This post is from Xyz who writes over at Our Financial Path. He and his wife are aiming to reach financial independence and retire early in less than 10 years. They write about their travel adventures, their investments, budgeting, and their views about life over at ourfinancialpath.com.
Our story starts off in 2014. I had just started working for one of the biggest banks in Canada and had met my (now) wife just a year earlier. We were living in a small condo in the downtown of Montreal and I always wanted to live in a nice house like where I grew up.
I grew up in the suburbs, playing outside; biking the nearby trails in the forests and sailing on the lake all summer...
I wanted that for my children and for us too. We like the Great Outdoors and wanted to live closer to nature so we started saving for a downpayment. We wanted a house we could grow in, something we could stay in for many many years to come.
We started cutting the small things to increase our savings rate. Our first thing was to cut cable and switch to Netflix. Right there, we went from a $100/month bill down to $10/month. That extra $90 went straight into investments.
We continued cutting and saving more and more of our take home salaries. We went on a no-shopping diet and started paying more and more attention to good promotions for the things we were spending the most on like travel.We even got free flights from credit card bonuses and banking promotions.
After just a year, we had enough for a downpayment and started shopping for our dream house.
Keeping it Steady
At that point, we were not even thinking about our savings rate. We just saved! We had a clear number to attain and knew we could attain it quickly.
Once our boxes were all unpacked and the dust settled down, we started to look back on our finances and how we did in the past year. We used Mint but you can also use a simple excel spreadsheet or wonderful tools like Personal Capital to aggregate all your accounts together. From there we saw that we were saving roughly 35% of our take home pays.
Even if we tweaked our lifestyle a bit, we did not sacrifice much and still lived a very comfortable life so why go back to our old ways? We just continued our savings habits and, now that we were tracking it, were able to optimize our spending even more!
After the house, we needed a new goal, we needed a new motivation.
That's right around the time I discovered MMM and the whole Financial Independence movement. I was quick to share my new discovery with my wife and after that, we were saving for a new purpose. A new calling. We now were hooked on the prospects of financial independence and early retirement.
We since increased our savings rate to over half of our net incomes are aiming to save roughly 60% by next year.
Have a Goal
What really saved us from falling into a paycheck-to-paycheck lifestyle is our clear goals. It is primordial for you to know the Why behind your savings. Whether you are paying off debt, savings for an emergency fund, or investing for your retirement, you need to know the Why behind your actions.
Your goal needs to be attainable and quantifiable. We, for example, try not to think about the dollar amount we need before retiring, that would seem unattainable! We focus on the savings rate, month after month.
- It seems impossible to save enough to have our investment income cover all of our expenses.
- It doesn't seem so hard to raise our savings rate up to 60%.
The two statement above are of great difference; one seems to take an eternity while the other can be attained by next month. Aside from those differences, having such a high savings rate will get you to achieve the first statement surprisingly fast! At that rate, after only a decade or so your investments would completely cover all of our expenses.
A simple change in goal can get you to the same end result without impacting your motivation.
To Conclude
The best way to get what you want out of life is to go at it step by step with attainable goals. If your goal is to save half your income this year, you can do it! Track your spending, cut the unnecessary, and save the rest.
I hope you enjoyed our little story, you can read more about us over at Our Financial Path.com
I did enjoy learning about your personal financial story! It’s inspiring to be able to cut out debt and actually attain your goals. I’m a bit of a minimalist so I’m a big believer in cutting out what you don’t need so you can actually have some financial stability!
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Living with what you Need rather than what you Can buy makes a huge difference. The minimalist movement is definitively a great way to increase your savings rate!
XYZ recently posted…Dude, Where’s my Returns?
It’s been a little over a year since Honey and I graduated from college. We are gradually paying off our student loans. I get depressed each time I have to pay off a chunk of it. It seems never ending. However, approaching it with this break down doesn’t seem so bad.
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I would not even think about the total amount left. Every time you can save a bit on something, put that difference towards your debt and doing so will pay it off faster. Whether you look at the balance of not will not affect your repayment but the little actions you can take everyday to repay it will get that balance down faster.
Your story is very inspiring and having an attainable goal is definitely the way to be able to get where you want to be. I’m sure you will continue to meet your goals.
Thanks, I wish you best of luck with your goals!
i am also a fan of saving money. i don’t spend money on unnecessary stuff. by spending only on the things that we need, we can save money easily. thanks for sharing your story.
Living a minimalist lifestyle is definitively a great way to increase your savings rate!
You have completely inspired me to save more. These tips are fantastic and it just goes to prove that you can really do it if you put your mind to it.
Anyone can increase their savings rate with a little effort, good luck!
Thank you for your post. It helps me a lot with my saving goals. 🙂 I want to become a minimalist and save everything 🙂 this is a good post for me to do the next step 🙂
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Good luck in your journey, remember that every little step counts!
You are right,having personal goals to reach is the key of motivation!
Have a goal and take daily, small, steps towards it. 🙂
I’d put my earnings in a completely different bank account that I “forget” about ! 😉
That is a great way to let your savings aside without thinking about it. The next step now would be to read our Open Book series and learn how to invest your savings 🙂
This is awesome! We work on putting money aside for savings every month, just in case something breaks!
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Having a healthy emergency fund is the first step to financial freedom
XYZ recently posted…Dude, Where’s my Returns?
such a great tips. i guess i need to start planning some serious goals now
Starting is the best thing you can do for yourself 🙂
This is really inspiring. We really need to have strong savings goals. Credit crisis is rising. Therefore early planning is needed.
Very happy to have inspired you, being ready for emergencies is always a great stress-relief.
Switching to Netflix is a huge money saver. I’ve save over $80 a month and don’t have to endure any unnecessary commercials. I need to go on a no-shopping diet. Having clear goals can really make a different. Great post! I learned a lot 🙂
We did a no-spend month this winter, ate from the pantry, didn’t buy any clothes or any shopping… It was great for the budget and the mind.
Looks like you guys are quite dedicated to saving. Well done, it takes discipline.
I would say that the best tool to take discipline away from the equation is making it automatic. Setup a direct transfer, every week or every month. Now, without even thinking about it, you will be saving!
Your initial goal sounds a lot like mine – to own my own nice house where my kid(s) an play outside. I definitely need to do a little better when it comes to saving. I really enjoyed reading your post and will definitely be back to read more!
Come and check us out on our blog! 🙂
This is what it all comes down to, having a goal. It’s what keeps you going especially when you lose motivation. I think it’s awesome that you got to save that much and you’re still continuing that kind of lifestyle.
To be truthful, we barely saw the difference between saving 20%, 30%, or even 50%. Once it is all automatic, you forget about it and adapt your lifestyle around it.
We do this as well. Since we are military. We base everything off his salary. So when I work its al savings too.
That is amazing, having low fixed costs is a great help.
It’s like you were reading my mind!! I’m in the process of getting my finances in order as well. My biggest obstacle in finding extra income to be able to pay off the big things and go from there. I’m very good at saving/cutting costs. But having goals on paper will definitely help me along the way!
I’m happy to help, I wish you best of luck in your savings.
This is great! Even tho I’m still in college and work part time, I’m saving money. After all I do want to move out of my parent’s house as soon as possible. So far I managed to save 50% of my monthly paycheck.
This is awesome! Living with your parents a bit longer will allow you to save a lot more!
Wow! Thanks for this. Saving is one of my goals since i got married to my man. We’re planning to be minimalists once we mobve back to Asia and start traveling. This is a great post. Thanks for sharing