the process

The Simple Math of Lifestyle Stagnation, the Biggest Secret of Our Success

If you’ve read here for any period of time, you know that we are not especially frugal, and though I had a 10-year-long side hustle that I loved like crazy, we’re generally not trying to wring every penny out of life. That combo of not watching every penny we spend and not maximizing how many pennies we bring in probably doesn’t, on its face, sound like a recipe for financial success.

Fortunately there’s more than one way to do most things.

While you can read our detailed rundown of our full financial plan and philosophy from last week, today we’re going to dive deep into the math on the decision that has by far given us the greatest financial success.

Overall, we attribute our financial success to a few primary factors:

  1. Not overspending on housing (and getting lucky with housing market prices)
  2. Earning above average incomes
  3. Not inflating our lifestyle in many, many years
  4. A combo of hard work, luck and privilege

Sure, we can talk a big game about living some baller years, and that for sure happened. But that was a long time ago at this point, and we’ve been saving in earnest for about a decade for a succession of financial goals, from our first home purchase to our second home payoff to early retirement.

The Power of Cutting Out the Inflation

This post is about #3 on that list of success factors: not inflating our lifestyle in many, many years. I said on the Mad Fientist podcast that we are still living on what we earned in 2008, and have banked all the raises and bonuses since then, but we actually think our “lifestyle stagnation” might go back even farther, to 2007 or even 2006.

Lifestyle stagnation only refers to our spending, of course. Our actual lifestyle has been anything but stagnant, including some fantastic international trips, a move to the mountains, lots of powder days and tent nights and many great meals — just all without increasing what we spend each year.

And today I’m sharing lots of charts to show just how powerful that simple act can be in actual dollars. As usual, I’m not sharing our numbers (here’s why we don’t share those), and I’m using modest earnings scenarios to show that you don’t have to earn a ton for this stuff to add up. // The Simple Math of Lifestyle Stagnation, the Biggest Secret of Our Success // Lifestyle inflation will sink any financial plan, avoiding lifestyle inflation, saving for retirement, saving for financial goals by avoiding lifestyle inflation

Let’s Look at Some Simple Math!

**Note: Assume all of these numbers are after-tax, for the sake of simplicity. But you can replicate any of these projections with your own numbers.

Let’s say your take-home pay in a given year is $40,000, and that you expect to receive an increase of roughly five percent a year (could be higher of lower some years, so let’s assume the average). Over time, your after-tax salary growth looks like this: Simple Math of Lifestyle Stagnation

We’re also going to look at a second scenario with periodic 10 percent raises every three years, which makes a sizable difference in income growth over time.


But let’s focus on that first scenario for a while with no bigger bumps, just the steady 5 percent increases. And let’s say that, in this scenario, your year 1 pay isn’t quite enough to live a comfortable life. (If that sounds crazy to you, just go with this for the sake of the example, and if you live somewhere expensive and understand, then hi!)

To get to a comfortable place, you need to work for a few years, but by year 5, you’re feeling good with what you’re able to spend, you’re able to afford to do the things that are important to you, but you aren’t blowing money frivolously. That’s your comfortable spending level, in this case just under $50,000 a year. Simple Math of Lifestyle Stagnation

Now, moving forward, you’ll keep getting those steady increases, but with easy successive year, you’ll have more money available to save without doing a thing. Just by continuing to spend at the same level.


Or, put another way, everything above that level spending line is the saving MAGIC. :::Cue glitter and puff of smoke::: Simple Math of Lifestyle Stagnation

Want to know what that saving MAGIC adds up to? In seven years, from year five to year 12, you will have saved $75,000, not including market gains, just counting actual dollars saved or invested. $75,000 by doing essentially nothing. 


If we keep projecting this out, doing nothing else to save money (or earn more) beyond collecting those basic raises every year — and still not accounting for market gains — you would have easily saved $260,000 by the end of year 20. Add whatever market gains you use in your projection to see what that would equate to in FI funds.

The Bigger Increases Scenario

Now let’s look at that scenario with 10 percent promotions every three years but otherwise similar 5 percent increases. Let’s also assume that we’re setting a comfortable spending level also in year 5, but at a slightly higher spend than the no promotions scenario, just to make the timelines comparable. Simple Math of Lifestyle Stagnation

As you’d guess, with more room to save, it’s easy to save more, in this case an easy $116,000 in those seven years, not counting market gains, by doing nothing more than not inflating spending. Simple Math of Lifestyle Stagnation

Over the course of a 20-year working career, that number of dollars saved balloons up to $578,000, again not including market gains which would surely increase that value significantly.

Some Magic Is Real

Maybe it’s because we hung out with owls in Japan last week which made me feel more than a little like Harry Potter, but I’m feeling the magic right now, and once you really get into the throes of that compound interest, it really starts to feel like some powerful sorcery.

The ONLs at an owl cafe in Tokyo, Japan

Money just starts adding up faster than you think possible. Like when all of the Hogwarts letters start flooding into the Dursley house in book 1. (Sorry, I’ll stop.)

Though the markets are certainly giving us nice returns at the moment (no predictions on how long this will last — you know we’re prepared if it doesn’t), it’s still true that the biggest source of compound interest in our financial lives has been in our earnings. And by letting those numbers continue to climb while our spending stays level, our balance sheet reaps the rewards.

Not too bad for essentially doing nothing. 

Tell Us Your Lifestyle Approach

No shame from us if you’re in that stage where you feel like you’d like to inflate your lifestyle a little more. When I was eating beans and rice every day (okay, I actually love beans and rice and am not complaining about that) and had credit card debt because I couldn’t afford to buy both gas and groceries, I was definitely itching to have a little more disposable income. And I’m glad I was able to get to a place where I could cover the basics and save a little.

For those who are at that comfort-or-beyond point, what’s your approach to managing lifestyle inflation? Do you keep spending totally level, or do you let yourself spend, say, a portion of each raise or bonus to provide a treat for working hard? Anyone else surprised by how fast those numbers add up even on a modest income? Imagine if you multiple that by a two-income household, or use bigger numbers. As always, we’d love to hear from you guys about how you approach this stuff! Let’s chat in the comments.

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Categories: the process

105 replies »

  1. I so agree that this is a powerful tool to increase savings relatively painlessly. This is actually the method I used to max out my 401k. When I would get a raise, even a small one, at least half that raise would go into bumping up my 401k contribution. It took years, but eventually I was able to reach the federal max without feeling a decrease in lifestyle. The same is true for bonuses, I don’t count on them so the entire amount can go toward my financial goals at the time. I don’t really feel the need to have a “reward” for working all year-my reward is increasing my savings and reaching freedom faster.

    • That’s great that you got to the 401(k) max that way! I love seeing people reach big goals through incremental changes that feel fairly painless. And extra high five for banking your bonuses! Woohoo!

    • I hadn’t even thought of that as a part of the mountain tax, but yeah, you’re right that it probably is! Our Subaru is certainly a pricier car than my old Civic. Mostly I say the mountain tax to refer not to things like a 4wd car that are necessary here, but to things where the price is jacked up artificially because greedy people are taking advantage. Like gas costing $.75 sense more than lower towns, or groceries costing more, utilities, etc.

  2. Great post, I love your simple, easy to understand, charts. They explain a powerful concept, in terms everyone can understand! We’ve done EXACTLY as you’re doing, and have had “lifestyle stagflation” for the past 7 years (we actually had “deflation” when we downsized last year!). Great post, with a powerful message!

    • Thanks! Big fan of those Powerpoint charts. ;-) So glad this strategy is working so well for you! And same here with reducing expenses now that the house is paid off. Woot!

  3. I appreciate this post so much because we are not in the wring every penny out of life camp, either. We are not willing to side hustle all the time or relocate for promotions, etc. And we are relatively thrifty but have our limits there, too. We have always increased giving in proportion with our income. And we added some expenses since having kids but our overall spending hasn’t increased much because we’ve deflated in other areas. I’m sure as they grow older, expenses will too, so our spending won’t actually stagnate. But I agree there is a lot of power of limiting that and banking the rest!

    • And I appreciate your comment back! I think there’s a lot of implicit pressure to maximize everything and I know that way of living isn’t right for all of us. So I wanted to show what’s still possible even without drastic cuts or massive hustling — and you’re further proof that it works! :-)

  4. This is fantastic. And it’s so true! Our budget (and I use that in the loosest sense possible) has entailed clicking “Make a copy” every month for nearly two years. It’s amazing how that savings percentage goes up when nothing else does. Except those pesky property taxes ;)

    • Property taxes pay for schools, right? ;-) And yeah, it truly is amazing how much you can save without being super penny-pinching just by not increasing your spending.

  5. Oooooooh this is the exact word for what I’m trying to write about this week! I love this – getting to your comfortable spending level. I’m so stealing that phrase and linking back to you guys – thanks for giving me words for what I was trying to say!!

  6. Sorry, I’m having trouble following. How many employers are giving out 5% Annual raises AND 10% merit raises? I get the point you’re trying to illustrate, but these scenarios are far more optimistic than reality, and frankly near impossible for those of us in the nonprofit sector.

    • I do agree that many jobs are looking at stagnant to falling wages. Even here in healthcare. That makes lifestyle stagnation even more important.

      If you current position is stagnant, the way these 5 and 10% increase come about is by working your way up the ladder at work or jumping between jobs if you have hit a ceiling where you are.

      Its pretty hard to jump around as a physician but possible if your current situation is limited.

    • Lyn is right here…I worked for ages in the ‘for profit’ sector and *never* saw 5% annual raises like that.

      A 5% raise was more likely when I got a *promotion*…which of course doesn’t happen every year…

      In truth though, the main gist of the article is correct — Don’t let your lifestyle inflate with your salary (regardless of the annual raise size). It worked for me, and bought me my freedom.

      • It’s hard to find irrefutable data on salary growth, especially when trying to hone in on folks likely to be in a position to pursue FIRE. (Hard to imagine most minimum wage earners or those earning just slightly more, for example, can do this, and as that’s a huge portion of the workforce, it skews the data.) I used this source:, and this stat: Wages in the United States increased 4.47 percent in January of 2017 over the same month in the previous year. Wage Growth in the United States averaged 6.29 percent from 1960 until 2017, reaching an all time high of 13.77 percent in January of 1979 and a record low of -5.77 percent in March of 2009. Of course plenty of employers do annual increases lower than 5%, but plenty also do larger increases that bring the average up. But think of it as an arbitrary number for the sake of the example. :-)

    • You can never make everyone happy when picking an arbitrary number. :-) Here’s what I based 5% on: “Wages in the United States increased 4.47 percent in January of 2017 over the same month in the previous year. Wage Growth in the United States averaged 6.29 percent from 1960 until 2017, reaching an all time high of 13.77 percent in January of 1979 and a record low of -5.77 percent in March of 2009.” (source: Of course those do not equate directly to pay increases, but I had to pick a number, and if I’d gone for 2-3% (which is lower than inflation in some years), then some folks would have criticized that as being too low for the private sector. This is meant to be an example, and perhaps it is too optimistic for many people’s situations.

  7. I kind of wish you did the market gains in that analysis. It would make the numbers pop a lot more and is realistic (maybe something conservative like 4% growth to recognize inflation).

    I think we’re around year 10 on living comfortably with the same expenses. The except is splurging on day care/education for the kids. I’m not one for budgets, so I simply ask myself if what I’m buying is really necessary or if I’ll be really excited about it a month from now. If it is necessary or it is something that I really for a couple of months (and it isn’t over $250), I just buy it.

    All that said, this year I’m actively looking for ways to spend money that really improves our lifestyle. I like to call it mindful lifestyle inflation.

    • I didn’t want the charts to get too complicated (or to have to debate what market rates I had chosen!). ;-) But yeah, no doubt market gains would amplify this growth in a big way. And I love thinking of what you’re doing as “mindful lifestyle inflation.” That makes total sense, and if something will truly add value to your life and you can afford it, then there’s no shame in spending that money!

      • We’re big fans of that concept! Inflating where it truly adds value and meaning to your life, but not otherwise.

  8. These are great points and something I definitely have been doing. I’ve been saving all of my raises and bonuses for years now. The real benefit is if you invest that money as well, and then your savings amount will compound.

    • Yeah, totally. I didn’t add in investment gains only because I wanted to keep the charts simpler here, but you could easily be looking at those numbers doubled or more, just by banking raises after your early career years. This stuff adds up fast!

  9. We maintain lifestyle stagnation and probably have since we combined our income during engagement in 2011. Each month we track our expenses and see what kind of money we spend to help us gauge retirement withdrawals. While our raises are only 0.5-3% a year with an rare big jump in positions, with every raise we ask ourselves, how much more can we stash away! (with our employers we have access to great tax-deferred vehicles like 401as, 457bs, 403bs and more.) Housing is super cheap in our mountain town, costing us only 8% of our monthly gross income. Salaries are above average for our area, but not anything like they would be in a bigger city.

    We had a couple big splurges. One was our new custom travel trailer (totally worth it), then the husband seems to buy new skis/bindings ever year because they each have a different objective. The quiver looks pretty full to me, but we’ll see haha. Might as well get them now while we have that cash flow!

    • My jaw nearly hit the floor to read this: “…costing us only 8% of our monthly gross income.” WHAAAAT?!?!?! That’s incredible! I know everyone is now dying to know where you live and how they can move there. ;-) And I totally know how that goes on the skis and bindings! Hahaha. (In fairness, Mr. ONL isn’t really that bad… but he TALKS about buying new skis a whole lot.) ;-)

  10. Keeping your lifestyle from inflating, or deflating your current lifestyle can create a lot of “free money” that you already have. We took that approach when we first started on this whole journey, and we were able to “find” a lot of money that we were just wasting in all sorts of ways. It was key for us “finding” all that money to save.

    I don’t think we ever banked our raises necessarily. I’ve only once gotten a 5% or better raise, and that was with good reviews. The last year Prof. SSC spent at megacorp she got a $330 raise. For the whole year… It amounted to about a 0.002% raise, lol. The kind where you see it and want to say, “Oh, maybe you need this more than me. You keep it.” :) I just got a raise at my current place, after no raise for 2 years. It was just under 3% though.

    We do re-evaluate how much we are investing month to month when those things roll around. For instance, we just upped our monthly investments from $3k to $4k per month. It leaves us a little less “spending money” but whatever, it’s an extra $12k/yr invested versus being spent on who knows what.

    Our bonuses basically go to investments, minus a little off the top as a reward. Of course, they are bonuses and not deferred compensation, so we don’t really factor them into any spending scenario and are just happy when they do actually happen. This year I actually got a bonus, so we’ll dump it into the kids 529 plans. :)

    • So you guys must have just started with big numbers to begin with in your jobs (speaking of Prof SSC’s prior job, not her current one), huh? It surprises me, given some sense of what you earn, that your raises are that small and infrequent, but then again you are also in a fairly beleaguered sector these days!

      • I was surprised too. :) At megacorp, raises were very subject to your immediate mgr fighting for them, not your performance per se. I ended up making more than someone that had been there for 6 years after only 3 years with meager COL raises. After 5 years, Mrs. SSC ended up about $30k/yr ahead of me salary-wise mainly due to a combo of great manager and great performance reviews. It wasn’t until I moved into her group that I started getting better raises and promotions. It was odd, because that was back in the boom days too.

        Currently, I am shocked I got a bonus this year and even a small COL raise given our industry situation, but I’ll take it and say thank-you just the same. :)

      • Just goes to show how circumstantial all this stuff is! And it’s hard to say which way is better — more data and pressure to meet targets but maybe bigger raises, or a more nuanced, supervisor-based approach which maybe don’t feel so much like big brother watching. I don’t know! And yeah, if I get any bonus at all this year, I’ll have the same reaction! ;-)

  11. Lifestyle stagflation is alive and well in the BITA household. We arrived at the FIRE party fashionably late, and while are we behind where we could have been, we aren’t miles behind. When I ask myself how this magic occurred, the answer is inevitably the fact that we never drastically increased our spending. We weren’t investing our money wisely, but we were saving without really trying because we weren’t inflating our lifestyles.

    • You’re only “late” to the party if you compare yourself to this tiny freakish majority of FI bloggers. In the real world, you’re still waaaaaaaaaay ahead of the game! And that’s great that you were already in the habit of not inflating your lifestyle, so the transition to FIRE planning must not have been so painful at all!

  12. We’ve generally run static numbers since about 2010 when we combines finances. We started with spending her income and saving mine. Over time my salary has come to equal hers plus mine. This is what enabled her to become a stay at home mom.

  13. I keep my lifestyle from inflating by manually tracking all of my expenditures. The more I purchase, the more items and time I have to spend on my spreadsheet… and I dislike doing my spreadsheet, so it helps me from spending a lot, because if I don’t purchase much, I don’t have to spend much time updating my finances. :)

  14. Watched some HP this weekend, there was a marathon on.

    We are on year 3 of saving all of our raises and financial windfalls and it has made a huge impact. We are lucky to both have above average incomes and our combined salary has been growing by over 10% a year for the last 3 (we were underpaid out of the gates however)

    I think averaging 5% is do-able working for a good company in the right industry – might slow down as your income hits above average ranges for your title/scope of work.

    • That’s awesome that you’re on a great roll of banking your windfalls and raises! And how great that you’ve been getting good increases, too. You’re right that raise percentages can slow down later in a career as you get more senior (but often it’s because the absolute dollars get bigger) — that’s been true in my case, but I still feel well taken care of!

  15. Great post again.

    For me the interesting part comes when you can actually start reducing your outgoings and end up spending less each month. Maybe due to a reduction in mortgage payments or something like that.

    In the UK a 5% pay rise is probably fairly optimistic for most jobs. I work for a large successful company and the basic wage rise for most employees was 2%.

    I allow myself to spend the percentage of my bonus that I would usually spend from my wages. So roughly 30% of my bonus is mine to spend on my wife and dog. The rest goes into paying off the mortgage. This means my savings rate doesn’t change but the actual savings figure goes up nicely.

    • Thanks! I agree that much MORE magic can happen when you can cut spending. All of it adds to that great momentum.

      5% is an arbitrary number here (though it was based on historical wage growth averages in the U.S., FYI), so unfortunately these projections will be a bit overly optimistic for some. Though often if people move from one job to another, they can negotiate a big salary jump there that makes it all even out. And I like your approach of spending some from your bonus on fun things as well as allocating some against the mortgage. Well done!

  16. Its been so long that my wife and I have gone without the newest gadget or newer car that it is just what we do now. Its not even that hard anymore.
    Two major items we have kept in check. Housing choices have really made a huge impact on my financial situation. 5 years ago my wife and i moved about 20 miles south from a major city to a bigger but cheaper house. My wife taking a job working from home enabled this to happen. Now we have a really exciting chance at paying that mortgage off in a few years.

    The next one is driving cars that are way below what we could afford.

    these two things have allowed us to save and invest way more than the average person while still maintaining a reasonable lifestyle. Our thermostat isn’t as low as yours BUT we do manage all of those little expenses really well.

    • I would never tell anyone to keep their thermostat as low as we do — we know we’re crazy on that one. ;-) So don’t use that as your measure of whether you’re doing well with your money! Hahaha. That’s awesome that you’ve avoided wasting money on housing and cars — those are the money black hole for so many people, so high five for not falling into it!

  17. Other than 2016, my expenses were pretty stationary 2010-2015 and now with no more mortgage (my husband took it over), they should drop a bit. That means I have lived off of 50% of my entry level salary after taxes with minimal lifestyle inflation, despite some reasonable salary increases some years and my husband moving in a couple years ago with his own large income. That has gotten me halfway to FI in seven years post-college and given me the ability to take this year off to pursue my MS with minimal financial impact! It’s really incredible watching my net worth compound at this point and super motivational. Despite not having an income at the moment, my investments have grown to the point that a 4% SWR would cover $1,000/month in expenses which is a really exciting round number to have gotten past!

    P.S. Thanks for sharing your Japan photos – it looks like a lovely trip!!!

    • That’s all pretty awesome what you’ve achieved, though I think most people would not describe what you initially earned as “entry level,” (though it was, in your case, the level of entry). ;-) But still, even with a higher-than-average income, it would still have been easy to blow all your money (I’m sure plenty of your colleagues did!), so you get all the high fives for making good choices from early on!

      • Oh yes sorry I meant to caveat that with that it is higher than a normal entry level salary which is why I thought 50% was a reasonable starting goal. It goes along with your chart though – I happened to pick a field where my natural sufficient spending level was well under the income.

        I would also caveat that buying my condo when I did is a huge part of my success at keeping my expenses relatively stable because rent has more than doubled in the last five years! Though my husband and I debate if we would have moved neighborhoods if we were renting so perhaps that isn’t a fair comparison.

      • It’s truly awesome that you could save that much right off the bat. If I’d chosen your field, we’d have retired long ago! Hahaha. And yeah, housing timing is totally luck, but it can make such a huge difference for those of us who get lucky!

  18. It must be nice to get raises and promotions regularly. We typically earn less and less each year for the same amount of work as insurance companies cut reimbursement. If we hadn’t held our spending low and constant, we’d have to cut our lifestyle year after year, so we’re lucky that we can hold steady with our habits and our frugal trips.

    • It is nice, but it’s also the trade-off of being expected to be working essentially all the time, including on vacation. So, pick your poison. ;-) I know the situation is tough in medicine, who knows what the new “repeal and replace” plan will mean for folks both providing care and receiving it! Good for you for not doing the typical doctor spending (at least according to the Millionaire Next Door) and instead keeping things steady and moderate!

  19. Love this – this is how we are paying off our mortgage way earlier – every year when I get a raise, we just plug the difference in my take-home pay back into prepayments. Put it all together and you’ve got a compounding recipe for debt destruction :)

  20. Saving magic is real! I think a lot of people get a raise and after all that hard work feel like it’s time to “make it rain.” While we’re not frugal to the extreme it’s interesting to look back over the past couple years of tracking and see that our expenses haven’t fluctuated much (about $2,000).

    I keep pretty detailed spreadsheets and one thing I haven’t accounted for was the “saving magic” of raises. Hopefully if we keep up our raises then we’ll be surprised in the end with a much shorter timeline than we’re expecting. I love the charts though! It gives even the little raises a good visual chunk in the savings chart.

    • That was totally true for us — all of our initial projections assumed level pay and didn’t anticipate how much we’d be able to increase our saving each year (both from salary increases and from just getting better at trimming our spending). So all of that was pretty major in shortening our timeline!

  21. Dear ONL… I Love reading your posts. Not in any way meant to be snarky, but I believe it to simply be a reality… I would add not having children as a 5th primary factor to attribute your earlier than most financial success. As you quoted in a previous post, I too believe that “Comparison is the thief (Theodore Roosevelt) or the death (Mark Twain) of Joy.” The following is shared not for comparison, but to add even more credence to your point that beyond salaries, children, luck, privilege, etc… that lifestyle choice is the biggest secret to financial independence. I’m 46 and my wife is 47. We have 3 teenage boys and our combined salaries have never totaled six figures (2017 will be the first time). Although both privileged to have been college educated without debt thanks to our parents, our teaching degrees did not translate to high paying salaries. My wife took a job teaching at a parochial school, and after several years of substitute teaching, I ended up taking an entry level position as a laboratory technician. In these early years, we both worked full-time and part-time jobs to pour into our little fixer-upper to prepare for our family. When our first son was born, my wife stopped working. My salary at this point (< $30K) was just barely enough… but it was enough. For the next several years, my salary increases were barely enough to keep up with the birth of our next two sons… but they were enough. Then one day, we began to have more than enough. I’d always taken advantage of matching 401K, but as 2006 was coming to a close, I shared a crazy thought with my wife… “Let’s put away the $15.5K max pre-tax limit in 2007” and see if we can live on what was left in my paycheck. 1 month passed… 2 months… 6 months. The safety net we’d set aside was holding and untouched. As our last little guy began pre-school, my wife went back to work part-time and we began funding Roth IRAs. When she eventually began teaching full-time again, she maxed out pre-tax contributions to her 403b. In 2012, we made our last mortgage payment on that same small “starter” home (primary factor #1)… and began funding 529 plans. Today we have a net worth around 25X our net annual COL. Since this includes our home value and 529 plans (which are still not fully funded), we still need to work several more years to pad our retirement accounts before we fully FIRE. Our goal is early 50’s, but even now, we have options that most folks in their mid-ish 40’s with kids don’t have. And no… all this saving for tomorrow does not mean that we haven’t lived today… and yes, over the years we have made adjustments to our COL. The key is… WE, not the Joneses, define what makes us happy…. what makes us content. For us, it’s simplicity… it’s time with family and friends… it’s creating memorable experiences. It is NOT about acquiring things. And while we do have many of the comfortable extras that most folks have, we’ve simply found ways to pay less for them. There is joy in the hunt… to find ways to repair vs. replace, to repurpose vs. throw away, to buy used vs. new, etc. Oh… and to further support your post… while it may be partially because my starting technician salary was so dismally small, now 20+ years and a lot of hard work later, my salary growth with annual increases, promotions, and shifting employers has averaged 7% year on year. Life is good. Thanks for your posts and sharing the message.

    • Wow, your story is so inspiring! And proof that you can still do amazing financial things with kids. I have heard both arguments many times: either that not having kids is the best financial decision we could ever make, or that having kids doesn’t have to be expensive and anyone who says otherwise is selling something. So it’s nice to hear stories like yours that show that, while I’m positive kids have added to your expenses in plenty of ways, you’ve still been able to achieve a ton in a relatively short time. And thanks for the point about your average salary growth — that seems to be in line with averages, so I don’t think the 5% I posited here is out of line. Thanks for your kind words. :-)

      • Dear ONL – Thanks for your reply. It’s one of the things I like most about your blog… that you truly care enough to read and reply to your readers. To again compliment and support your post… of the 5 primary “success” factors (kids included), there is no one factor that has contributed more to our financial success than lifestyle stagnation… living below our means. We reached… and more importantly, we realized that we had reached a lifestyle where we were truly content. Ten plus years later, we’re more content than ever to still be living that same lifestyle and having saved the difference. With respect to kids, I don’t think they are nearly as expensive as the crazy “studies” out there suggest, but there is no doubt that they are definitely a primary factor which impacts the timeline in which one can reach FIRE. Everyone always seems to pick on the early years of diapers, formula, etc. as being so expensive… maybe because they were harder to afford on those beginning salaries. But those infant costs were nothing compared to the teenage years. I can’t even begin to convey the amount of “fees” we pay between school and sports. If you can dream it up, we’ve paid it. Our second will be a driver soon… yikes car insurance. And three athletic teenage boys eating… don’t get me started. Additionally, it’s our choice to pay for their college education. Our parents paid for our educations so that we could start our adult lives debt free. This is our pay it forward moment. Reflecting on it now, our kids may be the only facet of our financial lives where we are keeping pace with the Joneses. Some of this is out of the quilt we’d feel if we didn’t (just being honest)… but mostly, just out of just plain love and the desire to give them every opportunity to reach and define what success looks like for them. Another point when it comes to the kid factor is… beyond the cost slowing the timeline to FIRE… there is time itself. Truly “raising” kids takes time. Our whole goal in ER is the freedom to travel. This past summer we took a 23 day, 7K mile drive out west where we visited, hiked and camped 13 National Parks. Priceless memories with our boys. If that doesn’t get one thinking of ER, then I don’t know what will. But the reality is… vacations are all we have time for at this point in our lives and in the lives of our children. Retiring any earlier would have us sitting at home while our kids go to school. Absolutely no complaints… it’s exactly what we signed up for when we became parents. It’s our path. Even when they go to college, our freedom will be limited to the time they are away at school. There’s no way three barely adult men are getting our home for the summer while we’re out traveling… can you even imagine? And there’s always the issue of covering their health insurance until they have their own jobs and their own coverage. I know there are the exceptions out there where couples with kids retired early, but I’m sure in order to do so there were sacrifices that wouldn’t have worked for us. Thanks for allowing me to share our story in the hopes that another young reader will be inspired to find the magic in saving instead of spending it on things they neither need nor will ultimately bring them happiness. My sincerest congrats to all wherever you are on your timeline… and wishing you Joy.

      • Aww, thanks for saying that! I feel like the whole point of doing this is to connect with people, so the comments and the back-and-forth are by far my favorite part. :-) I totally admire your determination to pay for your kids’ college — that totally falls into the bucket for me of “that’s what money is really for.” If you can’t help those you care most about, then what’s the point of it all?

      • I don’t think kids have to be expensive in and of themselves. For me it’s just the childcare while I’m at work factor. Pairing that with a HCOL area and it makes things tough. Hopefully I can eliminate most of that cost in a couple of years when she goes to real school.

      • Fingers crossed for you that you can keep those kid costs low soon! I know that childcare can be a budget killer (seeing the Slowly Sipping Coffee expenditures month after month has been quite startling on that topic!).

      • Thanks! I’ve been working a side hustle that helps pay the bills. Also, being a teacher keeps our hours similar, so I probably require less care than someone who works 9-5.

  22. This is probably one of my favorite articles and comments sections yet on ONL. :) Lots to think about and be inspired from! We are really struggling right now with reduced incomes (I lost my job two years ago and am making 10K less than I once was) and a young child who is still in full-time daycare (which costs as much as our mortgage). Still–I am constantly trying to find ways to keep the costs down and am hoping to do a lot more with regard to saving and investing once the daycare expense is gone (or at least greatly reduced to after-school care only once she starts kindergarten). ONL is one of my favorite blogs, although our lifestyles are currently very different. :) You are never sanctimonious or preachy and I ALWAYS find myself thinking about your posts long after I read them!

    • Thanks, Bonnie! So many kind words here — I really appreciate all of them! :-D Sending you lots of good vibes to get through this chapter of life without too much struggle, so that you can kick that daycare expense out and do more saving and investing for the future!

  23. Minus two big purchases (house, truck), my spending each year has been between $15k-20k for the last 10+ years. Over that same time my income has gone from mid 5-figures to low 6-figures to low 5-figures (almost went out of business) and back to low 6-figures. My lifestyle never really changed, regardless of income.

    I do cheat a bit because my side business is in the travel industry and I get really cheap/free vacations. But, people can do that with travel hacking as well.

  24. “Overall, we attribute our financial success to a few primary factors:
    1. Not overspending on housing (and getting lucky with housing market prices)
    2. Earning above average incomes
    3. Not inflating our lifestyle in many, many years
    4. A combo of hard work, luck and privilege”

    Pretty much sums it up. Add in learn to be a competent investor and manage risk, wash, rinse and repeat. Kind of amazing how simple the formula really is, and yet how few people even try it.

    • Yeah, totally! I was just saying to Mr. ONL how hilarious it is that I’ve somehow managed to write 230+ posts given that, ultimately, the money stuff is so simple. ;-)

  25. This is basically the synthesized version of my financial story. I inflated my lifestyle a bit right out of college but have kept my annual spending at pretty much that same level ever since, even as my salary more than doubled. If you can be happy and comfortable at $20k/year or $50k/year or whatever your number is, why not just keep things that way? If there’s one piece of advice I could give to newly minted adults, it would probably be this one.

    • You’re still my hero for how young you were when you started saving a big percentage of your income, and then keeping expenses contained beyond that. It took us some years before we got on board with that. :-)

  26. Great points. Looking back over my 22 yrs of working, your estimates are very reasonable. Once I started moving for job opportunities ten years ago, my income has quadrupled, but we still live on what we made back then (except for cash-flowing 2 college students now.) Driving old cars, not buying all the house “we could afford”, collecting “experiences” and not “things” – It’s allowed us to make FIRE reachable in about five to seven years. I still feel behind at times, but have been inspired by your blog.

    • That’s so awesome that you’re still living on what you made 10 years ago despite quadrupling your income! You get all the high fives today. :-) And you’re definitely not behind — don’t compare yourself to the super young outliers, compare yourself to the folks working until 65 and even then not being prepared for retirement. You’re soooooo far ahead of that!

  27. I love this post! I moved my family to our mountain town a little more than two years ago from the SF Bay Area, and the effect on our savings rate was nothing less than miraculous and life-changing. I was fortunate enough to switch jobs with the same employer, and as a result I was able to take advantage of a hefty relo package (paid all fees associated with selling our CA home and all fees associated with buying our new home – frictionless transactions) while increasing my compensation. Nothing like taking home a San Francisco salary while living in a less costly area! Of course there is the mountain tax, so things are not “cheap” per se, but it really is all relative (plus we have a Costco – huge!). I can’t expect annual salary increases in the 5% range (not even a promotion will do that for me at this company, sadly), but by keeping our lifestyle costs relatively stagnant, there’s still plenty of gravy to squirrel away each year after my raises. My bonuses also get banked, whereas in SF I needed that money just to make ends meet.

    Our biggest savings challenge is the fact that our kids’ private school tuition increases have thus far outpaced inflation (basically my annual increase), so we have to get creative and shave away at other spending in order to grow our savings rate. Of course this problem goes away if we just send the kiddos to public school, but this is an area where we think spending the money is the right thing to do, even if it prolongs my working years. Trade-offs…

    • That’s so awesome that you were able to swing this! How great. I also just love hearing from other city-expat mountain dwellers. :-) All things considered, it feels like you’re still coming out way ahead even with lower salary increases, given that you’re able to hang onto your sweet SF gig from a mountain town. And the school question is a big one, but I’m sure you guys have given it tons of thought and decided that private school is worth the cost. Your kids are lucky to have you looking out for them!

  28. Great visual representation of avoiding lifestyle inflation.We kinda did the same, except that we adjusted to the cost of 2 kids.

    The one inflation that we allow now, is to spend more on our travel.

    • And you know I support you in that inflation. :-) I think we’d do the same if the amount we capped things at didn’t already have a hefty travel allowance in there!

  29. I find this impossible to answer. My salary has bumped up with the current gig, but part of that is working OT. So much of my personal money is being invested in my small business that I can’t rightly tell what my true, personal spending level will be once the business can flow on its own.

    • You definitely have a set of circumstances that makes some of this stuff hard to project out! You’re doing so much to set yourself up for future financial success, though, that it feels like there’s no way you’re not on the right track. :-)

  30. My lifestyle approach….
    1. Have specific financial goals (Mine: Emergency, Kids Education, Retirement, Dream Savings)
    2. Every paycheck…Save first and spend what’s left and know what you spend on.
    3. Strive to save double-digit % of one’s income. Atleast start with 5%.
    4. Bonuses go directly to one or more specific financial goals and not for toys to show off.
    5. Invest savings..not spend them; Consider income-producing assets (real-estate, dividend producers) and re-invest income
    6. Get into debt only if you get something in return…
    – reduce taxes owed
    – earn points from credit cards to fund some expenses(partially)
    egs: gift cards, gadgets, hotel stays, flights, food, gas, clothes
    7. Pay off debt periodically and without fail
    8. KISS (Keep It Simple & Smart)
    – ignore the joneses,
    -live in a small home, drive used cars,
    – eat well, sleep well, exercise well
    – find a hobby/activity you enjoy;
    – invest in self and do the best wherever one is to keep the income coming
    – give love;
    – donate towards charity;
    – be grateful for what you have – always – because there’s a higher power.

    I am humbled and happy with the outcomes. I can’t believe that I can retire now if I wanted to at 48…am not single and have 2 kids too with one of them in college already.

  31. Great article! Lifestyle creep is a real financial independence killer. The strategy that I’m currently using is to keep my everyday expenses way below my means and spend more on my future (investing) and experiences (travel).

    Ps. The nerdy side of me really loved your graphs. :)

    • Thanks, Whitney! Glad you enjoyed! (Especially the graphs) ;-) We’re huge fans of hiding money from ourselves (having it go immediately into savings and investments before we see it or have to decide what to do with it) so that our checking balance looks a lot smaller than what we theoretically could be spending, and then we just live on that. Do you do something similar or have another strategy?

      • Yes! I have to hide money from myself. I was fortunate enough to get a 5% raise this year and chose to automate that amount each month directly into my investments.

        I did something sort of similar with my bonus. I first maxed out our IRA contributions, then filled in where we are a little low in a separate savings account for real estate taxes, 3rd made some charitable contributions, and then the remainder went into a yet another account for a future kitchen remodel.

        I have to keep the money out of my checking account; otherwise it so quickly slips away!

      • I love that! That’s so similar to what we do. We’ve even said that in retirement, we’ll “hide” money in separate accounts that we transfer over, say, twice a month. Because even though we now trust ourselves more not to overspend, we don’t want to risk it by putting all that money into savings!

  32. This methodology works. I developed and implemented my plan 20 years ago. Lifestyle stagnation took place 10 years ago in 2007. I’m a single income household in Singapore (one of the most expensive cities to be in). But the numbers I worked in 1997, adjusted along the way and tracked against actual results, saw me amass enough capital to embark on dividend instruments. The stream of passive income is reinvested and the compounding is phenomenal. My spouse and I come from humble beginnings and I can say that we have never been so confident of our financial situation as what we are today. I’m surprised to see the concepts spoken of here to be so similar to what I thought of years ago. I’m grateful to God for knocking this into my thick headed skull 20 years ago. I see my peers today where inflated living has caused many to think about working past retirement age. I continue to educated myself and stay connected to the financial happenings so that we can take the necessary actions to protect and preserve what we have built.

  33. A late reply to this post. I have a 3% yearly raised factored into my plan. Based on this, I have my vanguard 529 autowithdrawl set up to increase an additional $3k every yr beginning in July.

    • That’s great! If it’s a 529, is that college savings? Or do you also have a savings ramp-up on your retirement?

  34. So much food for thought here. It’s amazing what’s possible when you just look at the math and break down the numbers. I keep wavering between wanting to be super frugal so I can focus on financial independence and wanting to inflate my lifestyle and just enjoy the money I earn. Usually those kinds of extremes are about balance, but I feel like with FIRE you have to go all in and make a choice, right? I’m new to this and I need some goals. This was a really helpful starting point, though!

    • I think there are a lot of narratives out there that make it seem like going super frugal is the only way. But I definitely don’t think it is, especially if you can find ways to increase your household income. We live a life that feels totally comfortable to us and not frugal at all, but it costs about the same as what we lived on 12 years ago, even though we make a lot more now. I think if your income is fairly level over time, then the best way to accelerate your savings is to be more frugal, but if you can increase your income, you can achieve high savings just by capping your spending at one point that feels comfortable for you and banking all the gains over the years. Which is a long way of saying I don’t think it has to be one or the other, totally frugal or super inflated. ;-)