Today I upped my savings rate by 5%, now I feel BROKE!

[AnnaGrowsAMustache]

Obviously, I'm not broke, but by God, the budget feels tight. This one might take a few months to get used to.... BLAAAAAH!

[marty998]

Yep I know the feeling. Sweep all excess cash to savings and investments and suddenly you've only got $5 to entertain yourself for the rest of the month.

[Physicsteacher]

We've been through this periodically and finally settled on waiting to increase the savings rate when we make more money. Repeated experiments showed that beyond a certain point, increasing savings lead to decreased enjoyment of life and increased friction in our marriage. We aren't targeting a super early FIRE date and generally enjoy our professions. We're already on track to be able to retire right around the time I reach pension/retiree healthcare eligibility (without factoring in income from the pension which would provide an awesome margin of safety) so we're content to continue our semi-mustachian ways and gradually ramp up our savings rate as raises and bonuses occur. It's all about figuring out what's optimal for your life!

[nereo]

Obviously, I'm not broke, but by God, the budget feels tight. This one might take a few months to get used to.... BLAAAAAH!

I'll opine that if you're feeling "broke" something is amiss.  While this forum attracts its fair share of extreme savers, at heart the philosophy here is not to become such an extreme saver that you feel deprived in life.
Spend money on the things you value, cut out all the BS (which is a large part of most western budgets) and live a happy life.

[Laura33]

Yep, I do this too!  DH is spendy, and I learned years ago that automating the savings to the point that things "feel" tighter, it helps keep things more in check.  The good news is that if you find out it's just not comfortable, you can always readjust -- it needs to be livable long-term.

[wenchsenior]

It's funny how 5% sounds so small, but can feel like a lot.  Sometimes if you let the new savings rate ride for a while it stops feeling so tight. Sometimes not. Once we hit close to 100K in take-home pay, I convinced myself that a 5% savings bump should feel like nothing. But of course, that IS $5,000, which doesn't look like nothing when you type it out LOL.  I found that initially 5% increases were easy as long as I was in the mindset of prioritizing saving. But once we hit the savings rate of 45% of net income, every additional percentage point started to feel like a squeeze.  Right now, at 50-52% I'm mostly content to wait for raises to increase our savings.  And I just aim for 1% bumps at a time.

[Fire2025]

Yep, I do this too!  DH is spendy, and I learned years ago that automating the savings to the point that things "feel" tighter, it helps keep things more in check.  The good news is that if you find out it's just not comfortable, you can always readjust -- it needs to be livable long-term.

Agree 100%.  I upped my 401k contribution through a series of adjustment.  Same thing with my HSA.  each time it "felt" tight in the beginning and then it got easier.  Once it felt easy again, I upped the numbers again.  Rinse and repeat.  Worked great. 

Now I adjust up contributions to eat up my raises, so I'm always earning the same amount, to keep away the lifestyle creep. 

I figure if it starts to feel to hard, I'll keep a small piece of the next raise and call it an "inflation adjustment".

[Laura33]

Yep, I do this too!  DH is spendy, and I learned years ago that automating the savings to the point that things "feel" tighter, it helps keep things more in check.  The good news is that if you find out it's just not comfortable, you can always readjust -- it needs to be livable long-term.

Agree 100%.  I upped my 401k contribution through a series of adjustment.  Same thing with my HSA.  each time it "felt" tight in the beginning and then it got easier.  Once it felt easy again, I upped the numbers again.  Rinse and repeat.  Worked great. 

Now I adjust up contributions to eat up my raises, so I'm always earning the same amount, to keep away the lifestyle creep. 

I figure if it starts to feel to hard, I'll keep a small piece of the next raise and call it an "inflation adjustment".

Ditto -- After either one of us gets a raise, I look at the first paystub, calculate the net delta, and log onto Vanguard.  :-)

Actually, that reminds me:  I just wrote the last after-school care check *ever* last month, after 16 solid years of $$$$$ draining out of my wallet every month.  Time to call Vanguard again!  At least until the college tuition bills start coming in in two more years. . . . ;-)

[StarBright]

It's funny how 5% sounds so small, but can feel like a lot.  Sometimes if you let the new savings rate ride for a while it stops feeling so tight. Sometimes not. Once we hit close to 100K in take-home pay, I convinced myself that a 5% savings bump should feel like nothing. But of course, that IS $5,000, which doesn't look like nothing when you type it out LOL.  I found that initially 5% increases were easy as long as I was in the mindset of prioritizing saving. But once we hit the savings rate of 45% of net income, every additional percentage point started to feel like a squeeze.  Right now, at 50-52% I'm mostly content to wait for raises to increase our savings.  And I just aim for 1% bumps at a time.

Interesting! We hit 45% last year and it definitely felt like a squeeze. I've actually loosened up the budget a bit the last couple of months because 45% was feeling unsustainable.

Makes me even more impressed by the folks on here who somehow hit 50% or more!

[Bracken_Joy]

Yep, I do this too!  DH is spendy, and I learned years ago that automating the savings to the point that things "feel" tighter, it helps keep things more in check.  The good news is that if you find out it's just not comfortable, you can always readjust -- it needs to be livable long-term.

This is actually part of why we opted to do financing on our latest car. We could have paid cash, but we had the chance for a good rate (1.9%) plus they gave $500 for doing the financing. And now, rather than just our NW being lower, we feel squeezed on the cash flow a bit more every month. Nice little Mint illusion there =) Definitely keeps us spending less freely than we would have without that artificial scarcity.

[AnnaGrowsAMustache]

Thanks for the input everyone. I feel broke because I can't whip out my card and buy a coffee! Which I really don't need to do anyway. I have the odd lunch out with friends, but that's budgeted for. I feel broke because I have less money to fritter away! I'm one of those people that WILL spend money if it's available, so having an extra amount disappearing directly after my pay goes in is the only way to KEEP it.

[adamcollin]

Luckily, I never went through that phase.

[Vegasgirl]

I had a coworker years back who would take the extra dollars each raise and stash it away.  She just kept the same level/cost of living and put away all of the annual raises.  Seemed to work out well.

[Rosy]

I know the feeling - suddenly you feel broke, but after three months it has become your new normal.

If after three months it still feels too tight, it is time to adjust, that's my rule:) Gotta give it a real serious try first.
Then I give myself a mini celebration for making it for three months and admit that well, this is just not working for me, yet.
YOLO - roll with it.

[merlin7676]

I completely understand. Been slowing upping the 401K, the index funds, the savings account, ect.
After paying all that, paying bills, I'm generally left with about $100 until the next payday.  By the end of the two weeks I might have anywhere between $10 - $40 left over.
So while I'm always living "paycheck to paycheck", I'm also stashing away a significant portion of my income for retirement. And if I need more money for something, well that's what the savings account is for.

[ixtap]

I had a coworker years back who would take the extra dollars each raise and stash it away.  She just kept the same level/cost of living and put away all of the annual raises.  Seemed to work out well.

Yep, windfalls and raises go to savings. Period. It doesn't even occur to us that we should spend money just because some extra came in. I used to think we should at least celebrate promotions, but we never seemed to get around to it.

On the other hand, if we were to pay ourselves first by more than we currently do, even by the amount that we usually end up sweeping into savings, we would probably feel it desperately.

[Schaefer Light]

Giving anything up (whether it's extra spending money, beer, ice cream, eating out, caffeine, etc.) is difficult and will take some time to adjust to.  They key is giving yourself time to adjust, and not going back to your old ways just because it seems hard the first few days or weeks after making the change.

[madamwitty]

I used to think we should at least celebrate promotions, but we never seemed to get around to it.

Haha! DH and I are the same. DH got a promotion last month (years in the making!) and we bought a $5 cake to share with the kids.

[JSMustachian]

You eventually get used to it. After finding MMM, I set my wife's 403B contribution to 50% from 0% and mine to 40% from 5% to make sure we max the pre-tax accounts by the end of the year. Definitely a huge adjustment but its doable for us.

[Fire2025]

You eventually get used to it. After finding MMM, I set my wife's 403B contribution to 50% from 0% and mine to 40% from 5% to make sure we max the pre-tax accounts by the end of the year. Definitely a huge adjustment but its doable for us.

Good for you.  That's a big jump, way to kick@$$

[Jrr85]

It's funny how 5% sounds so small, but can feel like a lot.  Sometimes if you let the new savings rate ride for a while it stops feeling so tight. Sometimes not. Once we hit close to 100K in take-home pay, I convinced myself that a 5% savings bump should feel like nothing. But of course, that IS $5,000, which doesn't look like nothing when you type it out LOL.  I found that initially 5% increases were easy as long as I was in the mindset of prioritizing saving. But once we hit the savings rate of 45% of net income, every additional percentage point started to feel like a squeeze.  Right now, at 50-52% I'm mostly content to wait for raises to increase our savings.  And I just aim for 1% bumps at a time.

Well you didn't up your savings by 5%, you upped your savings rate by five percentage points of your salary(at least I don't think '%' is typically read to be percentage points). 

Another way to look at it, let's say your a good earner and saving 35% of your income and paying about a 25% effective tax rate.    Going from a savings rate of 35% to a savings rate of 40% requires reducing your spending by 12.5% (because at this point your tax advantaged savings options are maxed out unless you're self employed, and maybe even then). 

Another issue is taxes makes it hard to use raises to increase your savings rate once you get to even a 30% savings rate.  We've sort of hit a wall with this issue.  Our marginal tax rate has gotten painful enough that even if we get a solid raise of say 5% and bank the entire after tax amount, it just doesn't move the needle on our savings rate that much.  Less than 1.4 percentage point increase.  A huge promotion with a 20% increase and banking the whole thing wouldn't even move our savings rate 5 percentage points.  It would take almost a 225% increase in earnings (assuming our marginal tax rate didn't go up, which it obviously would) in order for us to move our savings rate from 30% to 50% by banking raises.  At this point, we really have to cut (and there is certainly fat for us to cut), but we're probably not going to make the sacrifices necessary to hit 50%.  At this point, even if things go well, I see us topping out below 40% in the next 7-10 years.   

[wenchsenior]

It's funny how 5% sounds so small, but can feel like a lot.  Sometimes if you let the new savings rate ride for a while it stops feeling so tight. Sometimes not. Once we hit close to 100K in take-home pay, I convinced myself that a 5% savings bump should feel like nothing. But of course, that IS $5,000, which doesn't look like nothing when you type it out LOL.  I found that initially 5% increases were easy as long as I was in the mindset of prioritizing saving. But once we hit the savings rate of 45% of net income, every additional percentage point started to feel like a squeeze.  Right now, at 50-52% I'm mostly content to wait for raises to increase our savings.  And I just aim for 1% bumps at a time.

Well you didn't up your savings by 5%, you upped your savings rate by five percentage points of your salary(at least I don't think '%' is typically read to be percentage points). 

Another way to look at it, let's say your a good earner and saving 35% of your income and paying about a 25% effective tax rate.    Going from a savings rate of 35% to a savings rate of 40% requires reducing your spending by 12.5% (because at this point your tax advantaged savings options are maxed out unless you're self employed, and maybe even then).

Another issue is taxes makes it hard to use raises to increase your savings rate once you get to even a 30% savings rate.  We've sort of hit a wall with this issue.  Our marginal tax rate has gotten painful enough that even if we get a solid raise of say 5% and bank the entire after tax amount, it just doesn't move the needle on our savings rate that much.  Less than 1.4 percentage point increase.  A huge promotion with a 20% increase and banking the whole thing wouldn't even move our savings rate 5 percentage points.  It would take almost a 225% increase in earnings (assuming our marginal tax rate didn't go up, which it obviously would) in order for us to move our savings rate from 30% to 50% by banking raises.  At this point, we really have to cut (and there is certainly fat for us to cut), but we're probably not going to make the sacrifices necessary to hit 50%.  At this point, even if things go well, I see us topping out below 40% in the next 7-10 years.   

Good point. Sloppy semantics on my part.   I wrote it that way because I think of our savings rate in terms of percent of net take home pay. So, yes, if we were to boost our savings rate by 5% in your calculation, it would be a decrease in take home of ~$2500 rather than $5000.