“As a family, we never used a budget. When we decided to pursue financial independence, we started a monthly tally of our total spending and savings rates.
Our initial savings rate was 20%, including 10% into retirement accounts and the other 10% into savings. This was a tough change in our routine and took some getting used to. But as our savings grew, we recognized the benefits. We made incremental increases of 5% in total savings each month. With less of our income left over for spending, we adjusted by cutting items that we could live without.
We used to say we couldn’t even afford putting 15% into our 401k plans, and that we would be miserable without that money. Before long, our 50% savings rate seemed low, yet we were happier. Eventually, we were saving about 70% of our gross income. With that savings, we paid off our six figure mortgage in a year and a half. It felt great, and was a solid ratchet point on our climb towards financial independence.
I recently lost my job after over 20 years of service. No pension, no severance, and completely outside of my control. If I’d been able to work 5 more years, we probably would have been completely financially independent. But despite this bump, we’re still on the road. Our habit of saving put us in a good spot.
Improving our financial situation thus far made us realize that we can’t reach financial independence by flipping a switch. It’s a process – a journey with many twists, turns, and detours. Being ‘only 60% there’ is not a failure; it means we only have 40% to go, and that is infinitely better than where we started.”
St. Louis, MO
- Saving money is important. But much like budgeting, the process can be as loose or as strict as you choose. Getting a handle on your savings rate can go a long way toward setting up an emergency fund and building a nest egg. Here’s some insight on taking a deeper look at savings rate.
- Getting to financial independence takes strategy. Even if you’re not yet fully where you want to be, there are plenty of progress points along the way. One strategic method to explore is a high interest savings account. Not only is it a convenient way to save, but it allows you to save while earning interest. Check out our list of the best high-interest savings accounts online for 2018.