At the beginning of the year, Eric and I have decided to tackle the One Percent Challenge. Every month, our goal is to save another percent off the top of our after-tax pay. So if we were bringing in $2000 a month after taxes, we'd save $20 in January, $40 in February, and so on. This is in addition to whatever we might already be saving.
I mapped it all out and the first half of the year looked like it should be pretty easy. After that, it'll get tougher, but I think we can do it.
We're three months in and so far, we're doing a great job.
It hasn't even been that difficult. Once you get used to the idea, it's not too bad.
Changes We're Making
We had already decided to limit our clothing budget to just $25 a month per person. That change alone will get us through several months of the challenge. We spend a crazy amount of money on clothing considering we're not all that well-dressed or really into clothing.
We're also committed to eating out less (only for holidays and birthdays, unless someone else is paying). We used gift cards we had from last Christmas to pay for carryout for our anniversary at the beginning of January. For Valentine's Day, we made a fancy meal at home. We've been avoiding social obligations that require eating out, unless we can pay with our allowance (we get $20 each, every week).
Another change we talked about is to cut way back on activities that cost money. There are a lot of free things to do around here, including free museums, and hiking. We probably won't go to any concerts, plays or other shows this year. Although I kind of want to go to a play this weekend, because it's being put on by a community theatre right here in our neighborhood. But I already spent my allowance on lunch today.
I'm also trying to spend less on interesting beers. This was nearly impossible. When we first started this challenge in January, I think I passed up exactly one beer that I wanted. At this point, I've passed up quite a few. We still spent a good chunk of money on beer when we went to visit my brother, because the grocery store had lots of great stuff, but when we're home, it's better. I no longer feel like I need every beer I see.
As of January 1, we were saving 16% of our income, mostly in retirement accounts, but that number also includes extra payments on the mortgage. It took us less than a month to get it up to 17%. Now our savings rate is up to 20%. We're a little bit ahead of the game, which is great.
If all goes well, by the end of the year we could be saving 28% of our income. I'd be absolutely thrilled with that!
But we're dreaming of a much higher saving rate. If that sounds totally insane to you, then check out this post from Frugalwoods. In 2014, they saved over 70% of their income. And that doesn't include their 401K contributions. If I took out our 401K contributions, our savings rate would go way down. I know it's pre-tax savings, but it's money we save, so I'm leaving it in.
I've been playing with our budget and the best savings rate I can get to work out without us giving up our cars or cell phones or something like that is 46 percent. But, you know, as we go along it gets easier. In the beginning, I struggled to not buy every good beer I saw. Now that's easy, so I have decision-making energy to use for something else. Such as thinking about how I might make my cell phone less expensive...
What's the Point?
This fits into our overall plan to spend less, have less, save more and hopefully move ourselves closer to the day we are no longer tied to our jobs. Sure, in the short term saving isn't as exciting as spending, but it's fun to watch our savings grow.
I'm also curious to see how much we can save. What all can we do without? It's not like we're really suffering here. We've bought a lot of stuff over the 15 years we've been together. Like everything we've ever wanted, it sometimes seems like. Now I guess we're trying to undo some of that accumulating.
Yes, Maybe We're a Little Crazy
Our end goal is early retirement. Maybe we'll make it, maybe we won't, but if we don't try, we definitely won't. At first it seemed impossible, but we made a few little changes, started saying no to some things that cost money and yes to things that cost less, and over time it's gotten easier. That change happened quickly, actually.
In many ways, it feels liberating. When we do want to spend money, it's there. We have fewer decisions to make (Order pizza? Nope.). Buy that beer? Maybe next year.
Some things I'm still struggling with. I do want to buy new clothes, but I don't. I don't like it when it's nearly the end of the month, but not quite, and we're out of grocery money. The vacation we have planned this year is no trip to Europe. But when did I start thinking a vacation had to take place in another country? Expectations escalate, lifestyles inflate, unless you work to make it not so.
So we're working to bring our spending back down a notch. If it turns out it sucks and we made the wrong decision, there's nothing to stop us from going back to our spendy ways. But I suspect that's not how it's going to end up.