMother

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Re: Savings by a thousand cuts
« Reply #10 on: June 05, 2014, 04:40:10 PM »


Boosted Savings from 26.5% to 52.5% of my pre-tax salary
Cut Taxes from 19% to 15% of my pre-tax salary
Cut Spending from 60% to 38% of my pre-tax salary


Really liked your analyses as a percentage of your pre-tax salary, so I went and did my own...
2012 - savings: 39.8%, taxes: 20.0%, expenses: 40.2%
2013 - savings: 46.4%, taxes: 20.5%, expenses: 33.1%
2014 - work in progress!!! BUT, maxing out my 457 plan so those taxes should be down a good 5%

Thanks again, EhMerman!

AssetGrinder

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Re: Savings by a thousand cuts
« Reply #11 on: June 11, 2014, 02:59:46 PM »
Great job on the cuts. Just this year I made many similar cuts as well. Its truly invigorating I find. Makes you appreciate every dollar that much more as well as your belongings. If motorized transport is a must look into a small scooter or motorcycle as they are much cheaper to insure, maintain and fuel costs are low. best of luck!

Trudie

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Re: Savings by a thousand cuts
« Reply #12 on: June 17, 2014, 11:11:13 AM »
Very awesome changes in a very short time.  You should be proud.

A few questions about your car:  Is it reliable?  Is it paid for?  How are you insuring it?

I applaud anyone who can go car-free -- and maybe that is possible where you live and given your public transport options -- but if your car is reliable and paid for, I would perhaps keep it and maintain it and drop all but the necessary coverages on it.  I'd look into just having liability (if it is an old car) and raising your deductibles, if you have a use for it.

If it's waayyy more than you need, by all means sell.  But, if it's worth more to you than your insurance company or a potential buyer, you may do just as well to keep it.