It’s been pretty hard to tamp down the excitement over here lately. Even though work is nearing peak stress, we’re gaining major energy from how close we’re getting to early retirement, both in terms of the calendar and the numbers. Some of that is thanks to the inevitable passage of time and generally favorable market conditions, while some of it is thanks to upping our game this year when it comes to savings. It just feels like the momentum keeps building, which makes us want to say to anyone who doubts the awesomeness of pursuing financial independence or early retirement: It’s real, and it’s spectacular.
We’ve talked a little bit about upping our game — at the start of the year, at the end of the first quarter, and at the end of the second quarter — but we’ve only talked about it in general terms. Today, we’re going to get specific about how exactly we’re raising the bar, and especially what that looks like for non-budgeters like us.
A note on savings rates
As always, we won’t talk actual numbers, but in a new change, we’re also not going to talk about our savings percentage anymore. We’ve realized that there’s the potential for unintentional shaming when we talk savings rate, and we don’t want to make anyone feel bad for having a lower percentage than whatever arbitrary number we might throw out there. All savings is good, and we should all be celebrating that rather than comparing. After all, much of our rate comes from having incomes above average, not from being especially virtuous or thrifty. So we don’t deserve any medals for saving more than anyone else. We’ll save those for the Olympians. High fives for saving, though? We have plenty of those for anyone who wants one!
Saving for non-budgeters
One of the hardest things for us to get our heads around when we were baby savers was that it was possible not to be budgeters and still to save money. We had tried and failed at several budgeting schemes, and felt pretty bad about it. We stumbled into the idea of paying ourselves first before we knew that that’s what it was called — we thought of it as hiding money from ourselves because we had this silly idea that we were bad with money. What we actually were was fine with money but not especially compatible with budgeting. These are different things.
Fast forward a decade or so, and we’ve not only made peace with our status as non-budgeters, we’ve also perfected the art of hiding money from ourselves, aka paying ourselves first.
Related post: How We Pay Ourselves First // Advice for Money-Conscious Non-Budgeters
For “pay yourself first” to work, you have to be in a place in life where you’re able to constrain your spending. Where you are tracking how much money is in the bank, you know which bills are yet to come out of your accounts, and you keep what you spend under that remainder so that you don’t overdraft. If you can live with that, then paying yourself first is really just all about artificially constraining your spending a bit more so you can up your savings, and maybe continuing to ratchet up that savings until it hurts. When it hurts a bit, you know you’re doing it right. [Insert Fifty Shades of Gray joke here.]
The formula we’ve been using for a few years now to pay ourselves first includes having HR split our paychecks so part of each automatically goes to savings without us ever seeing it, having automatic withdrawals set for our big monthly investments so there’s no willpower required to do it, maxing our 401(k)s, and putting anything leftover at the end of the month into savings.
Oh, and we’re huge believers in 15-year mortgages since you actually start building equity from day one, which is a different way of paying yourself. With a 30-year mortgage, you don’t gain much equity from your payments until almost a decade in. So many models that recommend a 30 over a 15 assume that you will stay put until you pay off the mortgage, but most people move within a decade of buying a home, so the short-term equity gains actually matter a lot. But that’s a different post!
Upping our game this year has meant keeping all of those tactics in place for paying ourselves first, but we’ve found other ways to save more, faster.
Upping our savings game
The biggest thing we’ve changed this year is our default setting. In the past, we took a wait-and-see approach with extra money sitting in our checking account, because we thought we might end up needing it later in the month. Now our default has become: “Oh, we have money? Hide it.”
We had this interesting/embarrassing experience last fall where I got super behind on my expense reports from work, but since we’re unwilling to carry a credit card balance, we just paid off the credit card bills each month from a combo of cash flow and our life happens fund until I got my act together and got my reimbursements. In the end, even though we were already focused on saving a lot, we only ended up taking about half the total of my work expenses from our life happens fund, and we found ways to cash flow the other half, so when I finally got reimbursed, it was a de facto windfall. That told us two things:
- We still had a lot of wiggle room in our monthly spending and could save more, and
- If we force ourselves to cash flow things, we can generally find a way to make it work.
I’ve stayed on top of my expense reports in 2016, but we haven’t let the value of that lesson escape us. Here’s how it’s helping us save faster this year than we ever have before:
Bank every “windfall” — “Windfall” is in quotes, because we’ve taken to considering just about everything that’s not strictly a paycheck extra cash and banking it (meaning: putting into our Vanguard investments or using it to prepay the mortgage). That includes principle and interest payments from the personal loan we made, the rent on our rental property, and many of our expense reimbursements from work (all except the largest ones). We put that cash straight into savings, and then find ways to cash flow the rental mortgage and the credit card payments. This is our single biggest change this year, and it has absolutely accelerated the progress we’re making. Once or twice we’ve overdone it and had to dip into the life happens fund, but we’ve paid the fund back with the next paycheck and still ended up ahead of what we wouldn’t saved without this new habit.
Travel on points and credits — We haven’t had time for a proper vacation this year, but we’ve still traveled for fun quite a bit. But we’ve spent very little to do it, thanks to travel points and — more importantly — e-travel certificates earned by offering to get bumped. We have more opportunities to do this than most people do, since we travel a lot, but we now make a habit of accepting bump offers whenever we possibly can. (And for those who can’t do what we do, there are so many great travel hacking options available.) It doesn’t always work out to accept a bump since we usually have a meeting we’re traveling to, but it has worked enough times to completely pay for our Thanksgiving travel and several other trips. Our Thanksgiving trip was going to cost $508, but we had two $250 vouchers from a recent bump and I was able to book the trip as two one-way segments that netted out to $4 each, or $2 per person per leg. And we’ll probably even get upgraded both ways — $2 first class, y’all!
Dine out less than ever — It helps that we’re in what we hope is our last big stressful work period before we retire, so we don’t have time most days to leave the house, except for a quick hike in the local trails at most. But we haven’t been dining out much at all, and that is undoubtedly saving us cash, especially when you compare it to our former baller days when eating out happened multiple times a week.
Eat less — This is a weird thing to say, but it’s true. We’re making a conscious effort to eat less food, and — obviously — this saves money. We’re not eating less in order to save money, but to be healthier, and we’ve cut out most of the remaining junk in our diets. Saving money is just a nice side effect.
Take less cash to the farmers market — Noticing a food trend? It is our biggest expenditure after housing, after all. And farmers markets have always been a major weakness of mine. I have at times spent rather obscene amounts there, but now I take a set amount of cash with me — an actual modest number — so I can’t spend more than the allotment. It’s been working, and I’m a lot more price conscious about what I buy. I am super thankful that several farmers bring their blemished or “ugly” produce to the markets and let me buy it for half price. It tastes just as good.
Save the monthly leftovers — Not talking food here — it’s back to money. Anything left at the end of the month gets saved, so that we don’t see that money sitting in there after we get paid on the first and let ourselves think that means we have extra to spend. If there’s money there, we hide it.
Keep squeezing — If we get through one month without feeling squeezed for cash, then we’ll increase the amount we invest the next month to squeeze a little harder. We’re now saving on average 50% more each month than we saved last year even though our raises were a tiny fraction of that, and we hope to have that number a little bigger by end of this year.
All of that is in addition to our randomly quirky cheapskate habits and common-sense habits like not letting shopping be a thing, and eliminating costly services like cable TV. (Though, man, we are totally missing live TV during the Olympics. In most places, we could at least watch NBC with bunny ears, but we get no TV signals in the mountains. #mountainproblems)
And we still have definite room for improvement, which we’ll focus on after work quiets down a bit. Though my cell phone is paid by work, Mr. ONL’s is still some pricey Verizon plan. We know we can do better. And we’re still outsourcing a lot of labor that we know we can do ourselves, like plumbing and changing the cars’ oil. Those are little expenses in the scheme of things, but we like to be able to handle our business. All on the to do list for retirement.
Unintended benefit
An interesting and totally unexpected thing has also happened that we only recently realized: We’re spending significantly less right now than we’ll be able to spend in retirement. So all that talk of needing a dress rehearsal or a trial run to make sure our retirement spending projections are realistic? All gone! We’re already living at that level with room to spare.
What a relief! We have always been just a teensy bit nervous that it would be a hard adjustment once we actually pulled the plug and had to live on the new budget, but instead we’ve focused on making changes to our lifestyle and spending gradually rather than all at once. The result: we can’t pinpoint any specific time when we feel like we had to make a big adjustment because there was never a big adjustment to make. We’ve just gradually notched down our spending and ticked up our savings, without ever going cold turkey on things we love doing.
Chime in!
Now let’s turn it over to you guys. I know you’ve got some money wizardry going on — what ways have you found to increase your savings? Or to decrease your spending? Anything else you’ve upped your game on? We’ve got virtual high fives at the ready, and we’re not afraid to use ’em.
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Categories: the process
Congrats to you guys for becoming even more efficient! I love that you bank every windfall. That takes a lot of discipline, but can make a huge difference.
My most recent savings win was a quick call to my cable company. I had just ended the promo phase of my contract and our bill had just shot up by 25%. After a quick conversation, I was able to get our bill reduced by 40%! I never hurts to ask. :)
Thanks, Michael! Banking every windfall is not something I would have thought possible a few years ago, but it’s been part of the whole gradual changes approach we’ve taken, and we’ve worked our way up to that. And as for your cable win, high five on cutting down your bill! :-)
Way to go, you two! I suppose the hidden benefit of getting crushed by work is limited time to spend money. Some of the lowest-spending months I ever had were times that I was constantly on the road. No food expense, no entertainment… just rent and bills.
We’re unusual on the savings front: we’ve never budgeted or paid ourselves first. Instead, we try to just be very conscious of every spending decision we make. We also track our daily average spending throughout the month (at least an approximate mental tally) to make sure we’re not going overboard.
Food is our biggest variable, without question — both at home and on the road. There’s probably a 95% correlation between how much cooking we do and how well a given month goes for us spending-wise. We’re doing a lot of cooking even while traveling internationally, and that’s helping a lot.
Thanks, Matt! And yeah, they should tell people that in interviews: “Your paycheck will feel bigger than it is because you won’t have time to spend it!” Haha. We’re totally in that mode right now — a lot of my food is being paid for by work, along with all the gas we’re buying for the cars. And it’s summer and we don’t have AC so utilities are low. It’s definitely the most cheaply we’ve lived in a long time!
I feel like I should know this, but what was your mode of saving if you didn’t skim off the top of your paychecks? Were you just disciplined about saving what was left each month? Conscious spending is super important, of course, but at some point you still have to decide to put that money into savings or investments, and I’m curious what that looked like for you. And I love knowing that you guys are still cooking lots while traveling — SO much better than eating all restaurant food for a bunch of reasons (mostly money and health, but also language barriers, etc.). I do love dining out some while traveling internationally, but I hit restaurant fatigue pretty quickly and just want to make things my own way. :-)
The only time I skimmed off the top was with a couple years of 401(k) contributions — though I didn’t contribute most years, thinking there was no way to access those funds before 59.5 (d’oh). Otherwise, I’d just spend normally, let cash build up for a few months in my checking account, and then transfer it to an investment account once in a while. I keep what most people would probably consider a ridiculous “buffer” in checking, but I’ve never been tempted to spend it just because it’s there. Maybe part of the reason I got into that habit was because of huge inflows and outflows with work travel expenses (and later, company start-up expenses). I’d sometimes be floating $10k or more in pending expense reports, so it wasn’t really practical to pay myself first when I had giant corporate credit card bills to pay off each month.
This new information is slightly shocking to me! No 401(k) contributions for multiple years… scandalous! Hahaha. Keeping that big buffer in checking reminds me of this 30 Rock episode (http://www.imdb.com/title/tt1001589/quotes). And yeah, I definitely understand about work expenses. I was $16K in the hole not long ago! Was super glad to get reimbursed for that chunk… that was NOT manageable through cash flow alone. :-)
Nice job guys! There definitely isn’t one ‘right’ way to save (just like everyone learns at school differently) just as long as you save!
We’re in the low earning part of our lives still, and of course we want to up that, but I think we’ve already got our money habits down. We are semi budgeters at the moment – we have an annual budget based on our expected income, then ‘guess’/estimate what our expenses will be and overestimate the variable ones by like 10%. This process is to see that our upcoming year is reasonable and we’re not deluding ourselves. We then try to beat our original numbers by being frugal as much as we can. We don’t constantly go back and compare, nor do we only withdraw $100 cash for that supermarket trip – they’re just motivational guidelines for us.
So how do we save? We have 2 savings accounts that require $200 to transferred in to receive the bonus interest rate (around 3% total rate, pretty good for these times in Australia). So we put in the $200 each. We then hopefully beat our budgeted numbers, so our checking account builds up. When it gets above $3k we move across more money to our savings account. So it’s like double saving :)
Mountain problems lol. One of our biggest money saving habits is only having 1 car (I don’t have a car!), public transport for the (money) win.
Tristan
Thanks, Tristan! If you guys are already on top of saving while you’re at the lower earning part of your careers, then you’re way ahead of where we were. We definitely did not do it right when we were starting out, and would easily be retired by now if we’d learned to save earlier. So you get tons of high fives for that! I love your approach of mapping out a general yearlong budget and then not sweating the details (so good for peace of mind — stressing about it all does not good), as well as doing the double savings approach. And yeah, stick with that one car as long as possible — that will keep saving you tons!
High fives all round! We don’t want to be ignorant of what we’re spending, but we don’t want to stress about every dollar either – I think it’s a good balanced approach.
If we can get to ‘about to be FI’ at your age we will be extremely happy and grateful with that!
Tristan
I definitely think your approach sounds balanced — mindful but not stressing too much about money. :-)
I’ve stopped even pretending to budget and instead go the mindful spending route where I evaluate every purpose on whether it makes my life better and is necessary. At the end of the day, my natural spending level ends up pretty consistent.
That’s fantastic, Taylor! That’s about where we are, too. Our regular spending is pretty darn predictable, and we contemplate bigger expenses long enough to be able to plan for them. We’re hoping this approach serves us well even after we don’t have paychecks coming in anymore!
We don’t use any kind of budget either (and never have) and we haven’t paid ourselves either (other than direct deposit into retirement accounts). It worked for us, but some days I wonder how! We are more concerned about budgeting now that we are FI but we definitely find ourselves spending less. It’s nearing the start of school and I have NEVER not gone back to school in 44 years… (sounds like a new post?) So there is no need for new “school clothes” to update or replace older things. The car sits in the driveway most days and we walk, bike ride to pick up little items now (win-win!) Food is also a huge variable for us as one is home from college now and the other is a 6’2″ senior who plays football. He needs his own grocery bill :) As we sell things off getting ready for a downsize, we are saving that money and then making extra payments on a rental property too.
I am a huge believer that there is no one right way to do things, so however you made it work, it worked! You get all the high fives for that. :-) And we’ll join you in being a little more concerned about budgeting once we no longer have paychecks coming in, so that’s something we’ll have to adapt to. At least knowing we can live on that amount is good for peace of mind going into it! I love that you are biking to run little errands — we do that when time and weather allow now, but can’t wait to do that more! And I can only imagine what groceries run for hungry kids!
Thanks for these thoughts, as usual you have made me think about things we do and think are common sense, not realising not everyone works this way. Like you, we hide money as soon as it comes in, so that we never even think about spending it (working in the public sector we would never get our payroll department to pay the money into savings for us) and yes, every ‘windfall’, however small and including my earnings from travel writing, go straight in to the savings, as we know we don’t need more than what we earn from our employers and if we have had a lean month, whatever is left at the end of the month gets squirrelled away too. However, we also budget every month and check spending against this and maintain savings lines for our holidays, annual costs for the campervan (insurance and services) and new specs, as these are always a major expense of about £400 every two years. We call these ‘savings’ but they are kept separate to the retirement savings but are tucked away so we can forget about them until we need them. I think compared to other people we are quite hands on with our finances, constantly checking that all is well … I’m probably a bit obsessive with this to be honest.
Glad it’s helpful! I love knowing that you guys follow a similar money hiding strategy. If your payroll departments can’t split your paychecks, maybe you could have one of your paychecks sent to savings and the other to checking? We’ve thought about making this switch, but since we’re so close, we probably won’t bother. And your “savings” for big expenses is what we plan to do in retirement to make sure we always have cash for big ticket items like our property taxes and insurance!
It’s amazing that you have so much to say about increasing that savings rate, and so little to say about what you’ve missed or sacrificed. (Not watching the Olympics is a bit sad–I’ll be useless this week while gymnastics is on.)
We also track and “hide” money and have incrementally our savings rate that way. We don’t hide what’s left at the end of the month, though. That’s a good idea. I love that Vanguard has an option to maximize your contribution to a fund, and it calculates the monthly amount and automatically sucks it out of your linked account.
It’s funny — what we miss is being able to sleep full nights and seeing our friends more, neither of which cost anything! But that’s a factor of work 100%, and not of scrimping in our budget. :-) We’ve still made time for the fun things that are super important to us, though we’ve found ways to make those things less costly. I think if we’d gone from our baller spending to now in one jump, it would be a HUGE adjustment and we’d feel the pain, but instead every change has happened gradually. We highly recommend this approach for anyone trying to cut back! And yeah, give the monthly leftover savings a try! Sometimes it adds up to a pretty sizeable extra chunk!
When we got our food budget down to $200 a month, that was a huge savings victory. We have way less junk food lurking behind cabinet doors, and less food waste overall. I’m so guilty of letting a little cushion in our checking account turn into $1000 or more before I slide it over into savings. This post is an awesome reminder that there are so many ways to save!
I still can’t even get my head around how you spend that little at the grocery store! Do you each weigh 90 pounds?! Haha. I totally know that our bill is driven up by my organic obsession and the gluten-free racket, and I just can’t bring myself to buy cheap eggs (actually a significant line item in our grocery spending). But I marvel when people manage to eat healthily and spend very little to do so. You get tons of high fives for pulling that off! And yeah, I completely understand wanting to hold onto that cushion — we did that for a long time! It helps to know we’ll have plenty of money coming in in at most 15 days at any given time, so if we oversave, it’s just a short-term pinch. That’s definitely a luxury that not everyone enjoys, and we’re grateful for that!
Haha, our last “budget update” I pointed out that actually we don’t budget, so it’s more of a “spending tracking” update. So, like you guys, our budget is no budget at all, we just track spending and when we notice things are running higher or out of whack with the usual we examine and correct.
However, to get us to where we are now, on financial autopilot, we did employ a few changes. First, we started tracking our spending – OMG what a difference that alone made. Second, we started employing the easy, “Is this a want or a need” tactic when out at stores. That cut out a LOT of overbuying, and unnecessary spending. Then we targeted our spending anomalies.
We realized that our biggest spending moneysucks were Target, Costco, and restaurants. How did we fix that? Well, first we cut Target trips to once a month, and used a list system, not on the list, not in the cart. Second, we dropped our Costco membership – we noticed yeah maybe it paid out, but the stuff we were buying wasn’t much cheaper if at all, than other stores and our tab almost always was $200 or more. Third, we put restaurants into our allowance budgets – so you want to eat out, “Whose paying?” was/is the first question asked. That lowered our restaurant tab significantly!
Finally, we also do the auto money transfers so XX amount goes into a “bills” account, XX amount goes into an investment account, and XX amount goes into a limbo account to be distributed later. Since we know what we spend each month, it’s pretty easy to split up the paychecks into those buckets. Any extra “non-paycheck” windfalls go towards investing as well.
This is all so similar to what we’ve done! Just getting our minds around our spending was very illuminating, as was switching to thinking about wants vs. needs. And like you, we dropped our Costco membership because too much stuff always found its way into our carts (plus Mr. ONL literally melts down like a toddler when faced with the crowded chaos of Costco — haha). And we found that Target was such a problem area that we stopped going there altogether. It think it’s possibly been two-plus years since I set foot in one? Anything we need from there, we now either buy at the grocery store, or we get it with Amazon subscribe-and-save, which avoids the terrible impulse buy temptations that Target presents. (Now I just face those at Whole Foods!) And your account splitting idea makes tons of sense, too — we’re not there yet, except that we use individual checking accounts to hold money that we know we’ll need to pay our credit cards (mostly a parking lot for expense reimbursements). But after we retire we plan to have many accounts for property taxes, groceries, fun money, etc.
For us, it has been five big areas.
1. Restaurants – as much as we had a blast through our baller period, cutting this WAY back has been transformational. And over time, we have gotten to the stage of not missing it and really enjoying it when we do occasionally splurge.
2. Travel hacking. This year alone, we think we are saving 40-50% on normal vacation budget. And when we reach FIRE and can have more time on our hands to plan, strategize even more on this one, it can go even higher in terms of percentage saving.
3. Intentional grocery planing. As simple as looking for the deals then planning what to buy.
4. Not eating out at work cafeteria. Brown bagging it probably 4 days out of 5. And the other day, watching what we buy at the work cafeteria.
5. Every bonus or stock award, straight to investments. Except for the necessary big home projects that just can’t be avoided.
One other area, and it is hard to put a number on it all. I don’t remember the last time I went to an ATM. Can only be a good thing.
All of this has transformed our savings rate. We have enjoyed the runway to get into a lifestyle that seems very normal now and will be the norm as we march into that next phase where deviating significantly from this will put pressure on our portfolio – yeah, not an option!!
What a great formula you guys have worked up to. High five for cutting back in several important areas! You reminded me with your brown bag note that we both work from home, so don’t have the option of buying lunch, or when we do, then it’s because we’re traveling and we’ll get reimbursed (pretty nice perk, actually). And when we go to the ATM, it’s just to pay for work travel expenses like taxis, so that’s also money we get back (and now bank). But overall sounds like you guys are doing great if you are solidly on the runway to your new post-ER lifestyle!
I actually do use a budget (I use YNAB), but I’ve found that the main benefits come from 1. paying myself first, and 2. being conscious in my spending. I find that just making myself plug in each purchase as I make it has led me to spend less which has in turn allowed me to put a higher and higher percentage into investments each month.
That’s great that YNAB works for you. I completely agree that just being conscious of your spending is the biggest and most important factor in success, along with paying yourself first. And we don’t just spend money willy nilly, which is why unbudgeting works for us. I think it would be a different story if we just spent unconsciously. High five for continuing to ramp up your investments each month!
Great job you guys! Our garden helps save a good amount of money during the summer/early fall. We get tons of tomatoes, which can be pretty pricey at the grocery store. Our savings go right to debt of course, but we’re steadily eliminating all of the credit cards.
You eventually reach a point where there isn’t much else to do to save money. That’s why we turn to earning extra money in order to expedite our progress. I’m not sure that you two have to worry about that though, you’re racing towards the finish line right now!
Wow, high five on the productive garden! I’ve gardened before when we didn’t live in the bad-for-gardening mountain climate, but I wouldn’t say that it ever appreciably cut down our grocery spending. That’s awesome that it has for you! And you’re right that you hit a point when you can’t save much more, at least without making things really hard on yourself, so I think your focus on earning more makes total sense. Since we’re both in jobs with a bonus structure, we do that by working really hard at our primary jobs rather than side hustling, but if we didn’t have the bonuses, we’d for sure still be side hustling! I think your approach makes total sense. :-)
For my wife and I, the very best strategy that we’ve used to spend less money is to, well, sell both of our homes and most of our possessions, then move into a 200 square foot Airstream and call it good. :)
Our expenses have never been lower. We pay one bill to the campground and that’s it, making it super easy. We’ve had one of the hottest months in Tucson *ON RECORD*, and we only spent about $100 for total electricity, and that includes us cranking the A/C down to 76 at night so we can sleep.
We have our food down to a semi-science. We spend around $350 / month on food, which is pretty decent for two of us. A single bag of dog food from Costco covers the dogs for the month as well, which is nice. When we want to go out, we budget that separately.
…five more months…
Now I feel like you’re just rubbing it in. Haha. ;-) I love how close you guys are, and all the ways you’ve found to basically flip the script and reject the normal American dream of the big house in the suburbs. $100 on electricity in the hottest summer ever? That’s amazing! It seems like it has really paid off for you guys to move into the Airstream well in advance of your actual retirement date. You’ll be pros at retirement before you ever even pull the plug!
Hehe – sometimes I feel like I’m rubbing it in too, but I’m honestly not trying to! This downsize is literally enabling SO MUCH of our anticipated early retirement, so it’s tough not to talk about. :)
If I ever come across like an ass, please do tell me cause it ain’t intentional!
Hahaha — I KNOW you’re not trying to. It’s just impossible not to be envious! ;-) Keep talking about all of it — I love all the updates and progress, and I’m sure you’re inspiring tons of people to follow suit! Just wish we were on the same timeline as you. ;-) We know we could be if we moved into an RV, but we have to remind ourselves that it’s worth a few extra months of work to have a permanent home base, just because we know that’s important to us. But I love that you guys have created your own path and decided that a permanent base holds no appeal — more power to you!
This is so impressive! I love that you are now used to spending less than you need in retirement and feel good. The food thing is so real. When I was making everything from scratch with a girlfriend, we ate so much less and felt better and more full/energetic. I wish I had the time for that now. It was pretty fantastic.
Thanks, ZJ! Yeah, no one was more surprised than me to know that we’re doing just fine on less than we can spend in retirement. Of course, we do plan to travel more in retirement, but we have tons of travel points that will sustain us for a long time — I’m just a stone’s throw away from a million miles at this point. Should hit it before the end of the year! And that’s awesome that you started feeling better and more energetic from making your own food from scratch! That makes it all so worth it. But yeah, totally feel you on not having time for that! We absolutely plan to make everything from scratch once we’re retired, but it is not in the cards for now. :-)
I know I keep harping on this, but I’m still excited about it. We’ve been at our new house for two full months now, and I can’t believe how much the shorter commute has saved us. We used to fill up both cars multiple times a week, and now I can fill up every 7 to 10 days. It’s so awesome!
That is awesome! High five! And is it costing you more to live closer to work, or did you manage to keep your housing costs low? We’ve found our bias toward keeping housing cheap to be our single best financial decision over time — all this other money savings pales in comparison to the power of buying or renting less home than we can afford!
It costs the same :) We looked at buying a bigger house further away, or the little house close to work, and went for the little house. Not only is the mortgage the same cost as rent, but the utility bills are the same as well, since we’re not heating or cooling significantly more space.
SO awesome. I’m glad that worked out so well for you guys! Plus I’m convinced we buy a lot less stuff when we have no place to put it — so hooray for smaller homes!
Hide all the money! We too bank every windfall and pay ourselves first. It has been interesting tracking the left over money that makes it into the house fund. In a 1.5 years, our minimum transfer was just over $200. So me that says I have to find a way to hide $200! I don’t want to spend it by mistake!
That’s awesome you guys do that! And with amounts that are not pocket change! I know you’re focused on your blog of sharing YOUR numbers, but I’d be so curious to know how it works out between both of you. Any chance you’ll switch to tracking collective finances on the blog anytime soon? ;-)
We don’t do well with budgets, they always end up feeling too restrictive or like some form of punishment. I do track groceries, because that’s where we tend to have the greatest issues. Even with rarely eating out, we still throw away too much food. It’s difficult to scale down recipes from six of us to two, but hopefully I’m getting better at it. We no longer consciously save (since we’re retired), but I recently embarked upon a plan to increase our miles rewards on our credit cards so we can travel to Europe after Mr. AR recovers from back surgery, and I’m finding it incredibly challenging! Years and years of wanting to be debt free, then finally accomplishing that, then turning around and intentionally using credit cards just for the rewards? It’s made me a nervous wreck. There’s money to pay the bills when they arrive, and we probably have enough miles already, but I have to say I just don’t think I have the personality for this particular lifestyle, although I know it works great for many people. I seem to be obsessing over what went on the cards, when it’s due, how I’ll pay for it, etc. 24/7. I think Mr. AR and I may be better off just buying the tickets when the time comes! I’m much better at managing cash flow without credit card bills looming on the horizon. It hasn’t even really been an issue, but I have a feeling it’s about to become one. We need to keep it simple around here, or my type A personality will rob me of my serenity. Hats off to people who do this every month, I just don’t think I’m one of them.
So important to know yourself and what will work for you! The kind of credit card churning that many people do to travel hack is definitely NOT for us, either! I can’t imagine keeping track of many accounts with all the due dates and different spending requirements. I feel nauseous just thinking about that. :-) We just do our normal spending plus our work travel spending on our cards (two each — an airline card and a hotel card) and have the due dates lined up so that they correspond to the start of the month, and it’s way less of a headache that way. Once we’re not traveling so often for work, we’ll probably switch to a carrier-agnostic card like one of the Chase Sapphire options, to keep things simple with just one card. But hey, if that doesn’t work for you guys, don’t sweat it! It very well might be worth the peace of mind to just buy yourselves the tickets!
I agree! It’s one month in and I already can’t sleep. Just not for me, I guess. As soon as I see where the dust settles this month, I’m back to cash only and switching our standard Chase Visa for the Sapphire. I’ve postponed doing so to get the Alaska miles, but I think we’re already there (or close enough), and frankly, life is too short for spreadsheets and due dates and stacks of receipts!
Amen to that! :-)
The windfall banking is one of the best methods I have found especially if you include raises. Our goals depend on us actually taking money away before it hits our bank account
We are similar to you were we don’t live a super frugal life and use income more than anything to boost savings.
Yeah, “bank every raise” is definitely a tenet of ours, too! We did that at the start of the year with our increased monthly investments, and then by treating other cash as windfalls, too, it’s really speeding things along.
I kind of budget, but not really. I have a budget set up, but if I blow it, then I’m not going to lose sleep over it at night. This usually happens with food, car and animal care. I’m making more of an effort to say yes to things, and sometimes those things cost money. It’s worth it to get me out of the house and keep me from sliding into a funk with my not so great work situation.
I’ve recently gotten more into travel hacking. I’m very excited about the Chase Sapphire Reserve/Elite that’s coming out in a few weeks. Hello 100k UR points!
That seems like a healthy approach! It’s no good sweating every financial detail, especially for things that are already done, so it’s great you don’t lose sleep if you go a little over one month. As for that card, it looks like it will have a super high annual fee, but maybe it’s worth it for the sign-up bonus. Seems like you could get that many points with a combo of other cards with waived annual fees. But then if you don’t already have Global Entry and like using the lounges, it’s probably a better deal than other cards.
Yeah $450 is steep, but I don’t have GE yet. The access to the lounges would also be really nice since I am ramping up my travel. They also give you an automatic $300 credit for airline spending (upgrades, bag fees, etc), 12 free in-flight internet passes, and all the benefits that comes with Visa Ultimate. Since I’m at 2/24, I’ll be getting all the Chase cards before I get some of the other companies out there.
The travel credit seems like the tipping point factor to me — without that, it doesn’t feel like it pays for itself, but that $300 credit ain’t nothing! My two cents on the rest: Global Entry works out to $20 a year, so (to me) shouldn’t be a reason to get a card that costs many times that. And airport lounges are a definitely slippery slope on the lifestyle inflation front — they lull you into thinking that using the lounges is the only way to travel, and after you’ve done the lounge bit, it’s hard to go back! And really all they offer is nicer bathrooms — if you’re traveling for work, you can expense your food anyway, so the free (unhealthy) snacks aren’t of much real world value. And all airports have free wifi now, and I find that the lounge wifi is usually slow because so many people are on it. Plus if you ever hit major travel snags, you can ask the airlines to give you a daypass to the lounge and they’ll often do it. Not dissing the lounges at all — they are definitely nice — but just know what you’re getting yourself into. :-) I paid for the lounge for a few years and started to see myself as a “lounge person.” It was hard to go back to being a “normal traveler” after that. :-)
The signup bonus is equivalent to $1,000, more if you redeem for travel. Add $300 in flight credits (buy some airline gift cards that never expire?) It’s absolutely worth it. Just downgrade or cancel after the first year. =)
As long as you don’t get hooked on those airport lounges, then you’re probably right that it’s a good deal. :-) Sometimes I forget that not everyone gets a few hundred thousand miles through work travel and spending each year, so it’s a different calculation then!
Personally, the only time I’ve been to an airport lounge is when I tagged along with my dad when it was included on biz or 1st class tickets that he redeemed for free with miles. Also, the last time I was in New Zealand ( ;-) ) when they re-routed my direct flight to a connecting flight, they give me a free lounge at the connecting airport. I’d never personally pay for a lounge, the “normal seats” at the gate are perfectly comfy for me in most airports. I’ve also had “free lounge visits” with various credit cards that I’ve never used…because I never flew anywhere. Or at least not at the right terminal that had the right lounge.
Everyone obviously places a different $$$ value on their time. If a bank wants to pay me $550 tax free to adjust my cash flow and frontload some spending (insurance policies, estimated taxes, gift cards I know I’ll use) ($1000 of UR points- $450 fee), then I’ll take that every time. :-D
The lounges are nice for sure, but like you said, most airports these days are also totally fine. The lounge is one of those dangerous luxuries that are easy to get used to and expect in the future. And if you can make good use of a card like that and it feels worth it, then don’t let me dissuade you! We all have to figure out our own cost-benefit analysis for this stuff. :-)
HIgh five for the awesome savings progress ONL!
I think this budgeting/not budgeting question is a very interesting one, because DH and I deal with it quite differently. I can set a budget, identify target goals, and understand that if I overspend one month I must underspend the next to pay it back, or save up across several months or years to reach a goal. DH, on the other hand, is much more like y’all–the anti-budget. And he is far more frugal than I am in many areas, but when he wants to spend he just goes for it.
We’ve almost always had automatic savings, but it wasn’t until we really began to earn more than we felt we needed that things got interesting. As I continued to budget, I would increase our spending allotments across all sorts of discretionary budget items because we had extra to spare. We didn’t spend it all every month, but I felt I “had permission” to spend, so naturally spent more. And we only transferred a set amount to savings.
Now, we’ve flipped the model and put every spare dollar into the Vanguard account. We still track all our spending and know roughly how much we typically spend, but the goal is to save as much as possible. It’s much more motivational to me to try to get that number higher, so I will delay purchases and think more carefully about wants vs. needs.
But I do think that this switch to no budgeting was really only effective once we moved past a certain income threshold. Or maybe its just the point we reached mentally where we felt we had “enough?”
Thanks, LG! :-) It sounds like you guys have gone through a similar evolution to us — having permission to spend more at first and then transitioning to saving more as your default as you earned more. And, GREAT POINT, the non-budget approach absolutely works better once you clear an income threshold. I made that point indirectly by saying you have to be at the point in your life where you can live on what’s in your accounts without overdrafting (or adding debt), but you’re right that being able to non-budget is definitely a privilege that not everyone can afford! I think having the “enough” feeling helps, but I don’t think it’s a realistic approach for people just scraping by. Thanks for the reminder!
I’ve always just bought whatever I’ve wanted. I just don’t seem to want a whole lot. So if I take an intentional drop in income to be nomadic or do a working holiday, I’m not expecting anything to change other than to go through a phase where I am not saving as much (or at all).
You have it easy then. :-) If I bought everything I’ve ever wanted, I’d have ALL THE THINGS. Or at least our house would look like a complete REI store. Haha. But that’s pretty awesome that your lack of consumerist desire will make it easy for you to transition to the nomadic life or semi-retirement. High five!
I would not say it’s easy, it is definitely convenient though.
Okay, fair enough. You have a more convenient path, then. :-)
Alaska airlines almost NEVER offers flight credits since they don’t seem to do the same overbooking technique as other airlines! I’m still experimenting with how best to squeeze. Right now, we do the same thing as you, but on months we get behind (like the big trip), then I’m busy trying to cash flow everything like I usually do AND refill the “life happens” fund. Then I feel behind on everything.
Aw, bummer! I’ve totally come to love overbooking, mostly because I have fancy status and so can never get bumped against my will, and so I have the luxury of viewing it entirely as a money-making opportunity. Haha. And I’m totally sympathetic on feeling behind in those months when you have high cash flow demands AND are trying to refill the life happens fund. That was us just last month because we got a little overzealous with saving in June. It helps to know that it’s a short-term problem, I think, but it’s definitely one of those “just keep breathing” times. :-)
I love this! Is it nerdy to be excited to learn more tricks to saving? :)
I use a high level bi-weekly budget (paycheck – fixed expenses – automatic transfers to investments) and track all my spending, which works well for me. But lately I’ve been seeing around $25-50 remaining on the next payday so it might be time to adjust my automatic brokerage transfers so I’m not tempted to spend it.
P.S. I’m with you regarding savings percentages. Everyone has different circumstances (dual/single income, trying to pay down debt, etc) and we should be celebrating and encouraging anything that betters someone’s financial position over the long run. I really hope that people aren’t discouraged when they read about insanely high savings rates. I, too, am not super frugal but can save a high percentage of my income only because I have a very well paying job. I started my career making $27k/year so I’ve totally been there and know what it’s like. I accredit my increased income over the years on great opportunities provided to me (a nod to your bootstrap post from last week :) ), and I’ve finally reached the point where I have decided to stop squandering that money and instead use it for my future.
It may be nerdy, but money nerds are definitely welcome here. :-) And it sounds like you could sneak a little more into your auto-investments and not miss it. I say go for it, and worst case, you can always switch back to the amounts you’re saving now.
And totally love your notes on the savings rate. Same here! We started at $25K and $29K (and this was in a big, expensive city!), so we know what it’s like to find saving anything unfathomable. But like you, our pay has steadily gone up, and now we’re investing that money in our future selves. But we never ever want to shame anyone else for having different circumstances!
“All savings is good, and we should all be celebrating that rather than comparing”
I can’t agree more on this statement. Unfortunately too many of us unintentionally compare when we see net worth or savings rate updates.
Bringing less cash to farmers market? That’s what we’ve been doing. Better yet, bring no cash and just try out all the different samples. :D
I think comparison is human and totally normal, so no shame to anyone for doing the comparing game. We just don’t want to make anyone feel bad for what they’re doing, so are going to change our ways. :-) And man, I couldn’t go to the market at all if I couldn’t bring home some yummy fruits and veggies. I live for summer produce. :-)
We’re definitely in the automatic investing and mindful spending camp. Over the last year, I’ve increased our automatic investments twice and haven’t even noticed the missing funds.
And speaking of Costco as someone mentioned above, we actually cancelled our membership today. For us, that was $400+ per trip!
While we didn’t do any travel hacking to get to Chile, we opened cards to purchase airfare specifically to build up points that should pay for a couple weekend trips in Europe.
Lastly, we’re selling both of our cars this weekend and only getting one in England. That should lead to some nice savings!
That’s so awesome that you’ve increased your investments without feeling any pain! And congrats on quitting Costco! :-) We don’t miss it one bit, and you guys have such a big change coming that I’m sure you won’t even have time to notice that Costco is no longer in your lives! Good luck selling your cars and making the big move!!
Lol, “bunny ears”. I haven’t heard that since I was a kid :) Okay, now I am nostalgic and want a tv with bunny ears again! Can we go back in time? :)
I hear ya about the grocery bill. Everything just seems so expensive and trying to reign in the bill seems tough sometimes. I am looking into maybe trying batch/freezer cooking so that meals are already planned and ready to go and I can save in that capacity. Hopefully. *fingers crossed*
Okay so back to the bunny ears… :D
But remember what that was actually like? TV with bunny ears was kind of terrible. All fuzzy and everything. Haha.
Good luck mastering batch/freezer cooking! I was good about that for a little while, but then fell out of the habit, and then recently our outside freezer died… so yeah, it didn’t work so well for me. But I bet it will work better for you! ;-)
We’re in a very similar situation and this article inspired me to upped our savings game since we’re very close to FI. We already started making some changes earlier this month and will be posting an article on that. Cheers to FI.
That’s so fantastic! Pretty much the best thing ever to hear that we’ve inspired you to up your game! :-)
Ooooh, your post is so inspiring and dangerous at the same time. Inspiring because I love tips for increasing the savings rate. (This also explains why Mr. Enchumbao was so quick to sweep our “windfall” money into investments this month, which normally were floating free agents across accounts.) Dangerous because I have the “FI is around the corner” itch as well, and reading your post makes me extra excited and inpatient. I have had a few work situation where I almost told my fellow corporate Americans “that’s BS” or “I really don’t care since I am a pre-retiree” and I have to remind myself to keep the filter on just a little longer. It’s great to see like-minded folks who are just around the corner/mountain and I hope we’ll cross paths soon in our FI lives. We’ll be coming out of the FI-blog closet around your timeframe, and we can all take turns having a freedom ceremony.
Cheers,
Mrs. Enchumbao
Yes, let’s definitely have a big freedom ceremony! And we *totally* know how that goes with wanting to call BS on ridiculous moments at work — LOL. But yeah, gotta keep things under wraps just a little bit longer. I’m super excited to hear that you guys upped your savings game! There’s no downside to that at all, because you’re saving money. :-)
Someone may have already said this, but GoogleFi for your phone! $20 a month for unlimited talk and text with $10 per GB data usage. I thought I used a lot of data (Instagram and Snapchat :D), but I only use about 1.5GB a month. You only pay for what you use – so I would only pay $35; GoogleFi doesn’t round up! You do need to buy a Google Nexus phone, though. I bought not-the-newest one for $250 and I have never loved a phone more! I am obsessed with all things Google and this phone delivers on the price, quality, and service!
GoogleFi is definitely on our list to check out once we get closer to retirement. That’s especially good to know that you don’t actually use all that much data… I am a big data user too, or at least I think I am, but maybe it’s not that bad?
I like using credit cards to take advantage of the rewards they offer and paying them off every week. I’ve been working on eating out less and trying to spend less at the grocery store. I’m going to try to put some leftover money in a retirement account. Great tips. I enjoyed reading your post.
That’s great that you’re doing so many positive financial things! We’re big fans of credit card rewards, too, and that’s super disciplined of you to pay yours off every week!