Category: Saving Money

An emergency fund can mean different things to different people. Essentially though, it is money that you can access very quickly without any complicated steps. The amount that you should have in your emergency fund, varies by individual. However, for peace of mind, you should consider having a simple emergency fund set up before you initiate your long-term investing plan.

Nobody likes thinking about emergencies. It is said, however, that people who anticipate emergencies, and make a mental plan for what they will do in such a scenario, are much more likely to have a favorable outcome. It’s why we practice fire drills at school…

Similarly, having that emergency fund in place will you give you peace of mind knowing that you have easy access to your money, without jumping through hoops, should the need arise.

To me, that is worth it. But there are plenty of considerations that vary by individual as well. This has the Wh’s written all over it. Who, What, Where, When, Why (and How/How Much)? Let’s take a look at all of these (except for “Who”. That’s hopefully all of us.) so you can make an informed decision on what works best for you.

First, let’s get on the same page on the basics for what an emergency fund is and why you might want to have one.

What is an Emergency Fund and Why do I need one?

An emergency fund, in my mind, is any money that you have easy access to AND you won’t touch unless a situation you deem emergent arises.

People can need emergency funding for a variety of reasons. Essentially though, it’s for a significant and unexpected expense that arises. Should this expense present, you have these emergency funds so that you don’t have to scramble or take on high interest debt to cover it.

Where you keep your emergency funds depends on what works for you.

For me, I can’t necessarily keep my emergency funds in my checking account. In theory, I could dip below what my designated threshold (we’ll definitely discuss this), a little too easily. In fact, I could do this without even knowing it. Then, should the need arise, the money wouldn’t be there.

Keeping your emergency fund in a place where you can’t accidentally access it, is definitely part of the equation.

So is easy access.

If the need arises, you don’t want to be selling off invested funds and waiting many business days to have access to it and more business days for it to transfer to your bank. That’s not immediately helpful (though eventually this can factor into the equation as well. We’ll discuss this later as well).

So, like I said, we need the emergency fund to be accessed easily, AND it should probably be separate from the account we have for everyday expenses.

Next, let’s look into where we might want to store your emergency funds.

Where Should I Keep my Emergency Fund?

Personally, I think a separate savings account at your bank is the best place to store an emergency fund.

All of my day-to-day spending and credit card bills come out of my checking account. So, if I keep my emergency fund in a separate savings account, I can’t unknowingly dip into it.

This is that extra layer of protection (from myself!) that gives me peace of mind.

Additionally, because I am so very frightened of overdraft fees and the like, I always like to keep a cushion in my checking account as well. This, in essence, is a little extra emergency funding that I can access very easily.

If this line of thinking appeals to you, then go to your local bank and open a separate savings account to store your emergency fund.

Want bonus points? (Don’t we all?) Go shopping for a bank that has the highest interest rates. That way, your emergency fund can actually grow a little while it is sitting there.

Typically, a savings account will be the one that has higher interest rates than a checking account so that seems like the best candidate for storing your emergency fund.

Personally, because savings rates were so low, I did not even bother. However, shopping around online, I did see a few that had rates at .5% (half). If there is a branch in your area that has such an account then it’s probably worth it.

I always like the idea that it’s growing, even a little, while I do absolutely nothing to it.

Do you have a Need for Speed?

In my mind, I can’t envision too many interactions where I would need absolutely instant access to my money. The reality is, I have a cushion in my checking account, AND I have credit cards (that I pay off in full each month) that give me points.

The problems arise when unexpected expenses that can’t be put off arise and you don’t have the money available to cover it.

This means you end up charging it, and because you don’t have the funds to pay it off, the credit card company starts charging those deadly APR’s (Annual Percentage Rates) in the 19 – 25% range.

This is where the emergency fund comes in. It helps you avoid that slippery slope of credit card debt.

When I invest, I’m accounting for 8% return on investment. This allows my money to double every 9 years.

If my credit card APR is 24% then that is 3 times the percentage yield of what I hope for in investing. This makes my debt double every 3 years. That hurts and we want to avoid that pain!

So, with the emergency fund in place we can charge the unexpected expense incurred and it gives us a whole month to allocate funds.

If you are still concerned about needing instant, instant access to your funds then open that separate account at a new bank and put whatever amount you deem necessary in the checking account. The rest of the emergency fund can go in savings.

Then, you have fast access to it but you also know that funds from that particular bank is ONLY to be used in the event of an emergent, unexpected expense.

Emergency Fund over Time

As you start saving and investing your money, the emergency fund becomes even less concerning. After your emergency fund is established, you may begin investing your extra savings.

Here’s a post on the very basic, easy to follow investing plan I use.

This newly invested money will go into a brokerage account (don’t worry about this now but essentially it’s an investing account for your money after it’s been taxed. It’s for the money you actually get in your paycheck). This means, you’ll have access to that money as well. It only takes 3 or so business days (I’m sure it varies place to place).

Three days is well short of the month you have once you charge something. So, if that expense arises, you can calmly make the necessary transfers to pay off that credit card in full.

The same is true for a Roth IRA as well by the way. I don’t ever want to touch my Roth IRA (a retirement fund for after tax money that does NOT get taxed when you extract it later (presumably after it has grown considerably)). You CAN take out the money you have put into a Roth IRA without penalty. Read that last sentence carefully, because it’s only for the money you have put in and NOT for the interest you have accumulated. Nevertheless, you can access it if the need arises without penalty as well.

So, as you can see, as you begin saving beyond your emergency fund, you have more options and each unexpected expense becomes less dire.

Why Even Bother with an Emergency Fund?

After reading that preceding section you may be wondering, if I have so many options, then why even bother with the emergency fund? Why not just start investing and growing my money right away and have it double as an emergency fund?

First off, I like how you are thinking. Now you are thinking long term and how you want to grow that money you’ve worked so hard to save. But there’s a “but” coming here…

BUT, there are a few reasons this line of thinking isn’t as effective as a starting strategy.

The reasons are taxes, fees, maintenance, and mindset.

If you invest that money and it starts growing, you might be feeling pretty good about it. If you then have to take it out there will be a few things working against you.

First off, if you have it in the account less than a year than any gains you have accumulated from your invested will be taxed as income ( called short term capital gains, but don’t worry about it now).

Some brokerage firms may also charge a transaction fee.

I’ve never done this so I don’t know, but if you spend all the money you have in that account you may have to close it out as well. That could be high maintenance and may prevent you from reopening it again in the future. We don’t want that.

But most importantly, I don’t like the mindset of it all. I don’t want to have you lose all that momentum. Additionally, we want to be thinking long term. So, when you put money in a Roth or brokerage account we want to be thinking that this is money I am setting aside for my future self.

In my mind, for those reasons (taxes, fees, maintenance and momentum) it’s very much worth it to establish your emergency fund before you begin investing.

But fear not, you’ll be growing and investing your money in no time! If you’re like me, you just want to get things started right away. I totally get that! But because we’re thinking long term, what’s 4-6 months in the scheme of many decades?

It’s a blip on the radar, that’s all.

Once you access a few money saving tips, and drastically improve your savings rate, you are going to have that emergency fund set up and you’ll be adding to your investments in no time.

How much should I have in my Emergency Fund?

This is where we get into that nebulous area of “it depends”. I hate those answers, but they exist for a reason I suppose…

Nevertheless, I’m going to toss out a number at the end and try to justify it. First, a little background.

According to this article on CNBC, ONLY 41% of Americans would be able to cover a $1,000 emergency with their savings.

But, the article goes on to say that the average cost of such an emergency is $3,500.

Both of those statistics can be very problematic if you were to incur an unexpected expense. If you are unable to pay it off, then you will probably end up paying much more over time due to credit card expenses. We want to have our funds in place so we don’t get bogged down in expensive credit card debt.

Continuing on, if you do a quick Google search, most sites recommend anywhere from 3 – 8 months worth of expenses.

The good news is, because you have drastically improved your savings rate, you now “need” less each month and that brings the amount required for your emergency fund down as well.

My nebulous version of this answer to the question “How much do I need in my emergency fund?” is; Whatever gives you peace of mind.

If you think your amount is too low and it causes you stress, then add to it. Conversely, if you are not as concerned, then maybe it’s okay where it is.

But now I’m going to throw out a concrete number here. I do this in case you are a “doomsday thinker” and you feel like you can NEVER have enough in your emergency fund. I also want to make sure you’re not “too cool for school” and think $100 bucks should get it done.

How does $6,000 – $10,000 sound for you as an individual? If you share expenses with a partner then you can double that.

Here’s my logic: If I get into a situation where I just dipped into my emergency fund, and I have no source of income, then I’m immediately going into preservation mode. Bye-bye to any extraneous spending. Adios gourmet coffee and Netflix. So long occasional restaurants and wardrobe upgrades.

I will only pay for housing, food, utilities, gasoline for necessary transportation, phone/internet (this would be a last resort cut). You get the idea.

With that mindset, and no income, I could get 6 months out of $6,000. But it wouldn’t be pretty. And remember, that’s just for me. My wife would have similar expenses as well. Double that figure if you share expenses.

But realistically, I also think I’m going to be earning money in that time as well. I’m confident I could bolster my income and extend that emergency window.

Maybe you don’t feel as confident, or you don’t want to kick it into such a drastic savings mode. In that case, your number might be higher.

Ultimately, it comes down to personal preference, but that $6,000 – $10,000 range gets you in the ballpark (in my humble, non-professional, opinion).

Look at the expenses that you are unwilling/unable to part with and use that to devise your own emergency fund number. Going above or below the range is fine as long as you are intentional and can justify it.

Then, once you have your number, go about getting it so you can then turn your energies towards building your long term wealth as well.

Family and Other Considerations

I was raised in a family where we openly talk about finances. I’m thankful for this but I believe I’m in the minority on this one. In general, I would say it’s still generally taboo to discuss finances. I disagree that it should be, but it’s not my call either.

However, if you do feel open to having these conversations with trusted friends and family, then I think it’s a worthwhile idea. It may give you a little peace of mind and/or clarity on how much you need for your own emergency fund.

Basically, you want to know, in the event of an unexpected expense, how much can you expect from this person.

You should also have a conversation around what constitutes an “emergency”. If my brother asked me for $500 because he “needs” to get the newest gaming system, I’d tell him to get lost. Make it clear, what would and would not constitute an emergency.

What I don’t think you should do is assume you will be helped. I think a lot of people get into trouble by assuming their friends or family will help them when need arises.

Then, if they don’t get the help they were counting on, a rift can form. Feelings of anger, disappointment and betrayal can arise. We want to avoid that.

And let’s be honest. People are weird about money. Why should our friends and family be any different?

Here’s how I might go about starting a conversation.

Example conversation with Friends or Family

So, how about this for a conversation starter?

You: “Hey (friend or family member). I have a somewhat serious question to ask you but I want you to know that, whatever you answer is okay.

Them: OK. (Right now they are intrigued). “What are you going to say?” they wonder.

You: It’s about money.

Them: “Oh no,” they think. “They’re going to ask me for money! I knew I shouldn’t have asked them if they needed anything!”.

You: “Don’t worry, I don’t need any money from you!” you blurt out.

Them: “Phew!” (Now they are primed for the conversation.)

You: I’m starting to think long term and I want to set up an emergency fund. Again, whatever you say is fine. I just want to make sure I have all the information before I start. Basically, I want to know, should an emergent unexpected expense arise, would you be willing to temporarily help me out so I could avoid getting into major debt? And if so, I would want to know how much I can reasonably expect from you, with the obvious idea that I would eventually pay it back?”

“Remember,” you continue, ” I don’t have a need right now and zero is an acceptable answer. AND as I start saving more and more in my own fund, there is less of a chance I’ll need help from you. However, I just want to factor in your answer when I find an emergency fund number that works for me…”

That’s the general idea. Was that clunky? I tend to be clunky. But ultimately you want to find out if they will help you out and for how much.

So, frame the conversation any way you want, but if you are going to rely on others as part (not all) of your emergency fund, then you should have the facts straight so as to avoid duress should your need arise.

Also, it’s important to keep in mind that it’s extremely difficult to know how much available money people have by looking at them. Some people like to have all the best stuff but they are in a ton of debt. Others, can be covert millionaires that drive around in a 2004 Corolla and haven’t bought a new article of clothing in 20 years (that’s my own personal goal). The point is, they may not be able to help you and you want to know that before the storm hits.

In my humble opinion, IF you are NOT willing to have that conversation, then I think you have to assume that you will NOT get assistance and plan accordingly.

Also, even if they say they will give you $1,000,000 I think you should still establish your emergency fund(it just might be slighly less). If you thought that conversation was clunky it’ll only be worse when you have to actually ask. And, as much as we don’t like to think about it, other things can come up and we don’t want to put all of our eggs in their basket.

Using your Emergency Fund

If you do end up accessing your emergency fund, make sure that you refill it once you start getting traction again.

First, if you ended up having to use credit cards, pay those down as quickly as possible.

Then, if you had to borrow, pay that back next. This will show, if it comes up again, that you are good for it.

Next, refuel your emergency fund. On this step, you can also reassess what a good number is for you and your peace of mind.

Finally, once you have retooled, you can begin investing again.

In Summary

Nobody likes to think about needing emergency funds, but taking the time to establish one can dramatically reduce stress should the need arise.

It can also save you lots of money as it prevents you from incurring those massive credit card expenses.

If you haven’t already, it’s probably a worthwhile venture to sit down and come up with a plan for your emergency fund. How much you put in it, and where you store it, are personal preferences and up to you. Hopefully this post gave some helpful guidelines for you to consider though.

Finally, if a trusted friend or family member is to be part of your emergency plan, I strongly recommend an explicit conversation. Find a way to get on the same page about what an emergency is and how much money you could rely on should the need arise.

Then, once you have factored in all of these considerations, start saving and working towards your goal.

The emergency fund gives you peace of mind that you will be taken care of should an unexpected expense present itself. That, to me, is a worthwhile investment!

Thank you for reading. I welcome your thoughts and comments below. Do you have an emergency fund number that works for you? Have you had any of these conversations with friends or family that we can learn from? If it’s that, or anything else, then I want to hear about it. And as always, if you prefer, feel free to reach out and contact me at any time.

Some people, when making big purchases, justify it with the idea that “you only live once” (YOLO). Too much of this can hurt savings, lead to stress and, in many cases, a poorer quality of life. It can also spiral out of control. But there is a way to embrace some of these YOLO purchases AND keep your savings thriving. This is what we will explore.

Misuse of a Saying

I’m just going to start with a mini-rant here. Why not right? One thing that used to bother me in teaching was this concept of teachers practicing “self care”. It seemed that the powers that be, whoever they are, noticed that teacher longevity statistics were tanking.

They were and are.

Then, it feels like they decided it must be stress that was causing teachers to burn out.

It was. Stress is what got me at least.

So, as a result they started pushing this concept of “self care” for teachers. It makes sense. However, the part that irks me is this: It felt like these “higher ups” thought they could just push out a few articles on “self care” and have administrators say the words “self care” from time to time and all would be well.

As is the case with many things, they were not addressing the myriad sources of stress that teachers face daily. Teachers, in my opinion, are stretched way too thin. As a result I ended up wanting to scream “I don’t have time for self care!” whenever I heard it. Am I alone on this one?

Mini-rant over. I may explore this later though…

For now, however, the reason I went on that preemptive tangent is because it reminds me so much of the YOLO phenomenon. Just like administrators saying “self care” was thought to be enough, it feels like when rationalizing a rash, and somewhat substantial purchase, a person needs only to yell “YOLO!” and it is instantly justified.

As you may imagine, spending significantly on rash purchases can have a deleterious effect on your savings.

And YRTL (You’ll Regret This Later) doesn’t quite have the same catchiness (though not the worst either).

But the reality is, if you “YOLO purchase” frequently, you’re most likely going to be hampered by debt. Debt is inherently stressful. We want to avoid debt. Stress from debt will easily counteract any short-term benefits you may feel from a “fun” purchase. In most cases, these “YOLO purchases” are ill-advised.

But is there a balance? Can I “YOLO purchase” a little and still keep my long term financial goals intact?

I think so. Let’s explore!

Taking YOLO back

Sometimes a phrase gets overused and so disfigured that it loses all of it’s original intended value.

You Only Live Once (YOLO) is one such quote. As far as I know, you do only live once. And taking it a step further, it certainly makes sense to me to make the most of the time we have while we have it. That saying is even worth revisiting when we get caught up in things that don’t really matter in life.

You can even connect it to taking healthy risks that challenge you as a person. For my money, that’s a good saying.

But for my money, it’s a bad saying.

I just don’t like the idea of connecting that phrase to purchases. When we do that we are saying that the items we purchase will bring us happiness and we’ll regret it later if we don’t buy them. I believe, by and large, the EXACT OPPOSITE to be true.

Purchasing things will NOT bring us happiness and we’ll regret it later if we DO buy them.

In a previous post, Don’t Let Buyer’s Remorse Eat Away at Your Savings, we saw that the majority of us feel remorse for most of the purchases we make. Remorse and regret are synonymous to me. And most likely, that regret comes when you see that credit card statement…

Debt in all forms equates to some degree of stress. For me, I’m going to be much happier without the debt than I am with the shiny new toy. And when that toy loses its shine, I’ll probably wish I could just have that money back.

This is obviously not true for all cases. But that’s why it’s so important to be intentional about purchases rather than rash. It can be a very slippery slope indeed.

The Slippery Slope

If someone does a lot of YOLO purchases, unless they are wealthy, there is a good chance that they will be in debt. At the very least, they’re probably not saving a whole lot.

But for our purposes, and given the trends we see for the average American, they are probably in debt.

As we’ve already mentioned, debt is inherently stressful. Usually, a person in this state of mind will try to relieve said stress. So what do they do? Make more purchases of course! There, in lies, the slippery slope.

They are taking the short-term relief with the purchase which only compounds their problem later. And that just leads to even more stress down the line.

If this describes you at some point or even now, don’t worry. It described me too. If you’re reading this than you are actively trying to combat it as I am as well.

If we stick to it, and play our cards right, it can and will be combatted!

Just don’t play the YOLO card. We see that that won’t get us where we want to go.

But let’s look at how we can still have a little YOLO in our lives without crushing our savings.

YOLO Purchases = Spontaneity

To me their is a significant element of spontaneity associated with YOLO. You’re driving by a fancy car dealership. You lock eyes with your significant other. The outdated, haggard car you are currently driving practically drives itself into the dealership and… YOLO!

But we won’t operate that way with major purchases. That will hurt too much later.

Nevertheless, nobody will blame you for wanting a little spontaneity in your life.

One of the recurring themes I heard in my FIRE (Financial Independence Retire Early. Here‘s a post I made on it.) deep dive was the idea that those folks that were seeking FIRE had fixated so hard on the end result that they forgot to enjoy the ride.

Then, once they achieved FIRE, there was a “now what” feeling that was woven throughout their stories…

So, how can we smell some roses, have a little spontaneity AND avoid regrettable purchases that will smother our long term goals?

Have a YOLOWANCE (YOLO Allowance)

Even I’m groaning on that one. I’m starting to see where my students were coming from…

But put the horrible headline aside for a moment. Can you have a fixed amount of money, that you set aside per month, to spend on whatever strikes your fancy?

Then, once that money for your, ahem, YOLOWANCE, dries up you shut it down for the rest of the month. Almost like a robot. You are programmed to spend spontaneously to a certain limit, then stop.

“Wait a minute,” you say suspiciously, “this sounds an awful lot like a budget.”

To which I reply, yeah, it pretty much is. But if I had written “budget” you’d never have YOLOWANCE (last time) enter into your life. You’re welcome.

Budget might be one of the least spontaneous words there is, but if you budget in these YOLO purchases, you can make them without regret. This can bring a little spontaneity into your life. It can also help stave off some of the perceived drudgery and grind associated with saving. All the while, it still provides you with the peace of mind that you’re on the right track to achieve your long-term financial goals.

And if we are budgeting some YOLO purchases, then it makes perfect sense that the less we spend on any given purchase allows for more purchases later.

I have a list of go-to YOLO purchases that I like to make when I’m out and about. I’ll put it below. But I’d also like to hear your ideas as well! Let me know in the comments and we’ll add to the list.

My Favorite Low-Cost YOLO Purchases

Before I give you the list, just make sure you have some system to track your spontaneous spending and you’ve set aside a reasonable amount for it as well.

I usually set aside about $50 per month for YOLO purchases. If I keep it to $12 per weekend, it’s easy for me to track. And with $12 I can get plenty, but here are some of my favorites!

Ice Cream – I can have a delicious treat and spring for my wife and kid as well.

Nice Coffee – Give me a coffee and a book and I’ll never complain.

Bakery Goods – Add a croissant to that coffee/book equation and you may never see me again.

Pizza – I can’t shake it so I just have to moderate it. I absolutely love pizza. In fact, on my second post I talked about taking a pizza making course in Italy, as one of my long-term goals for myself. For now, a few slices from the pizzeria downtown will have to suffice.

Take in a matinee at the movie theater – As long as you avoid the expensive snacks and sodas, a movie can be a great take on a budget.

Modified Picnic – If I bring a few supplies from home and buy a sandwich from a local deli, I can have a lovely picnic on a tight budget.

Brewery Sampler – It’s hard to throw a stone these days without hitting a local brewery. We have plenty in the area. One thing I like to do is try a new brewery and buy a sampler of some of their beers. If I don’t get to all the beers in that visit, I can always go back later.

Activities – There are many activities I enjoy like mini-golf, bowling, pinball, or pool that cost very little and are good for hours of good fun.

That’s all I’ve got! Clearly that needs more. Also, it’s pretty apparent that I need to make some healthier choices.

What do you do for a little spontaneity that doesn’t hurt the savings? Tell me about it in the comments and we’ll get a list of ideas going.

It should also be noted that are plenty of free activities as well, but that wasn’t the goal of this post. We just want to spend a little and stil keep the majority of our money saved. Spending that little amount of money spontaneously may also help us avoid those large YOLO purchases that can destroy our saving momentum.

Summary

Take YOLO back and make it about living a full life without regret. But disassociate the saying from purchases.

If you want to be spontaneous, you can budget in small spontaneous purchases without losing track of your long-term goals.

That way you can still spice up the “now” and keep your money for “later”. In the end, as is usually the case, it’s about finding balance.

Thank you for reading! If you have any comments or questions you are welcome to put them in the comments below. If you have any suggestions for ways to spend a little without breaking the bank, I’d love to hear those too. You can also feel free to reach out by contacting me.

I’ve heard and read the term “Lifestyle Creep” a lot in my research on how I can retire early from teaching (if need be). It’s an important topic to understand so we can achieve our long-term savings goals. Lifestyle creep is the gradual increase in spending that happens alongside a person’s gradual increase in income. The net result is that we are spending more money instead of saving more. Let’s look into what this means for our lives and how we can use this knowledge to help us save more of our hard-earned money.

What is Lifestyle Creep?

Don’t judge, but I am still a fan of the movie Dumb and Dumber. I was 14 when it came out and Jim Carrey was absolutely the hottest star in comedy at that time. Thinking about it now, it’s almost a statistical impossibility that I NOT like the movie. I still like music from that age as well… We were impressionable at that age!

I’ll stop rationalizing.

The reason I bring it up is that I can think of no better portrayal of lifestyle creep in cinematic history than the one in that movie. And it’s neatly packaged into a 2 minute clip! Brilliant!

In case you need context, these two dumb/broke guys, who are traveling across country in search of a girl and a better life, come across a briefcase filled with cash. This scene right here (and embedded right below) depicts lifestyle creep perfectly.

Go ahead and watch! You deserve a break!

You see how they immediately increased their spending to match their increased wealth? That’s what we mostly tend to do as well (in a much more gradual and far less extreme manner). When we earn more, we have more to spend. And that’s exactly what we do. And that is lifestyle creep in a nutshell.

In fact, there is even a psychological term for this. It’s called “The Diderot Effect”. I learned all about this and so much more by reading Atomic Habits by James Clear. I wrote a review on this book, and talked about the profound impact it can have on you personally, professionally and financially.

If you are interested it’s called Baby Steps to Success: An Atomic Habits Book Review.

Why Let Lifestyle Creep in…

Like so many other things in our society, Lifestyle Creep is completely normalized. It is why individuals with 6-figure incomes still live paycheck to paycheck. We connect more stuff and better quality stuff with a better life. And in some cases that can be true, but for most of it, I would say it’s not true. The end result is that the lifestyle creep that takes place over time eats away at our savings.

This can have huge ramifications down the line when it comes to our savings. If you haven’t already, check out this post on Drastically Improving Your Savings Rate. It lays out the argument for why we should all be doing this and how significant it can be for our long term savings goals.

Recently, we talked about the overwhelming prominence of buyer’s remorse and how we regret a large majority of the purchases we make. But it’s also natural to want to make improvements to your lifestyle.

So what do you do with that yearly raise? Can we have both? Can I improve my savings and upgrade my life a little too?

I think so.

First we should consider some other important factors regarding Lifestyle Creep so that we can better prevent it and hold onto our hard-earned money!

Understand Cost of Living Raises

To better stave off Lifestyle Creep, we should make sure we solidify our understanding on these “cost of living raises” we get annually.

A true cost of living raise is designed to counterbalance the rates of inflation that naturally occur slowly over time. Inflation is the gradual rise in prices for goods and services over time. It can also be thought of as the slow devaluation of your money over time. A good example of inflation is that classic grandpa telling us that when he was young, gas was a nickel!

Whatever the case, most teachers have a cost of living pay bump from year to year. That can feel great because it feels like a raise. But really it might just cover that almost imperceptible rise in prices that takes place yearly. In some cases, it can actually damage our savings because we increase our spending even more to match our perceived “raise”.

Teachers often also get a pay bump for years of experience. All told, these two pay hikes might be more than the rates of inflation. If not, or if it comes out neutral, don’t treat it like a raise and increase your spending. That’s where we can get into trouble.

If you do end up making more than about 3% (typical rate of inflation) then let’s come up with a plan to get something now and make sure we are better taken care of later.

Save More and Creep a Little

Confession time. You know how “What was your first cd?” is a question you hear from time to time? Well, mine was TLC Ooooooohhh…On The TLC Tip. (And yes I counted the number of O’s in Ooooooohhh. Seven.). Very catchy cd. Still, it’s not my favorite question to answer and I usually exhibit questionable behaviors to avoid answering it…

The reason I bring it up is, because I remember that later on TLC had a hit song called Creep, which has nothing to do with lifestyle creep… I don’t know where I’m going with this… Maybe I’m just showing you how I think and you can have an embarrassing factoid to hold over my head forever and anon?

Back to the point! I’d say, if you want to, you can let lifestyle creep seep in a little, but not before you set aside your extra savings. Make sure you have given a significant bump to your savings and then you can spend the rest guilt free. You’ll already know you’re taking care of your future self so you won’t have to stress about it.

If that still doesn’t satisfy your needs in the immediate future, then we need to get our hands on some more money don’t we? First, I’d ask you if feel like you’ve made an honest go of saving? There are vast sums of money to be had by changing a few habits. Try reading a post I wrote that can slash your outgoing expenses very significantly. It’s called Simple Steps to Big Savings and it helped me improve my savings rate from 10% to 40%.

If you’ve got your saving to a good spot, then we’ll just have to get that money elsewhere won’t we? I have some very innovative ideas below!

Earn More Money – Jump Lanes

“Gee, thanks. Why didn’t I think of that? Very Innovative…” you mutter. Wait, is that sarcasm I detect? Fair enough! But if we are not treating a cost of living bump as a raise, then we have to get this extra money from somewhere right?

By far my favorite way to make more money is to do what we call a “lane jump”. This is when teachers earn a certain amount of graduate credits so as to move “lanes” (or columns) on a pay scale.

The logic for most school districts is this: “More highly educated teachers are better teachers and better teachers should be paid more.” I understand the logic, but it’s flawed. I know absolutely amazing teachers that simply haven’t had time to do a lane jump because they are so busy dedicating their time to their craft (thus making themselves better teachers), but I digress…

If you haven’t already, find out what your school districts pay scale (or “salary schedule”) is. In many cases, it can be many thousands of dollars more per year for the rest of your career. That can be huge savings!

As always, if you do make a lane change, your first priority (in my humble opinion), should be to set aside a large chunk of that for savings and take care of your future self!

And if you feel strapped for time, Mr. D. has got you covered! I really like these online courses at webteaching.com.

If you get the flex courses, you can do them on your own time (you have a year to complete them) AND earn graduate credits from UCSD. Best of all you earn 3 and1/3 credits per course! That means every 3 courses you complete earns you 10 graduate credits. They are relatively cheap (I usually wait for a sale to get them at under $300 per course), they are much less time consuming than typical courses, and they keep their courses topical.

Note: This is NOT an advertisement and I will NOT get paid a dime if you choose this course. I just appreciated the streamlined package they offer and wanted to share it with you. As always, just make sure your district will accept these credits. Both districts I have worked for have accepted them no problem. It’s UCSD after all…

If you do end up using them, reach out and let me know! Jumping lanes can be an excellent way to earn some extra money for savings AND have a little extra for yourself!

If you were a new teacher and you ended up getting a Master’s very early on, it’s not unreasonable to think that your pay bump would be north of $3,000. And let’s say you set aside $2,000 per year for savings/investing…

That extra $2,000 per year, invested over 30 years of teaching, with an 8% rate of return (the market’s average rate of return since it’s conception), would get you over $260,000 in your bank account by the time you hang up your key card (retire).

And that’s just from a lane jump! Imagine what happens if you do a few lane jumps and combine it with all your other savings? The results become life-changing.

Summer jobs and side hustles are other options for more income that some teachers like as well…

So let’s keep finding more ways to keep that Lifestyle Creep at bay and keep our savings growing and flourishing!

Quick Tips to Block Lifestyle Creep and Save More

Here are a few quick ways I try and consider when trying to reach my goals in the now without sacrificing my long-term goals. If you’ve read other posts, you know I haven’t always been successsful. At one point I was not only penny wise and pound foolish, as the saying goes, but penny foolish and pound foolish.

As you might expect my savings did anything but flourish. The only thing really flourishing was my lifestyle creep.

Here are some tips and mindsets that really helped me keep Lifestyle Creep at bay.

Quick Tip #1 – Be Intentional About Purchases

In the post I did about buyer’s remorse (link above), we saw that most of us feel buyer’s remorse for a majority of the purchases that we make. So, by being intentional about what we buy, and trying some of those strategies to avoid impulse purchases (like putting it on a list for a few days before purchasing), we can nearly eliminate buying things we’ll later regret and dedicate the money to savings instead.

Quick Tip #2 – Reassess Your Goals

As we age our needs and wants change. When I was 10 I think my life’s goal was to collect as many sports cards as I could. It stands to reason then, that your goals for items and housing might have changed as well.

Take a hard look at those goals and make sure it is still something you really want before you spend that hard-earned money on it. Sometimes we get ideas in our heads from when we were younger and they don’t mesh with what we are looking for in our present lives. Recognizing this can be fundamental in avoiding large expenditures that seriously hamper our long term savings goals.

This ties in well with our next tip.

Tip #3 – Be Wary of Major Purchases

Maybe when you were younger, you decided that you always wanted a boat. Who can blame you? And with summer’s off, the plan fits. I’m even talking myself into one right now as I write this…

But even a very basic model of a new speedboat costs $20,000. And let’s be honest, most likely we’re not getting the base model. Then you have to get a trailer to move your boat, and gas and life vests and all the myriad things a boat requires. That costs money too. Is it too unreasonable to think you are spending $30,000 on this boat and everything else associated with it? I don’t think it is unreasonable.

Using the 20/40 rule (I made this up and wrote about it in my 5 Money Saving Tricks that Really Work and am really pushing it. Basically you multiply the cost times 20 to see how much you would have 40 years down the line if you invest the money instead), we see that instead of spending $30,000 on that boat now, you could have over $600,000 in 40 years. And realistically, you are taking out a loan for the boat which charges interest. So actually, it would cost you way more than $600,000 down the line. Think about that!

You get the idea. These big purchases can have huge ramifications down the road. So, before you get that boat, new car, new addition to the house, remodeled kitchen, or whatever else, make very sure that you really, really have to have it. As we see, it will cost you way more in savings than the actual sticker price you are paying.

And getting back to the boat. Before you buy it new, maybe you want to explore other options like buying used? If it were me, I would want to avoid that whole hassle of cleaning/maintaining/fixing. For my money, I’d be planning to rent a boat a few times per summer. That way I get my fix, save most of my money, and avoid all the extra work that comes with it.

So before you make that major purchase, I think it’s worthwhile to assess how much you really want/need it, explore alternatives, and consider the effect it will have on your long term savings goals.

Tip #4 – See if You can “Hack” a solution

Some day I’ll do a series on some of these life hacks. For now, I’ll just say this: There are so many life hacks that can save you real money in just about any subject area you can think of.

Whether it’s saving on your kid’s college education, saving on contractor fees, or going to Disney World for free, there’s a hack for it. I heard about most of these by doing my deep dive on the ChooseFI podcast. There were hundreds of ideas that I have written down and will eventually share (I hope).

For now, as an example, let’s look at taking a vacation. Mind you, I have not tried this yet. When I do I will tell you! But there is a preponderance of evidence that this actually works and I absolutely believe and trust it.

For vacations, there are credit cards that offer very significant travel rewards programs. If you use these cards to make purchases AND you are savvy about how you book your trips, you can end up taking valuable vacations for free.

It looks like the average cost for a week’s vacation for a family of 4 is about $4,500. If you do that every year, that amounts to massive amounts! But if it’s free, you can get that well-deserved vacation AND save your money!

These cards offer a major sign-up bonus that far outweighs the annual fee (about $95) and easily surpasses the 1 – 2% savings you get from a typical credit card.

If you are interested, here’s a link to ChooseFI’s travel rewards program. I trust these guys and have listened to hundreds of their podcasts. But you should make sure you trust them too. Also, be sure you understand HOW to maximize the savings. There are tricks that they will illuminate. Finally, make sure you have your credit card debt paid off before you open a new account.

Near-free vacations is just one example of a hack to save money. There are thousands of them. Before you spend large amounts of money on something, always look into alternatives/hacks to get similar results at a fraction of the cost!

Lifestyle Creep – In Summary

Lifestyle Creep is an all-too-common phenomenon whereby we end up increasing our spending to match our increase in pay. Understanding that some of that money for pay increases is there to offset the cost of inflation is important.

Then, making sure that we dedicate a healthy chunk towards savings should be our first step before allowing ourselves to increase our spending.

Finally, by learning to master our savings, finding other ways to improve our income and using some tricks to avoid incurring big debts, we can knowingly allow a little lifestyle creep into our lives without sacrificing our long-term financial goals.

If we do it right and are intentional, both things, lifestyle and finances, can actually be augmented simultaneously!

Thank you for reading! If you have any thoughts/questions then I’d love to read them below in the comments. You can also let me know what your first cd was. Can you beat mine? As always, you can also feel free to contact me!

Do any of you remember a Now and Later craze? I think I was in middle school, and having these candies was a form of social capital. We’d all measure our self worth by how many we had. I was very valuable. Apparently, they got their name because as you kept them in your mouth, they would be faintly sweet in the now and then release a blast of sweetness later? I don’t remember that. I just remember that they came through in a wave, and just as quickly, they were gone (isn’t that always the way?). Today I bring them back from a bygone age! We’ll use them as a way to think about some money saving tricks that really work.

I’m even going to create my own competitive spinoff of it and get filthy rich in the process! Mwah ha ha ha!

And back to Earth… Really though, after reading, I hope it helps us form a mindset to resist impulse purchases. I also hope it illuminates the massively positive ramifications of saving our money. Finally, I’ll lay out some money saving tricks I’ve used that really work. Then, we can all start saving together!

Now or Later? A Sweet Saving Mindset

Okay, as promised, my spinoff candy! I call it the Now Or Later?

Not impressed?

Me neither. But just work with me here. If I were to make a candy to help people save money that is what I would call it. The Now Or Later?

The question it prompts us to ask is, do you want a little sweetness now (dopamine hit from impulse buy), or a blast of sweetness later (many times that amount of money later in life)?

Rather than delaying many minutes for the flavor burst, my particular candy would take many years. Something tells me that wouldn’t sell very well in today’s market…

Nevertheless, the blast of sweetness would be so profound that you wouldn’t for a moment regret your decision to wait and save.

If in this post, Teacher’s Pet – Compounding Interest, I shared a reaction from a colleague who was nearing retirement. In it, she was given an opportunity to have a hypothetical conversation with her 18 year old self. More specifically, she witnessed her 18 year old self reaching for the “$10,000 now” envelope instead of the “$250,000 later” envelope and she absolutely lost it. It’s worth a read and also helps us to understand why compounding interest makes our savings get so big over time.

In the last post, Harness Buyer’s Remorse and $ave, we discussed the concept of buyer’s remorse and how prevalent it has become when making purchases.

So, the way I see it is this: If 1. There is a high probability that you will regret your purchase. And 2. There is a very high probability that the money you save (by not spending) will be worth many times more later, then quickly it becomes a non-starter to buy a given item.

Over time, after rejecting many purchases, the savings accumulate and the good habits crystalize.

So, every time you are on the verge of making a questionable purchase, pop a Now Or Later? in your mouth. You’ll be so glad you did!

Before we get to our 5 Money Saving Tricks let’s briefly look at the numbers so we can see how powerful this really can be.

Seeing the Power in the Numbers!

Sometimes it’s helpful to put concrete numbers out there, to get a firmer grasp on how potent this can be for your long term financial goals.

Let’s say the average American is staring at a purchase of $100. They know they can easily cover that in savings so, most likely, they don’t even flinch. But what if I told them, in 40 years I’d give them $2,000 for that $100? They would at least flinch right?

The flinch is good! It’s a place to start. Now, I have their ear.

Then, I tell them, if they can cut $100 in impulse spending per month, for those 40 years, they can have over $300,000. Chances are, by now, I have their attention.

“But why stop there?” I ask them. “It turns out, you are spending closer to $500 per month unnecessarily (I actually estimate it’s closer to $1,000). So, if you trim back on that, after 40 years your number could be over $1.5 million.”

“But go ahead,” I would encourage. “Click away and buy that VR headset that’s on sale. I’m sure it will still be current in a few years and you’ll be using it a lot.”

What do you think, do they make that purchase? Probably! But, I at least got them to flinch. Really it doesn’t even matter if they make the purchase or not. The important thing is whether YOU AND I can change our habits and prevent that purchase.

We know if we curb our frivolous spending, we’ll develop good habits that will amount to massive savings over time.

So, after looking at the numbers, try on one of these Money Saving Tricks for size. If it fits, use it and reap the rewards.

5 Money Saving Tricks that Work!

It’s so easy to buy things these days. I believe it is imperative to have strategies in place to prevent impulse purchases. Sometimes, I feel like I am protecting my future self from my present self. But whatever works right?

Try some of these money saving tricks. I have personally tried and can vouch for each one of them. Try a few and see which one works for you! If you have success with one, or like one I didn’t list, let me know about it in the comments.

#1 on our List of Money Saving Tricks – Use the 20/40 Rule of Thumb

In the last section, we showed the math of what happens when you think long term. Rather than buying an item now, you can project how much you will have down the road if you don’t spend the money at that moment.

This is a trick I use often. It is the only one I made up on my own so maybe I’m a smidge biased. And as always when investing, I assume an 8% return on investment.

Here’s how it works: Basically you see how much something will cost you now, and you multiply that amount by 20. This will tell you how much you’ll have in 40 years (if you invest it at the 8% return that the market has averaged since its conception.)

So, in the case of a $100 item, I ask would I rather spend $100 now or have $2,000 (100 x 20) later?

The 20/40 rule of thumb works particularly well for larger sums of money.

If buying a new car, and deciding whether I want the sunroof package (which we all do) for an extra $1,500 apply the 20/40 rule and see if $30,000 (1,500 x 20) down the line seems more enticing!

Or better yet! Rather than buying a new car at all, how about a used car for $10,000 less. Applying the 20/40 rule you ask yourself do I want to spend the extra $10,000 now or have $200,000 (20 x 10,000) later on? Now we are talking life-altering figures! And guess what, that new car is going to lose its battle with father time just like the rest of them.

Try the 20/40 rule of thumb and see if it helps deter any impulse buys.

#2 on our List of Money Saving Tricks – Set A Fixed Savings Amount

This is similar to having a budget, but essentially you set a non-negotiable saving amount.

For example: This month, no matter what, I will save $500.00. That way, if an item strikes your fancy, you only have to ask yourself whether it cuts into your $500 savings allotment. If your answer is yes, then hold yourself accountable and don’t buy it.

If it doesn’t cut into your savings allotment, then you can feel free to go ahead with the purchase. This works for people that like hard lines to help guide them. It also let’s you buy a fancy coffee without feeling guilty.

With this strategy, you have to keep track of your spending and make sure you don’t go over accidentally. I liked checking in once a week to see how I was doing, but if that’s not your style you can also automate your savings.

Have your designated savings amount be automatically transferred each month from your checking account (for example) to your savings account.

In a way it was kind of like having an allowance. If I wanted something, but didn’t have enough allotted for that month, I made sure to set aside that amount for next month. This ties in well to the next on our list of money saving tricks.

#3 on the List of Money Saving Tricks – Make a 3-Day Wait List

This is designed to curb the capricious impulse spending that we all fall victim to.

It’s very simple and surprisingly effective.

Here’s how it works: Anything, and I do mean anything, that you get an urge to buy has to be written down on a list. Then, after 3 full days have passed, if you decide you still want/need it, you can go ahead and purchase it.

Now obviously, things like common groceries or gas for your car, are an exception to this rule. But almost everything else goes on the list.

I’ve tried this and had many “What the eff was I thinking?” moments.

Just for laughs try putting very small items, like a pack of gum you see in the checkout line, on the list. Obviously, after 3 days that pack of gum is not going to get you back in the store, but might be good for a chuckle. Oh the hilarity!

I found this strategy really helped me curb that impulse spending and helped me drastically reduce those urges to spend. In other words, not spending became a habit that I’m pretty good at keeping to these days.

#4 on our List of Money Saving Tricks – Always Pay in Cash

I did not like this one, but it was HIGHLY EFFECTIVE. There is something very different about handing over physical cash versus theoretical credit card cash. Sometimes the clerk had to wrestle it out of my hands.

In the few months that I did this, I essentially didn’t buy anything. The steel-cut oatmeal in the food pantry got eaten, the old polenta grains, and all the food I had sitting around just so I didn’t have to go grocery shopping and hand over cash.

So in that sense, if you feel like your pantry needs a good cleaning, this may be a nice secondary benefit.

The primary benefit was that I didn’t spend much of anything.

In the end though, the inconvenience of getting cash (which is partly why this works so well) and the loss of credit card points (which I easily overcame by not spending any money), were too much for me.

It’s definitely worth trying for a month to see what you think.

#5 on our List ofMoney Saving Tricks – Avoid Temptation!

Sometimes when I watch a program I feel like I am watching thinly veiled infomercials. If you stop watching the show and just look for things like product placements it can become glaringly obvious to the point of being painful.

I’m going to date myself here, but I was the perfect age to watch Wayne’s World. In it, there is a scene that perfectly spoofs this very concept (and also features very youthful versions of Mike Myers, Dana Carvey and Rob Lowe).

Go ahead and watch it! You deserve a break too!

But, ridiculousness aside, these things work. Remember, advertising is a $300,000,000 industry! They know what they are doing.

So, start to keep track of times you make purchases. Figure out situations that give you an impulse and see what you can do to counteract those impulses.

Do you have trouble driving by a specific store without going in (I know I do)? If so, take a different route (when reasonable) or just power past!

Are their certain shows you watch that stimulate you to spend? Take a break from the show or tell yourself you can only watch it if you promise not to make a purchase during or after.

Whether it’s commercials, infomercials, grocery shopping, tool reviews, clothing stores, new gadget blogs or anything else, make it a point to be self aware and formulate a plan to help you avoid those impulses.

Like everything else, after you are successful for a spell, it starts to become a habit. Pretty soon, you might realize you just drove by that store without even thinking about it!

Summary

As teachers, we work very hard for our money. When we come home from a long day at the job, there is a likelihood that we are a little drained, and if we don’t have correcting, reports, emails, etc. on our lists, it seems perfectly reasonable that we just want to unwind a bit.

But when we’re tired, we’re probably also a little vulnerable to make impulse purchases. By understanding the forces working against us (like advertising), realizing when we are most vulnerable, and using strategies to counteract our impulses, we can start saving more and more of our hard-earned cash.

Over time it will become a habit and our savings will start to accumulate. Our investments will grow as our need to spend dwindles. And the one thing we can’t buy, happiness, will not take a hit at all. In fact, it will probably grow.

In the end, we’ll be happier, healthier teachers with more options and less stress related to our finances. This will probably make us more effective in the classroom and allow us more precious time for pursuits that renew us.

Whether it’s one of the money saving tricks highlighted above, or any other that you’ve found effective, I think we can all benefit from building habits around saving our money so that we can have more time and more options later on down the line.

As always, thank you for reading. I’d love to hear about any money saving tricks that you’ve tried that have worked for you. Please feel free to comment below or reach out and contact me with anything else that’s on your mind!

Buyer’s Remorse happens to us all. If we can learn to harness it, the end result can be life-altering in terms of money, stress, and so much more. I hope this helps you stave off buyer’s remorse in your own lives. It did for me…

In 2001, at the end of a wonderful semester abroad in Dublin, my new friends and I took a last hurrah vacation to the Canary Islands. Very “spring breaky”. Not for me.

While I was there, I wanted to get gifts for my host family. More specifically, I wanted to get a gift for my 7 year old host brother. He was a truly delightful kid. He played Game Boy and this place had a lot of electronics stores, so it felt like a fit.

Every store I walked into had these “30 games in 1 cartridge” sales. At this time, Spain (of which the Canary Islands are a part) was converting to the Euro but most sales were still in the peseta. So, I did a quick conversion and figured out that this 30-game cartridge was only about $14!

I didn’t have a lot of money left over after studying abroad, but even I couldn’t complain about $14! The kid would think it was “brilliant”. I was as happy as a clam in a mudflat…

Until, that is, while exiting the store, I realized I had made a huge mistake.

I had made that classic accounting error where I misplaced the decimal. This game cartridge had actually cost not $14, but $140! That, I could NOT afford. Sorry kid.

No big deal. I turned right around and went in to exchange it.

Well, it became a big deal when the very same clerk that just sold it to me, feigned that he didn’t remember me, and told me there are no refunds.

That was a sinking feeling.

Long story shorter, I never got my money back. I ended up pestering the guy for a better part of the afternoon until he let me exchange it for a camera which I thought I might need.

Then, I still had to buy the kid a gift. Later, I got him a $35 version of the one I had just bought (at a different store of course).

At the end that exchange, I had a shoddy camera that ended up breaking soon thereafter, a gift I still needed to buy, a wasted afternoon on “vacation”, and a lot of life lessons wrapped into one experience.

Of all the emotions I ran through that day, the most pronounced was this acute understanding of buyer’s remorse. Granted, mine was augmented by my own foolishness, so it was more pronounced. But even sitting here writing this, I can go back and get into that flood of emotions.

And if we extend it to our own lives, buyer’s remorse is an all-too-common phenomenon that we all experience. If we learn to mitigate it, and harness it, the money saving opportunities accumulate and the results can be staggering.

Buyer’s Remorse – Learning From our Past

I’m going to make an outrageous claim, that isn’t true but makes a point. Then, I’ll walk it back a little and try to make a worthwhile point out of it. Here goes.

Outrageous Claim – We experience buyer’s remorse with 100% of the purchases we make.

Now obviously, that’s outrageous. In the end though, maybe we can come away with a claim like this: We experience some degree of buyer’s remorse with a large majority of the purchases we make.

Then, each of us can look into our own lives and see how true that rings. Depending on our answer, we can adjust accordingly and start getting into a saving mindset.

First, what is buyer’s remorse?

My definition is this: The feeling of regret I get for a purchase I have made at ANY time in the past.

Another way of looking at it is by asking yourself “Would I exchange this item back if I could get my money back for it?” If your answer is “yes”, then you have some degree of buyer’s remorse.

Time will be a key element if we’re going to be able to prevent buyer’s remorse and start saving our hard earned money. The ability to look down the road and foresee what will become of this shiny new purchase is crucial. Also, the ability to look down the road and anticipate what will become of the money if I don’t spend it, will also be essential.

For now though, let’s look at how often it comes up.

Doing a little topical sleuthing, it appears that the typical American feels buyer’s remorse on over half of their purchases? This article talks about how we felt remorse on over $74 billion (not million, billion!) worth of items that were on sale for Black Friday alone! Imagine what it is overall?

That is a lot of money that we regret spending. In fact, to put it in perspective, that figure is higher than the GDP (Gross Domestic Product) of over 125 Countries in the world!

Yikes! We may have a slight spending problem on our hands here…

Knowing that makes me more steadfast in my assertion that we can ALL learn from it and make better decisions with our money going forward. There’s no need to beat ourselves up. Clearly, it’s not just us!

It makes sense too. It feels like our whole financial system is based on us making lots of purchases. The advertising industry alone is estimated to be a $300 billion (Again, not million!) dollar industry. That’s a lot of brain power scheming to induce a purchase in the easiest manner possible.

If we’re to resist it, we have to first understand it and recognize the impact it has on our own lives.

Buyer’s Remorse – Learning from our Past

Obviously, items like computers and cars naturally depreciate value over time, so it’s not a completely fair comparison. Most of us need those in our lives these days but even with necessary items we can have buyer’s remorse.

Take a car for example. Did you buy new? Did you opt for the sunroof or the cruise control? Do you have a second car, like a truck, for trips to the dump (I’m guilty of that one. I think I just wanted a truck)? All of those questions above have answers that cost thousands of dollars.

So while having a vehicle might not induce regret, maybe some of the bells and whistles do? Maybe once I forget to close the sun roof and it rains I decide I could have done without it. Or when my once shiny new car is now littered with the detritus of every day life, and gotten it’s first, and tenth scratches, I’d just assume have bought a used car?

Remembering this post I did earlier on being penny wise and pound foolish, we see that those decisions, when coupled with other spending decisions, can add up to life changing amounts of savings.

As always, there’s no judgment here. I’ve fallen victim just as much as the next person. I’m just convinced that I need to get out of the spending cycle. More often than not, I just regret the purchases, resent the clutter, and wish I could sell it for a fraction of the price on Craigslist.

So, how about keeping that sentiment in the forefront of my mind, bypassing the purchase and regret phase, and just keeping the money? I like the sound of that!

If only it were so easy…

So, I say we take an honest look into our past purchases, and try to suss out approximately what percent of past purchases we now find regrettable.

Digging into your past.

Don’t worry, no unearthing of skeletons from our past required!

All I’m talking about is past purchases. And I don’t mean last month.

How about this for a little exercise: Why not log into your Amazon account or your credit card account and go back one year? And again, be honest with yourself. It’s just you and your thoughts. However, if you want, put a regrettable purchase in the comments below. You’ll be in good company.

I’ll start. Here I go…

Okay, I just looked at a credit card from a year ago and two things jump out at me; fast food and toys for my toddler. The fast food is because I was stressed out in my job and trying to cut corners with food. But that month, I had over 15 trips to Dunkin, McDonalds, or Cumberland totaling over $90.

Not only is that incredibly unhealthy, but I’m also just throwing money away. I easily could have spent $20 bucks in groceries on those meals and been healthier for it. Projected over a year that’s $840 in savings on those purchases alone.

The other one is toys for my toddler. He plays with a new toy for 10 minutes sometimes. So, not only is it a lot of money but I also have all this toy clutter in the house just staring at me and filling me with regret. At the very least, I should buy used, but I also want less!

Not even places like Goodwill and Salvation Army want kid’s toys around here. So much of it is just expensive land filler. I’d much rather just get him swimming lessons from here on out.

So, to be honest, I was hoping I would have a cappuccino machine that I haven’t used in 6 months but I didn’t. My more regrettable purchases would probably be deeper in the past before I started seriously thinking about what I bought. Still, seeing a column filled with fast food joints is still eye-opening. Do you have anything like that you’d be willing to share? If so, I want to hear about it.

Now that you’ve dug a little bit into your past purchases, I think it’s worth it to tally up the amount of money you are spending on regrettable purchases. This could include anything from an impulse bag of chips at the grocery store, an outfit that’s already out of style, fast food, unused toys, the blender you don’t use, a third car, or anything in between.

Use it and make an estimate. What is the average total amount per month that you spend regrettably?

Once you know that, it’s time to get time working in your favor.

Leave Buyer’s Remorse Behind and Put Time on Your Side!

If you stop buying making regrettable purchases for a month, that’s good, but it probably won’t amount to much in the long run.

The magic happens over time.

So, let’s look ahead, and see, if we can consistently prevent buyer’s remorse, what that will amount to over time.

In the last section, I asked you to come up with your average monthly amount of money you regret spending.

Mine was about $200 per month. And that’s even at a time when I was already starting to be conscientious with my spending.

So, $200 in savings per month over a year is $2,400. After a 30-year teaching career that would be $72,000. That’s already worth it to me to not have 30 years of fast food in my body and a lot less clutter.

Invested, and assuming an 8% rate of return (which I always do because that is what the market has returned over time) that regrettable money comes to just shy of $295,000 after 30 years. Yes please!

But here’s the thing, I was already getting wise to it at that point. If I could just pluck a typical American out of thin air and have access to their expenses, I honestly think I could save that person over $1,000 per month. I really do.

But to be fair, let’s call it half of that, or $500. Given the astronomical figures in the first section of this post I don’t think that’s too far fetched.

Saving $500 per month and investing it would project out to over $680,000! That’s a hefty price for stuff you don’t even want don’t you think?

I’ll do an article on this later, but if you are intimidated by investing, like so many of us are, how about this strategy: Why don’t you just invest the money you don’t spend on regrettable purchases? That way, if your worst fear is realized, you can always chalk it up to the idea that you would have wasted it anyways? But, if everything continues on as usual, you can reap the rewards!

Summary – Don’t Let Perfect be the Enemy!

If anything should be the enemy here it’s buyer’s remorse. Thousands of dollars, that can eventually mean hundreds of thousands of dollars, get sucked out of our future savings in the form of highly regrettable purchases.

I’m still working on this. 42 years (my age) of commercials and consumerism can’t be undone over night.

One thing that helps me is looking into the crystal ball to see what my purchase will look like over time. Will these $100 jeans get tattered and stained and forgettable just like EVERY OTHER PAIR OF JEANS I’VE EVER OWNED? If my answer is yes (which it is), then maybe a $5 dollar equivalent at Salvation Army is a good option.

Thinking about what will become of a purchase over time and comparing it to the savings I would reap instead is a very powerful mind trick. That trick alone has prevented me from buying so many things.

It’s also drastically dulled the urge to buy things which can be just as difficult.

And as the saying goes, don’t let perfect be the enemy of good.

Instead of going for absolute perfection, how about trying to get just a little bit better month to month?

Then, incrementally, you’ll gradually become less inclined to buy and you won’t even feel the monumental shift that is taking place in you.

Over time those savings can add up to huge amounts and give you options down the road.

It’s better for your health (fast food/chips), the environment and your wallet.

And don’t forget your psyche! Having to stare at your regrets and stressing over finances can take its toll!

Take that honest look at your spending and figure out how much of your spending results in buyer’s remorse. Little by little, see how much of it you can stave off. If you do that, your future self will be so thankful you did!

As always thanks for reading everyone! Please feel free to comment below on anything. If you’re up for it, give an example of your biggest example of buyer’s remorse. Also, if you have any questions, don’t hesitate to contact me either!

Often times, when we are looking for more money, it’s right there in front of us and we just need to save more. Taking simple steps can amount to big savings. Over time, these little amounts can add up to truly massive savings that are impossible to ignore!

Where to begin?

You know how often times the answer to the problem is in the problem itself? Scientists trying to cure a disease immediately comes to mind. They don’t just start in the Amazon rainforest and feed the patient rare plants right? I suppose that could work but what are the chances? Instead, you study the disease itself and try to understand how it works. Then, you can formulate a plan of attack based on what you find…

Well, that’s where we should begin as well. And I’m not saying our lack of saving is a disease. Though, I bet I could make a pretty good argument for it with some people…

I’m just saying that if we are going improve our savings, we need to know what we are spending our money on. Nowadays, it’s all right there in front of you in your monthly credit card statements. If you can, give them a look right now and let’s get to it!

Don’t worry! This will only take a few minutes! I’m not going to take you deep in the weeds on this one. Remember from the last article, we’re not going for that 70% savings rate. We don’t want full upheaval. Just a modified upheaval!

Where Do Those Savings Go?

Most likely, your expenses can be divided into the simple categories you see in the table below. If it’s not all covered, add and subtract as needed.

This table is just meant to help categorize our monthly average expenses so we can all be on the same page. Then, once we have it all sorted, the simple steps to big savings fall right into place!

Expense	Amount Spent (per month)
Housing
Transportation
Food
Phone
Entertainment/Hobbies
Internet
Credit Card Debt/Student Loans
Miscellaneous/Other

The Big Ticket Items

Looking at the table above I’m going to briefly discuss some of the big ones that aren’t so “simple” before getting to the lower-hanging fruit.

Most likely, your housing, transportation, and student loan debts are somewhat set for the time being. Acting on those would not be considered “simple” by any stretch of the imagination. Those are taller tasks that require more effort (and future posts entitled “Not Quite as Simple Steps to Big Savings”).

But I will say this. It doesn’t mean those can’t be addressed as well. Like I’ve said before, there are a lot of strategies I’ve seen in my deep dives that can dramatically impact those big ticket items as well. If those are weighing on you, reach out and I’ll go back down the rabbit hole for you and report back.

Also, if you don’t have a house, own a car, or haven’t accrued student debt, make sure you do your due diligence before making that commitment. If this concept of saving your money and buying time is appealing to you, then making sensible, informed decisions on those big ticket items can have a major impact on your financial future.

For now though, let’s see what smaller, simpler steps we can take to have a more immediate impact on our savings.

Simple Steps to Big Savings

Really it should be called “Relatively Simple Steps to Big Savings”. It’s still going to take action on your part. Still, relative to selling your car and riding your bike every day to work (I haven’t tried it but it would save tons!) these are quite simple.

Here are my simple steps to big savings with a rationale for each as well!

Step 1: Slash Those Food Expenses!

Two eating habits that add up to huge bucks are eating out and buying whimsically at the supermarket.

As teachers, time is always at a premium. This can often mean we don’t have a lot of time to prepare meals. The result? Some of us grab food on the fly from whichever store is closest. Or, we buy pre-packaged meals.

If you look at it from a dollars to calories point of view, it is way out of whack with what you can get from buying in bulk and preparing meals at home. It’s also usually not nearly as healthy. Spend less and eat healthier? That’s a potential win-win!

A Real-Life Example

One of my co-workers gets a coffee and a breakfast sandwich every morning on the way to work and a sandwich from Subway for lunch.

On the surface, $6 for breakfast and $8 for lunch doesn’t look too bad right? But add it up over a month of school days (call it 22 days) and that’s $308. Over an 180-day school year it’s $2,520!

If he had cooked that egg at home, with a slice of cheese, some bacon and some bread how much would that meal cost? $1 maybe? Then he brews his own coffee and makes his own sandwich, what does it come to? $4? That’s probably high. Those would be some really nice ingredients to get it to $4, but the math is easier so we’ll stick with it.

That’s $10 per school day on breakfast and lunch alone. Over the school year that’s $1,800 in savings.

If I invest those meal savings instead, after 30 years of teaching I have $234,496. So, which would you rather have? Mediocre and less healthy food that is convenient? Or, better quality food and nearly a quarter of a million dollars?

And that’s just breakfast and lunch! I’m sure he goes out to eat or orders out a fair amount as well. That just cuts into savings even more.

You get the idea. Those little amounts add up to huge savings over time.

I encourage you to look at your bills and see how much you spend on food per month. A goal I am setting for myself is $50 per week. If I have that hard number, it helps me stick to it. I honestly found, that once I got used to it, I really didn’t feel like I was making any sacrifices at all. It was also a welcome barrier to buying that random bag of chips that I ALWAYS go for.

This article here at treadlightlyretireearly.com goes into more specifics about how they were able to cut their food bill by 63% and still eat out.

As with everything, each family has their own dynamic and there is no hard and fast rule. My aim is only show you the power of it so that you can make an informed decision for your specific situation.

But let’s keep going and get to some more simple steps to big savings!

Step 2: Change Your Cell Phone Plan

I know, this one stings a little. And it’s not for everyone, but just let me make my case and you can decide if it’s for you.

Here’s my case, and it doesn’t involve flip phones!

The average American spends $70 per month on their cell plan. For a lot of us it’s more though right? I spend $25 and I do have a smartphone.

The key to this is Wi-Fi.

When cell phones were first starting out, most places did not have Wi-Fi. Now virtually everywhere does. Most importantly, my school does and my home does. That’s where I spend most of my time. And when I am out and about, I still have 1 GB of cell data to use and I rarely even come close to using it all.

When I’m in my home or school, my phone automatically connects to Wi-Fi. That is where the savings lie, and it’s relatively simple to adjust to. As long as I’m not streaming movies when I’m out, it works out great. And if you do run out. It’s very easy to buy more right there (They don’t mind giving a little more data to get paid.) It’s only $5 for an extra gig as well.

My phone is a Samsung and it cost about $100 (a new iphone can cost over $1,000). I hope to get many years from it like I did with my last one. It should also be said that I’m not a tech person, nor do I worry about photo quality. If those things matter to you, I totally get it. We’ll get those savings somewhere else! I know I’m strange in this regard…

But if, like me, you don’t care too much about some of the finer technological advantages, this might be a good move for you.

Considering that an average cell phone bill costs $70 and also allowing for an extra $100 per year to cover the cost of the cell phone ($400 vs $100 over 3 years), the total savings for a switch would be $640 per year.

Over 30 years that comes to $19,200 in savings. Enough for a nice car.

Over 30 years invested, assuming that 8% return, it comes to $79,308. To me that’s worth it.

If it’s worth it for you then check out Republic Wireless. That’s the plan I use. (Note: If you reach out to me I can get you $30 off your first bill (which would make it free with $5 towards your next one), but no worries either way!)

Step 3: Cancel Your Subscriptions!

In my day, when I went door to door to sell magazine subscriptions to raise money for the town soccer team (getting paid in cheap soccer balls), the word “subscriptions” meant magazines like Reader’s Digest.

Now, I’m talking about your streaming services. It happens to all of us right? We get pulled into one streaming service for this show and another for that show. Before we know it, we’ve got 5 services and we can’t even keep up with the content.

But canceling is such a pain right? I can’t explain it either but it’s just so onerous for some reason and I never get around to it.

Meanwhile, month after month, they are sucking money from our accounts and most of us barely even think about it.

But here’ s a little secret that we all know. If you cancel, it’s not permanent. They will happily take your money again!

Here’s a good strategy that I like. Cancel all but one of your streaming services. Then, consume the content on that one streaming service until it starts to dry up. Then, cancel that one and sign up for the next one and repeat.

That way it becomes way more affordable and you can just focus on one service at a time. I also like to think that while I am using Hulu, for example, Netflix is working behind the scenes and around the clock to create a whole bevy of content for me at no cost.

Another strategy is to share subscriptions with friends and family. Just don’t let it become a point of contention!

Bottom line. These subscription services feast on our unwillingness to cancel. They sign us up for a great deal knowing that they’ll keep leaching, little by little, later on down the line.

Stop the slow bleeding out of your savings. Cancel all but one. Then, take solace in the fact that signing back up is merely a click away.

Step 4: Clear Your Credit Card Debt/Always Pay in Full!

Credit cards, when used effectively, can actually be a vehicle to help you save. These days they all offer a certain percent cashback on your purchases. You can then use those accrued points to wipe out real money on future bills.

There’s also travel rewards (which I plan to investigate and report back on) and sign-up bonuses and more. When done right, there are big savings to be had.

But you have to do it right.

The reason credit card companies can offer such great deals is because they depend on you doing it wrong. They bank on the fact that you’ll pay the minimum, or at least not pay in full each month.

Then, they feast! They take massive percentages from the amounts you don’t pay off and just casually add it to your totals. These percentages usually hover in the low to mid 20’s (mine’s 24% so that’s what I’ll use). That means, for every $100 per year that accrue in debt, I give the credit card dompany $24.

But $100 is nowhere near the average figure. Triangulating some sources I see that the average American has a little over $6,000 in credit card debt. That means, at 24% APR the average American gives the credit card companies $1,440 dollars for free each year. Ouch!

If you have this debt, you are not alone. It has become so normalized in our society that we don’t batt an eyelash over credit card debt. (much to the credit card companies delight!) They even boost your credit score for that debt. That should be criminal!

My advice is to take that money back. Before you worry about investing, or anything else, pay off that credit card debt. By investing you are expecting an 8% return but that is only 1/3 of the 24% the credit cards take.

Now you can flip it around. Every dollar you sink into paying off your credit card you can think of it as a 24% return on your investment. That’s amazing! And as that credit card debt dwindles, your future savings automatically go up.

Once you finally get down to zero, let me know how you did it and I’ll celebrate you in a post!

From then on out, always pay your credit cards in full (there’s usually a setting for it do automatically pay in full on your credit card site ). We all know how hard-earned your money is. You deserve every penny of it!

Step 5: Take Back Your Fashion Cents!

I’m not sure that headline works at all (It doesn’t). And honestly, I am the last person to be talking about fashion. I just wear flannel and wait for it to come back into style every 12-15 years. Nevertheless, I want to make a case because it’s one of the simple steps to big savings that can have a profound impact with minimal effort.

Like I said before, fashion’s not my thing. All I know is that the fashion industry is an insatiable juggernaut. It churns out new style after new style and we, as a nation, keep buying it and feeding the monster.

I’m way out of my element here but I think it’s pretty safe to say that new clothes cost a lot of money right? I think it’s also safe to say that they go out of style relatively quickly.

So, in order to keep up with the newest styles, a person needs to spend a lot of money rather frequently.

Then, a few years later, when that person tries to sell those clothes that they spent a ton of money on, they can’t really get much for them at all.

So, most likely, to clear out closet space for new expensive clothes, that person eventually end up donating them.

But so does everybody else.

The end result is that they get thrown away. From an environmental standpoint, and doing some quick searches, it looks like we throw out over 14 million tons of clothing per year in this country. That also has huge environmental ramifications that I won’t get into here, but is easy enough to research.

I know I’m sounding all “high-horsey and judgy” here. I’m really not trying to! I just want to give you facts, but I’m also not trying to hide my opinion on what I think to be the better course of action.

If you ask me, I would tell you to mostly give up on the fashion game. It is way too expensive to keep up with and the value of your purchase diminishes way too rapidly. It’s also hugely detrimental to the environment.

Instead, how about one new outfit a year, and buying used for the rest? Because, as a nation, we are obsessed with keeping up with the latest trends, it means you can benefit from it. There are loads and loads of lightly used clothes out there that you can buy for a fraction of the cost. My wife loves thredup. If you do a limited number of purchases, you can cut back on environmental impact from shipping as well.

Or, another option is to just ride with what you’ve got. That costs nothing and it comes back in style every 12 years or so.

But realistically, there is probably some combination to be had that still amounts to very big savings. We’re all different in this regard but look through past expenses and see how much fashion is costing you.

The average American spends around $1,400 per year on clothing. I probably spend around $28 but that’s a whole different kind of problem! Would it be reasonable to get that down to $400 per year?

That’s $1,000 per year, which we know adds up to big savings over time!

It’s something to think about at least…

Step 6: Scan for Miscellaneous Expenses

If you are serious about making changes to improve your savings rate, then it’s probably not a big ask for you to take an honest look at your expenses and try to uncover some miscellaneous expenses that might be adding up. No judgement and don’t beat yourself up.

Maybe you collect beanie babies? I don’t know, and I’m not telling you to stop either.

I just think it’s worthwhile to do a cost/benefit analysis. Ask yourself, does the new beanie baby bring you long-term joy? You probably get a rush when it first arrives right? But in 6 months does that specific one still make you happy?

If so, go for it. If not, maybe it’s time to weigh whether it’s worth spending your hard-earned money on.

Personally, I tend to get really into something, buy up all the gear, then lose interest. It’s taken me quite a while to learn this about myself, but I think I finally have a good grasp on it (but if you need any seed growing equipment or golf clubs, or olive trees or equipment for making mead, etc. just shoot me a message!)

Summary of Taking Simple Steps to Big Savings

Debt causes stress. Sometimes when we are stressed, we buy things. I certainly do. But if we buy things haphazardly, we just accrue more debt which leads to more stress. It’s a downward spiral.

At the core of it, many of our purchases are, in some way or another, an attempt to buy happiness. But it’s a lot harder to be happy when you are constantly stressed over money. And really, we all know that happiness can’t be bought.

So, for me, it became incredibly worthwhile (and relatively simple) to significantly improve my savings rate. Now that I’m used to it, I truly do not feel like I’m making any sacrifices at all.

I also know that I am significantly improving my financial outlook for the future and that is a comfort to me.

I estimate, based on some of the simple steps to big savings listed above, I could easily save the average American $6,000 per year right off the bat with minimal effort. Based on the $2,500 monthly salary we referenced in the last post about drastically improving your savings rate, that’s a 20% savings rate almost instantly. Already we have doubled the conventional savings rate of 10% and we haven’t even gotten to the big expenses of housing, cars, loans, etc.

If we invest that $6,000 we just saved at the assumed 8% return rate that the market averages, it gets us over $725,000 after a 30 year career. That’s game over right there!

And maybe not all of those steps are for you. But how about starting with one? Once you see that it doesn’t negatively impact your life at all, then you can try another.

With such minimal effort, taking simple steps to big savings is absolutely a worthwhile endeavor. In fact, over time, these simple steps can be life changing…

Thanks for reading and please don’t hesitate to leave a comment below. If you have a place where you harvest big savings or you just want to leave a thought, then I want to hear about it. If you prefer, feel free to contact me here.

In the following post I hope to convince you why it’s a great idea to drastically improve your savings rate by showing you the massive benefits that will come from it. The numbers don’t lie and they are very convincing!

Penny Wise and Pound Foolish

Somewhere along the way you’ve probably heard the phrase penny wise and pound foolish. This, of course, deals with the monetary system used in the UK whereby a pound is the equivalent of a dollar and a penny is still a penny.

It also refers to someone who is good at pinching pennies, but makes somewhat regrettable larger purchases. Someone who buys a top-of-the-line coffee maker (google it and you will see these run from $3,200 to over $25,000!) and then uses Folgers coffee to “save money” comes to mind.

Obviously, if saving is your ultimate goal, penny wise and pound wise would be the most desirable approach. I think I started out that way in life.

Then, my wife and I bought a fixer-upper house and I couldn’t spend money fast enough. $10,000 for this, $1,500 for that. Sure, why not? That’s what I had saved for right? At this point, I was an embodiment of the original saying of penny wise and pound foolish.

But then I got to thinking (Uh-oh). “If I’m spending these huge sums on my house, why am I drinking such crappy coffee and eating like I’m still in college?” Now, no expense could be spared for anything. I wanted the best of everything. I had become Penny foolish and pound foolish.

Presently, I am seeking a happy medium. I grew to appreciate some of the smaller delicacies, but also realized I didn’t need it all. Especially when I saw my financials tanking!

As I write this, I am happily nestled into a penny foolish and pound wise state of living. I spend a little more on some things I enjoy (like olive oil and coffee) but I don’t get sucked into the massive expenditures that will hurt my long term financial goals.

This is worth it to me. It allows me to enjoy the now and still feel good about planning and setting myself up for the future.

What’s a ‘Good’ Savings Rate?

In my general outline of how I plan to retire early on a teacher’s salary, I highlighted “Improve Savings Rate” as one of the key steps.

We often fall into the trap of thinking we need to earn more in order to be able to save. A lot of times, however, the money is right there to be had. We just need to cut a few things out. That is what I am trying to do.

If time is what I value most, then something has to give. In my mind, it is absolutely worth it.

But what is a good savings rate? First off, let’s talk about “saving’s rate” as “the amount of money that I save per given paycheck”. If I bring home $1,000 and I save (or don’t spend) $100 of it, then my savings rate is 10%.

A 10% savings rate is what the consensus opinion is for a “good savings rate”. You often read it on a lot of traditional retirement sites.

I hope to flip that on its ear. I want to go significantly higher. First though, let me show you an extreme example. Then you won’t find mine to be so outlandish!

I hope it also opens you up to some of my ideas for simple steps to big savings (next article) so you can improve your savings rate as well.

An Extreme Savings Rate

If 10% is the savings rate you generally hear to be good, what might constitute an extreme savings rate?

This article is about Scott Rieckens, and is a good, quick read. Basically, he and his family were living the lavish lifestyle on the beach, making good money and saving next to nothing. Then, he heard an interview from Mr. Money Mustache on the radio about the FIRE (Financial Independence Retire Early) movement and everything changed.

Almost overnight, he and his wife’s savings rate went from about 7% to around 70%! He actually made a documentary about it called Playing with FIRE which I plan to watch and review.

My sense, reading up on it, is that it was very difficult for Scott and his family and I believe they ultimately scaled back on 70% as their number(they might have settled on 50%). I have heard other people take their savings rate as high as 80%!

For me, that’s impractical. I suspect it is for a lot of you as well (If not, go for it!). What then, is a good savings rate to aim for to still dramatically impact your future goals without throwing away the present.

A Reasonable Savings Rate

A Reasonable Savings Rate? Well, so much for the headline of this post, huh? Sorry, but Improve Your Savings Rate Reasonably has no hope of clicks. I’m scraping and clawing here so cut me some slack!

Now that we’ve heard examples of people that get their savings rate as high as 70-80%, I’m hoping my goal doesn’t sound so bad.

How does 40% sound? That’s my savings rate goal. I figure I can pull it off with some sacrifices but without too many mental gymnastics. No cutting coupons or driving long distances to save 9 cents per gallon on gas. Our job is too demanding as it is, and I don’t have the bandwidth to add another thing to it.

I’ll make some simple cuts. I’ll also show some of that discipline that I preach to my students. And at the end of it all, I hope to be at or around a 40% savings rate. This post, Simple Steps to Big Savings, highlights some of the “non-drastic” steps I am taking. Check it out. They’ve already made a huge difference!

Also, it needs to be said, that we all have different financial situations. We all have varying mortgages/rents, car payments, student loans and other expenses. These can all be extremely burdensome. Maybe 40% is unrealistic for you. But is there a way you can find ways to improve your savings rate? If so, I think it’s worth it and when you see the numbers, I think you’ll agree.

Also, let me say this. If you are daunted, like so many of us, by those school loans, mortgage payments, car payments etc. do not fret. There are answers/solutions to be had! When I was doing my deep dives, I was astounded by the creative solutions people had for all those problems and more (like putting your kid(s) through college).

If you want, go ahead and contact me. Tell me what you want me to look into, and I’ll research it for you and write up a post about it (while obviously maintaining your anonymity). These debts can seriously weigh us down. It’s very real! Part of what I want to do is help alleviate that burden so you can better focus on the important work you are doing.

For now, let’s look at an example of what happens if you improve your savings rate. If you can do it, the math will smile down on you!

The Simple Math of it All

In order to do this, I’m going to have to make some assumptions. We all have drastically different pay scales. And as we age that salary goes up. So, for the sake of this example I’m going to assume a monthly salary of $2,500 after taxes. That seems reasonable to me.

So, if my savings rate is 40% of that, then I save $1,000 per month. Nice and neat!

And if you haven’t read my post on the magic of compounding interest, now is a good time to do that. It shows how, over time, money that is invested can balloon to life changing amounts.

So, as always we will assume an annual rate of return on investments of 8% because that is what the market has returned, on average, since it’s conception.

Now comes the fun part! I’m just going to type “compounding interest calculator” into google. and start punching in numbers. I like this one here from Nerdwallet.

I put in the “initial deposit” of $1,000 (Usually you have to start with something to begin an account. Also, it wouldn’t let me put in 0 as an amount!)

For “Contributions” I type in $1,000 and click “monthly”.

My “Rate of Return” is 8.0% and I click “annually” for “compound frequency”. This will give me the lowest results.

For “Time Span” I will start with 10 years. And remember, even if I don’t invest it, saving $1,000 per month is equal to $120,000 after 10 years. That’s nothing to sneeze at!

Instead, if do invest that money and get an 8% return, my total after 10 years equals $176,158.

I can hear you now. “Good. Sure. But it doesn’t exactly blow my mind.”

Fair enough! But I will say that you have an extra $56,158 for doing next to nothing. Still, I get your point.

But remember, time is another crucial ingredient. Let’s see what happens to that money given more time. We’ll go in increments of 5 years over a 30 year career.

Savings Rate Over Time

Here is a table of the dramatic (or dare I say drastic?) improvement an increased savings rate can have on your financial goals.

Watch what happens over time. One column will show your savings if you didn’t invest (still good). The other shows what happens if you do invest and get that 8% rate of return.

Years	Savings (w/out investing)	Savings (Investing at 8% return )
5	$60,000	$71,978
10	$120,000	$176,158
15	$180,000	$329,233
20	$240,000	$554,150
25	$300,000	$884,628
30	$360,000	$1,370,207

For me, this table got my attention at the 15-year mark. $329K vs $180K. That’s a difference of about $150K. Now we’re cooking with gas! That’s like getting a $10,000 dollar per year raise for doing the exact same job.

After 20 years, it’s game over. At $550,000 with some sort of side income and a halfway decent pension, I’m riding off into the sunset. That’s 10 years of time at your disposal. Imagine what you can do with 10 extra years?

These are life-altering changes and it came from doing very limited extra work.

Now let’s look what happens if you stick with the conventional wisdom of a 10% savings rate.

10% Versus 40%

Just for fun let’s see how the conventional 10% savings rate stacks up against the 40% savings rate I plan to use for myself.

In this case I will invest both amounts at 8% and use the same $2,500 monthly salary after taxes.

10% of $2,500 is $250. That means after 1 year (12 months) I would save $3,000.

So let’s look at the difference over time if they are both invested at the same rate of return (8%)

Years	Total w/10% Savings Rate	Total w/40% Savings Rate
5	$19,097	$71,978
10	$45,659	$176,158
15	$84,688	$329,233
20	$142,034	$554,150
25	$226,294	$884,628
30	$350,099	$1,370,207

Summary

I really think those numbers speak for themselves. I find the math on that to be very compelling. That is the reason why I am convinced that I need to improve my savings rate.

Rather than picking up extra work and exhausting yourself even more, I think it’s a lot easier to make some cuts to your spending. Just improve your savings rate, invest wisely, and let the math do the work for you.

And that’s just the beginning. Questions like “What if I increased my savings rate to 50%? Or, “What if I got a summer job and invested all of that money?” come to mind as well along with so many others.

In the end, each person can find a path that works for them. For now, I hope you are convinced that if you improve your savings rate, it can have a drastic (I’m all in on drastic!) impact on your financial outlook.

With a new financial outlook, all sorts of possibilities are at your disposal.

As always, thank you for reading. Please feel free to ask any questions or leave comments below. Also, if you have a specific question on a specific type of debt that is weighing on you, contact me and I’ll happily do that deep dive for you (I’ll get some good content as well!) Thanks everyone and be well!