As I mentioned on my food post, I’ve been tracking my finances for going on seven years now. This time period encompasses the last vestiges of graduate school, my post-doc and the first five years of my career. So I have tons of historical data on how I’ve chosen to spend my money in wise and not-so-wise ways over the better part of a decade. Looking at how much I’ve earned over the last seven years is sometimes depressing, and it’s easy to regret not saving more as soon as I started my “real job.” However, I had debts to pay off and seven years of pent up desire to spend money on stuff and traveling. I bought a car, I went to Europe, and I contributed to fixing up Mr. Green’s house. I’m sure I also bought a lot of stuff I didn’t need, but here we are.
Little By Little
After having my little green revelation a little over a year ago, I started paying a lot more attention to my spending. Yes, I had “paid attention” before when I would look at the monthly dollar amount for restaurant spending or craft supplies or clothes shopping and cringe and say “oops” and close the Mint tab. I figured as long as I didn’t stoop to the “5 days until payday and I have $10 in checking and need groceries” scenario of my graduate school days, I was doing ok. But a year ago I started to consciously dial down those spending numbers instead of just saying, “I need to do better.” I upped my savings little by little each month, hiding money from myself by increasing my pre-tax retirement deductions. I started to plan for a taxable investment account so (part of) my cash savings could start doing a little more work. When I found out I was going to be an aunt, I started putting away a little money each month that could eventually fund a 529 account. And then, in June, as my birthday gift to myself, I paid off my car and started this blog.
The Case For Cold Turkey
Some will argue that your debt is an emergency and needs to be dealt with as swiftly as possible. In retrospect, I certainly agree that I could and should have paid off my debt much faster. I’m fortunate that my debts were fairly small potatoes compared to many, but I’m sure I would be horrified by the amount of money I’ve lost to credit card and student loan interest payments over the years. My student loan was under $5000, and the minimum payment was so laughably small that I paid well over that amount from the get-go. By the time I bought a car, I was at least cognizant of the expense of interest payments, and did all I could to secure a low rate. I did the math to know how much interest I would save by paying extra each month and making additional payments when I had windfalls like a tax refund or a side hustle check. Although I’m currently debt-free, I anticipate I will be responsible for a mortgage payment in the near future. I plan on being totally honest with myself when estimating how much I can afford each month on a 10 or 15 year loan, and work towards throwing extra money at it whenever possible.
Setting a Savings Goal
My eyes were opened to the power of frugality last spring when I stumbled upon a comment from The Frugalwoods while looking for financial inspiration on another blog. When I first learned of their savings rate, an astonishing 71%+ of their take-home pay (after maxing out their 401k’s), it seemed absolutely unattainable. But the perfect is the enemy of the good, and I set what I felt was an ambitious goal of saving 50% of my take-home pay after maxing out my 403b.* July was the first time I was able to contribute $18,000/12 to my voluntary 403b, and the first time in 4 years without a car payment. July would be my new normal.
To get to my current level of savings, it took over a year’s worth of effort in being more conscious with my spending and experimenting with my savings levels. Before that, it meant seven years of at least being aware of my spending levels and striving to stay out of consumer debt, even if I wasn’t always on a tight budget. Prior to last spring, I had been routinely canceling subscriptions I didn’t use or enjoy and eliminating other fluff from my monthly spending. The first six months of this year were spent throwing extra payments at my car’s principal and analyzing my spending elsewhere. So I did have to work at it, but my spending changes were so incremental that it didn’t lead to me “feeling” a vast difference in my life as a consumer. Plus, as my priorities changed, I no longer felt the need to be a part of that consumer culture as I once did.
Despite all that, when I logged in to Personal Capital last week to glance at my finances, I was surprised to see my spending for July was exactly where I wanted it to be. It had worked. July didn’t feel particularly frugal in terms of the quality of my lifestyle. I did re-commit myself to bringing my lunch more often after ‘fessing up to my food spending a few weeks ago. However, I also bought some clothes and several overpriced beers at a “free” outdoor festival. I didn’t have an uber frugal month, but my ambitiously high savings goal – one I thought should “hurt” a little bit – actually felt, uh, fine?
(*Two caveats here: I can actually contribute more than $18,000 a year to my 403b, because my mandatory 5% pre-tax contribution does not count towards the maximum $18,000 pre-tax voluntary contribution. The other caveat is that I don’t count my “rent” as spending, since it actually goes into a joint savings account with Mr. Green and is used for home repairs and other things. So it gets counted as savings, and when it is spent it is counted as spending. So I guess you could say it’s similar to some PF bloggers counting their mortgage payments or other debt payments differently from consumer spending.)
Where Do I Go From Here?
Part of the power of frugality is that every time we make an expense obsolete, that frees up hundreds, if not thousands of dollars over the course of a year. I already have plans to switch to a low-cost cell phone carrier in the next few months and eliminate a few more monthly expenditures that have been nagging at my freshly frugal self.
I’ve (perhaps wrongly) told myself that I don’t have to keep up the maximum voluntary contribution to my 403b for the rest of my working life. I know I should, but it still feels like a negotiable budgetary item in my mind. I’d love to travel more, and I had been telling myself I’d contribute more to my travel fund once my car was paid off. Depending on what Mr. Green and I decide to do about our housing situation, I may choose to temporarily re-route some of that money to contribute to a larger down payment. I’m assuming our wedding will be reasonably frugal, but our friends love food, and we’d love to feed them well. But what if I didn’t have to reduce that contribution? What if I could find another couple hundred dollars in my budget to bolster our down payment or wedding or travel fund? What if eliminating a few of those nagging luxuries actually ended up being fine?
It took me over a year of consciously changing my spending habits to get where I am today: saving 50% of my take-home pay, after contributing the maximum pre-tax amounts to my retirement vehicles. I know I have the ability to keep chipping away at my monthly expenses without feeling like I’m depriving myself. I’m excited to see where I’ll be six months from now, and whether or not I can funnel more money towards my other savings goals without feeling the need to dial back my retirement savings. We meet with the bank this week to discuss our next mortgage, so we’ll see how I’m feeling after that!