So you have been bitten by the FIRE bug and now you want to do your best to try to minimize your expenses and save more of your hard earned money. But since you are currently reading this post I would assume you need a few ideas for what to do.
Pay yourself first
Did you know the average savings rate of take home pay in the United States is a measly 6%. Now that doesn’t include any retirement matches that your job may provide. Just for example if your job provides a 6% match to the first 6% you put towards retirement you automatically get a 12% savings rates. If you manage to save the measly 6% on top of that you are looking at a rate of around 18% of your pay. Pretty good right but if you want to be on the path towards FIRE you are going to want to save a bit more than that.
One easy way to do that is to pay you first. Most people in my experience place saving as the last thing they do each month with whatever they have left over.
That is a mistake!
Make savings an item in your budget and if you don’t have a budget you better get one. At the top of that budget the first category should be one labeled Savings, Paying Myself, Booyah whatever you want. Then write down the highest number you can imagine saving and add 5 dollars to it and that is the number you will save that month.
These days pretty much every bank/credit union has the option to set up automatic transfers between your accounts. So set one up between whatever account your paycheck lands in and your savings for the amount you figured out above. This transfer should occur at the first day of every month regardless of whether you get payed that day.
If you really want to challenge yourself add 5 dollars every month to the amount you save until you literally don’t have enough money left over to pay your rent and then rebalance from there.
Ahh the phone though these days it really not fair to call those minicomputers in our pockets phones. They are ubiquitous and a lot of people pay way too much money to buy them and use them. These days the pay as you go options are essentially just as good and you can usually get the phones and the plans that go with them cheaper.
I personally use the Straight Talk service since it sells its phones both online and in Walmart which makes it easy to replace damaged phones and buy new plans. My wife and I together spend 75 dollars for two smart phones with unlimited talk, text and 2 GB of data each. We never use all our data because we only do large downloads while on the home Wi-Fi and preload audio books or podcasts instead of streaming. If that doesn’t appeal to you can get unlimited data with them as well for only 45 dollars a month.
Monthly subscriptions are the sneaky little vampires that suck almost unnoticeable amounts of money from your paycheck but they really add up behind your back. Some examples include,
· Cable- Though I have never actually payed for cable never saw the point
· Hulu, Netflix, Amazon Prime, etc
· Charity Donations
The big one that for me on this list that constantly sucks me in are the streaming services. I love good TV and movies and thought of having access to a vast library of quality on demand programming is very appealing. Up until quite recently I had both a Netflix streaming and DVD plan which was costing me around 20 bucks a month. But I came to the conclusion that I was not getting enough value from the DVDs since I had access to the streaming service. I simply do not have enough time to watch everything I want to and the DVD’s just sitting around were actually stressing me out. So I canceled the DVD plan which only saves me 8 bucks a month but those 8 bucks are now going into my savings where it can only improve my quality of life and not stress me out.
I know this one is kind of no brainer but it is still amazing how easy it is to overspend on food. Food of course is one of the basic needs of life and as such it is really easy to go overboard with your food purchases without even noticing.
Just as a hypothetical scenario let’s take a look at the average day of the American office worker.
You start off your morning late so you don’t have time for breakfast so you decide to stop at the local Starbucks for a coffee and a roll. You leave 8 buck poorer but at least you have something in your stomach now. You go to work for a couple hours and before you know it is lunch time. Well you always go out for lunch because you just can’t be bothered to pack one so you hit up the local deli and buy a soup and sandwich. This set you back another 10 bucks but eh not big deal you make good money.
At the end of the day you pack up and head home to make supper with your spouse and have a relaxing evening.
Doesn’t seem that bad right but let’s take a look at the numbers.
You spent a total of $18 dollars on food throughout the day. Let’s say you do that for 20 days out of the month because you are just so busy. By the end of the month you have spent $360 dollars on lunches and coffee. If this continues by the end of the year you spent $4,320 dollars on eating out for lunch and breakfast. At the end of 10 years you are looking at $43,200 dollars spent and that is without factoring in how much that money could have grown if invested.
Moral of this story is eat breakfast and make coffee at home, pack a lunch and put on a big smile at the thought of the money you are saving.
In the conclusion
So figure out exactly what you need to do in order to make little changes to your life so that you can become more frugal and reach FIRE sooner.