I save 85% of my income. And I’ve been doing this forever. I believe you can save 85% too. It starts with having money pulled directly from your paycheck into a savings vehicle before you ever see the money. The rest comes from lifestyle choices and, as I’ve said before, choosing to save instead of spend.
Here’s my rave for the day: The bare necessities of life are only getting cheaper! More competition drives lower prices. The more advanced our society gets, the less money people have to spend on the necessities of life. More arable land and advanced genetics mean cheaper food prices. More communications companies mean cheaper prices for your cell phone bill. Better technology in cars means fewer repair bills. Heck, 40 years ago a car that got to 100,000 miles was considered beaten to death. My last car had 310,000 miles and was still purring along until it got side-swiped. The more technologically advanced our society becomes, the more money we can save. The temptation to spend more will become greater but that can easily be wiped out with a little self-discipline.
Saving 85% was never my goal. My goal for years has been to spend as little as possible, while still being happy with my life. It just so happens that I can be very happy while saving 85% of my money. Who knew?
Note: I calculate my savings rate using after-tax dollars.
Fun Fact: I don’t make that much money. Although I haven’t disclosed my net worth spreadsheet on this blog, you should know that I make a decent salary for someone a few years out of school. Nothing spectacular though. I have about eight other streams of income outside my full-time job, but most of these are minimal.
Where the 85% Goes
About 60% of my income I never see. 50% goes straight into my employer-matched 401(k) Vanguard to buy up an assortment of index funds. 10% goes into my employer’s ESPP plan. That means 60% of my income is saved without doing anything but ticking a couple boxes on my company’s intranet.
I max out my Roth IRA each year ASAP. The max is $5,500.This goes into Vanguard as well.
After the Roth 401(k), ESPP, and Roth IRA, I put the rest in a taxable investment account. This is a last resort, as I wish I had more shelters for my money but I do not. I’ve researched a ton and can’t find any more ways to get my money into a tax-sheltered environment.
All this is pretty simple, eh? I’ve tried crazy savings plans in the past but, like most everything in life, the simple solutions are usually the best.
How I Spend the Other 15%
I’ve never been much for a written budget, but I’ve looked over tons of receipts to lay out my average cash flow so you can get an idea of how I spend that 15%. In total, it ends up being $580.57 per month.
Food: $75 per month
Auto insurance: $18.07 per month
Fuel: $17.50 per month (I mostly bike but drive home about once a month to see my family). Hypermiling FTW.
Car repairs: Basically non-existent, but we’ll say $30 per month to cover the eventual oil change, random hose. I fix everything on my car myself, too, so there are no added labor charges.
Housing: I’m failing a tad by living in luxury at $300 per month (utilities included). I’m not kidding about the luxury; the house I live in is nicer than most (HOA, BBQ deck, pool, cleaning lady, other fancy-nonsense that I never use).
Bike accessories/repairs: $10 per month
Cell: $10 per month via Republic Wireless
Toiletries: $20 per month. Normally much lower but I get a few laser/microdermabrasion treatments each year to make myself beautiful (aka fix my face from my acne-inflicted teen years).
Entertainment: Hmmmm. The internets are free… Well, I usually spend <$100 per month, but this category includes gifts so I estimate entertainment costs per month at $100.
Healthcare: Free. I’m under 26 so I can piggyback on my parents’ plan (no extra cost to them).
Students loans: None. I’m a big believer in making money before spending it, but if a person has to take loans, they should be wiped out ASAP.
Increased Necessary Spending as You Age
Living as a single person with a decent income is not expensive. Remember, saving money is easy (because you don’t really do anything), but spending takes effort.
You may say: “Oh, he gets free healthcare and fixes his own car and he’s a guy so he doesn’t need to buy makeup etc., etc.” But, by the time I have to pay for healthcare, my income will be significantly higher, so my percentage saved will still likely be 85%. I enjoy working on my own car and most people don’t. If you don’t, I would suggest you make maybe $30 extra per month to give your savings rate a boost. And, yes, I’m a guy so I have it easier in the beauty department. But I do work out a lot, so maybe all the extra food I eat makes up for the beauty expenses. That sentence probably made quite a few girls laugh. Please excuse my ignorance.
When you’re young, life is cheap, hence a higher savings rate. When you’re older, you’re making more money, so your percentage saved can remain high even as your expenses go up. As expenses increase, make sure income increases! NEVER STAGNATE. If I was still making the same money as I was last year, I would not be pleased. You shouldn’t be pleased with the same results either.
Life’s Necessities Will Get Cheaper
My life (much like yours) is constantly changing. That’s why I created the antibudget. The antibudget forces me to regularly write down and evaluate all of my expenditures. This exercise helps me decide how to spend money in the future. It goes hand in hand with my personal strategy to save 85% of my income.
Who Should Use the Antibudget?
In my opinion, everyone. But the antibudget is especially useful for people who are self-employed, work on commission, or enjoy the art of the side hustle.
I recently wrote that I save 85% of my income. But, a few months ago, it was 92%. This month, it may be a tad higher. But come December, it will probably be down to 70%. Aside from my regular salary, some months I make a lot, some months I make a little extra. As far as creating a budget to make sure I stay right at saving 85%, forget it! If I want to go on a ski trip or fly to NYC, so be it! No bossy paper plan is gonna stop me!
But I’m certainly not reckless with my spending; far from it. So, instead of budgeting, I constantly reevaluate my spending habits. This way, I ensure I’m spending the minimum amount possible to stay healthy and happy. Sounds like a pretty great alternative to a budget, eh?!
WARNING: This kind of spending requires self-discipline. Please consult books on the topic if you (like me) have room to improve.
How the Antibudget Works
About once a month, I make a giant list of everything I spend money on. Each good/service I spend money on falls into one of three categories: K (Keep on keepin’ on), D (Delete), or R (Revise). Why do this? Because most of us spend too much buying stuff that either A) we don’t need or B) there’s a better replacement. Also, because our lives are constantly changing, which means we must constantly change our spending.
Here’s a sample from my last antibudget session:
1) Mentadent toothpaste – R
Replace with Colgate Total, as it’s the most highly recommended toothpaste, even if it is more expensive.
2) Fancy lectric toothbrush – K
Although a manual toothbrush can clean just as well, it’s rare that the average person will always use the proper technique and time requirements, so an electric toothbrush (with a timer) is a safety net that’s worth having.
3) Persciption glasses – K
Keep upgrading lenses/frames as needed/desired. Although I usually wear contacts, it’s beneficial for eyes to breathe freely every now, then I’ll wear these a few hours a day.
4) Mutual fund expense ratios – R
I have to keep paying them, but I’ll switch to Vanguard from American Funds as the E/R’s over at VG are way cheaper and fund performance is comparable.
5) Fancy filtered water system – D
I do not need to keep buying filters and fiddling with water pitchers because there’s no evidence that shows there is anything harmful to filter out of my city’s water.
Harness the Power of the Antibudget
Creating a list like this will keep you from buying stuff just because “that’s the way I’ve always done it.” I got in the habit of using a water filtration system when I lived in a city with rust-colored water. I first bought into American Funds when I wasn’t as well informed. Our lives change, we become more educated, and our expenses are ever-evolving.
For all of the oddities I spend money on (random getaways, gifts for people, etc.), I think long and hard about their impact on my life. Then I choose to spend the money or pass. My life is chained to no budget.
I liken this way of watching your money to being self-employed. You have much more say in what you do and no person (or budget) is going to stop you from doing whatever you dang well please.
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