Diary to restrain spending, 51% savings rate
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Thread: Diary to restrain spending, 51% savings rate

  1. #1
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    Diary to restrain spending, 51% savings rate

    I moved to the US for a new job (all amounts in USD). My monthly spending went up entirely due to travel (exploring the region and frequent visits home). I fear I'm letting my spending run away from me and getting in that trap of higher income & higher expenses. I don't want to get used to an expensive lifestyle.

    I recently got a raise, and now I want to make sure I keep my spending in check so that I actually get ahead and don't squander my raise. Like Mr. Money Mustache, I think it's critical to have a high savings rate.

    My take-home pay is $5,900/month, and I've tried to adjust for tax refunds, dual-country taxes, etc
    Goal: save $3,000/month, spend $2,900/month to achieve a 51% savings rate.

    This is realistic and very doable as I budgeted these amounts based on my long-term averages.


  2. #2
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    I'm really focusing on spending through all of this. Here is my monthly spending in 2014. That year was quite typical of my pattern (previous years had similar averages)

    April 2,447
    May 3,078
    June 2,880
    July 2,710
    August 4,398
    September 2,643
    October 2,191
    November 2,384
    December 2,293
    2014 Average 2,780

    And 2015 so far. You can see how it's running away from me:

    January 3,009
    February 2,629
    March 3,178
    April 3,990
    May 3,498
    June 3,137
    July 3,767
    2015 Average so far 3,315

  3. #3
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    Additionally, to hit my monthly spending goal of 2,900 here are the guidelines based on my past averages. Single with an apartment in the city core:

    Food: 380
    Rent + utilities: 1,420
    Travel/transportation: 400
    Services incl cell: 140
    Home essentials: 110
    Consumer goods: 80
    Entertainment: 200
    Health-related: 80
    Gifts/donations: 50
    Uncategorized: 40 (this is avg of infrequent big purchases)

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  5. #4
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    Understand that one! I'm somewhat the same way, spending not savings come natural to us. Financial planning 101 pay yourself first. We bought several investment properties and have the mortgages come out of our regular account. This is recent but I have automatic withdraws for our DRIP accounts once the money is gone I don't really notice it.
    Last edited by Financialplannerdude; 2015-08-15 at 07:31 AM.

  6. #5
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    A 50%+ savings rate would be great. Seems like it's very doable for you James!
    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

  7. #6
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    Pretty good job none the less James. That's an incredible savings rate and very reasonable living expenses.

    We saved about 1/3 of the rate you are.

  8. #7
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    Geez when you said you had "high spending" in another thread last week I wasn't picturing this James! Well done. Not many people are saving so much of their income, especially living alone...

    I've taken less interest in budgeting monthly as I used to. I don't really see the point anymore. Just make sure your core expenses are efficient and low (rent, food, transportation, phone/tv/internet) and make sure that the extras are worthwhile to you, and you're good to go. Don't fret over spending 4 or 5k in a month when you're budget is 3k, so long as that extra spending has been on something worthwhile (like a surfing trip down south?).

    I also used to like MMM's chart with the math about savings rate, but I now think it's kinda silly. I mean I get the point, but when it comes down to it savings rate % is NOT the most important factor when determining when you'll retire, not at all. The most important things, in order, are: your spending during retirement, investment returns, and your saving amount (not rate) while working.

    Someone who makes 30k net, saves 20k and spends 10k living frugally is "killing it" according to the MMM chart. But you, who are spending 36k and saving 36k, have a "longer" time to retirement according to the charts because you "only" save 50%. I'd call bullshit on that. When it comes down to it, after 15 years he'll have some amount of money, and you'll have some amount that is twice as much. They'll say "but you spent so much while you were working so you'll spend that much when you're retired too" I'd call bullshit on that as well. It's easy as pie to cut back your spending whenever you want! Sure it might be a bit tougher if you're 40 with a mortgage, wife, and 3 kids... But when retiring/quitting work, I don't see why one cannot revamp their life extensively to accommodate any spending level they require, regardless of past spending.

    Overall I think MAKING more money is much more important than saving more money. Don't get caught in the MMM frugality trap where your savings rate is the all-important indicator of success. Budgeting, discount shopping, and reading about frugality all the time are very real drains on your brain. You only have so much mental energy to spend, and if you spend too much on frugality then other, more important things, are GOING to get pushed out. Things like investing, developing ways to improve your career/business, making side income, taking care of your health, etc.

    Of course I know know MMM has articles refuting what I've said, and insisting that frugality/savings is more important than income. But my post is getting too long already so I'll just leave it at that for now.

  9. #8
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    Thanks for the encouragement, everyone.

    peterk, I continue to debate this with myself. I've landed on the side of aiming for a certain annual expense target (35 K for me), but not depriving myself of things I want... like the surfing trip I still think that recording and tracking is a great exercise. But I fully forgive myself the high expense months, like the $4,398 month last year when I did two surfing trips and toured the Oregon coast. Worth every penny.

    You might have a point that expenses can easily adjust downward in retirement. Suddenly you gain flexibility in when you travel, book trips, etc. One reason my trips are so expensive is that I'm always booking around tight work schedules with limited windows, and I get forced into expensive tickets. That wouldn't happen when you're retired.

    Also - I'm not quite as nutty as I sound. My employment has been very boom & bust (due to the technical consulting field I'm in) and it would be very normal to encounter another year without income. Right now, business is great so I'm trying to save for a rainy day and 51% savings is feasible today. In two or three years it might not be and I may not be able to save anything, so the high savings rate is my protection. Averaged over say the last 10 years, my savings rate is well below 50%
    Last edited by james4beach; 2015-08-15 at 10:00 AM.

  10. #9
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    I went back and calculated that over my working years, my average savings rate is 30% (this is mainly due to periods of low income).

  11. #10
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    30% is still very high....well done.

    Hidden Content - Working on a $1 million portfolio and $30k per year from it.

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