I Saved $80,000 In 3 Years. Here's How I Did It.
It took a some money to start my advisory practice. Not only were there initial registration, legal, compliance, and technology costs, but the few clients I started with didn't generate what my family needed on a monthly basis.
It took me 18 months to generate enough income to make enough profit to pay the bills at home. It took me just over 3 years to get to a point where I could actually put money away each month.
This brings us to early 2016, when I was able to commit to a savings goal as part my personal financial plan. As of today, we've squirreled away $79,209 for future goals and emergencies.
Yes, I absolutely track this.
At $80K total (always round up), that's $26,666/year in savings we accrued, on average. I didn't have an amazing income, an inheritance, or any type of windfall. In fact, only in the last two years has my income exceeded $100,000.
Along the way, I've had the expense that is having little kids, a wife who we both agreed should stay at home, a $22,000 plumbing disaster that insurance didn't cover much of, two older cars that need healthy amounts of regular maintenance, and extensive medical bills. To say the least, it hasn't been easy keeping up with the Joneses.
Despite the obstacles just mentioned, here is a summary of the things I did and didn't do that allowed me to put away my $80K.
Here's What We Didn't Do
Took expensive vacations. Not one. We traveled locally, stayed home, and went on 2 bigger camping trips to national parks.
Buy stupid crap we didn't need. No new cars. No major house projects. I still wear the same tee shirts I did in college.
Enroll our kids in every program available. They took swim lessons, participated in one after school program, and sampled the occasional gymnastics or dance class at our local rec center.
Ate out much. Sure, we went out, but it was limited to celebratory events like birthdays or holidays. It wasn't because we felt lazy on a Friday night.
Subscribed to a huge tv package. For most of the 3 years, we didn't buy cable. We don't even have Netflix. As I write this, the only thing we do for tv is pirate our friend's Amazon Prime subscription.
Attend every wedding we were invited to. Instead, we sent heartfelt congratulations with small gift cards.
Here's What We Focused On
Every expense possible went onto a credit card to earn rewards points.
Earned 1.15% interest on our checking account. We used this single account for monthly expenses, paying off the credit card bill each month, taxes, and the bulk of our emergency fund. It is blissfully simple.
Worked with a tax advisor. I meet with the tax "guy" twice a year to review anticipated business revenue & expenses, payroll taxes, solo 401(k) plan contributions, and the salary I should be paying myself. His office takes care of everything and they're well worth the money I pay them.
Tracked cash flow via the built in budgeting app Transactions embedded in the financial planning software I use with clients as well as myself.
Maintained $1.25M in life insurance coverage and $10,000/mo worth of disability income coverage on myself.
Earned 5.21% on my investments at TD Ameritrade. This includes a 90% stock / 10% bond allocation in my solo 401(k), a 60/40 allocation in my joint taxable account, and a Calvert Community Impact Note (doesn't earn anything until it matures in the fall).
Checked in our our personal financial plan approximately 2x/year.
There's no magic to what we achieved. It came down to some sacrifices that probably made us better people. There were many times cringed under the intestinal fortitude required to say no to things we wanted or felt we had deserved. This was difficult.
However, in the end the pain of discipline was easier to digest than the pain of regret would've been. Had we not behaved as we have, I'm certain we'd have less to show for it.
My goal in disclosing so much of my personal journey is inspiration. If you want to save more, try doing a few of the things we did and pick a few of the same things we avoided. I won't promise it's easy, but the elation of a fatter bank account and more in your investment portfolio just might be worth it.
If you'd like to explore your finances in more depth to develop an action plan for getting organized and on track, please reach out. Click HERE to be directed to our home page and then click the Contact Us link in the upper right.