counting money
Finance

3 Ways to Supercharge Your Savings Rate

Part One

Is money a taboo topic?

Yes. Money is taboo. We can’t talk about that. We just earn it, spend it, earn it, spend it. Repeat till we die. It’s easy and simple.

Um, hold up. *record scratch*

Let’s not repeat this cycle. Let’s save it instead. In fact, let’s save a ton of it. No, a crap-ton of it. (Wait, is a crap-ton more or less than a shit-ton? I can’t decide.) Regardless, start saving!

If you’ve ever worried about retirement, lived paycheck to paycheck, are in debt, have savings but don’t know what to do with it, or are curious about how to work fewer years for the man or create wealth, and/or become financially independent, this series is for you!

What is a savings rate?

A savings rate is the amount of money you save compared to your total earnings. Having a high savings rate is one of THE MOST POWERFUL ways to accumulate wealth. And it’s the easiest thing to change. 

This post is the first of a series of articles about personal finance at The Eclectic Mother. My goal with the personal finance series is to help you make better financial decisions and define your financial goals. Ultimately, I want to play a teeny tiny role in helping you achieve financial freedom. 

Do the words “retirement” and “investing” make you want to cringe or head for the hills?? Ah, well, no worries. I’m going to explain that in a future post. Let’s just start with the easy stuff, mmmkay?

STEP 1

TRACK SPENDING

(Don’t skip this step!)

What do I spend money on?

Create a diary/journal/spreadsheet for your spending today. It should be detailed. You’re welcome to use my budget analysis spreadsheet. Of course, you’ll need to adapt it to your lifestyle, but it will hopefully get you started. Now, spend the next 3 months (or preferably more) evaluating your spending. It’s important to track every single penny. Mint may be of help to some. Personally, I prefer a spreadsheet because we have to use cash quite a bit here in Germany. Tracking your spending habits will create awareness. Learning about where you spend is the first step to making educated decisions about where you can save. Super simple, right?

By assessing your spending habits, you’ll discover whether or not the purchases you’re making align with your values. And actually, this is a great time for you to sit down and consider what is valuable to you and your family when it comes to spending money on it. Does your family love traveling, fitness, experiences, living in a specific location, or eating at fancy restaurants? What are the things you’re not willing to skimp on?

For me, it’s my kids’ education, traveling, and healthful foods. Each of us will allocate our funds differently, and that’s okay. However, it’s helpful to know where you don’t want to tighten the belt too far, because obviously we DO want to enjoy our lives. On the other hand, listing the items you don’t value much, may open your eyes to wasteful spending, which can be completely eliminated.

What should I not waste money on?

When I tried this exercise myself, I discovered that our family of four was spending 400 EUR/mo. on average eating out, and we don’t even like eating out! What the heck! Funnily enough, we found eating out to be a real chore! At restaurants we always struggled to find food our kids would actually eat (besides those nasty ol’ chicken nuggets and burgers on the “kid’s menu”), and we often left restaurants feeling like we could have made the same food at home quicker and cheaper. 

I bet you’ll also find something you’re spending money on that you don’t necessarily care about. We tend to be lazy with our spending, but I’m here give you a quick shake, and say, “Snap out of it! Quit drifting and open your eyes.” Eliminate wasteful spending and watch your savings rate soar. These savings will be put to good use, you can be assured. Hang in there. I’m going show you how! (in a later post) 😉

Another common example of wasteful spending might be a gym membership. Do you know how many people pay for a gym membership and only frequent said gym twice a year? Loads! A new survey conducted by MyProtein revealed that Americans spend 1.8 billion dollars on unused gym memberships! Crikey, that’s a lot of dollar bills, yo! (Granted, there are people who use their membership regularly. For them, this would go on their list of “valued spending.”) 

How do I find my core values?

It may surprise you, but your values play a major part in your spending habits. For instance, if you love travel it may be difficult for you to minimize your spending in this category.

When you find out what your core values are before you start slashing your spending, you’re able to hone in on the line items that don’t even matter to you. Begin by listing all the items you spent money on in the past six months that you’re glad you purchased. Think beyond physical items. Did you spend money going to a concert or taking a friend out to dinner? Maybe one of your top three values is experiences!

Personally, I made a simple t-chart. Fancy, I know! A good ol’ fashioned T-chart!  I wrote down my 3 “most valued spending” items, and my 3 “not so highly valued spending” items. After taking the time to write these down, I had a pretty good picture of what we could save drastically on!

Here’s my list.

STEP 2

Cut Unnecessary Spending

Ok, now that you know where your money is going, let’s get to the next step. This is where it gets fun. Upon learning about your spending, you’ll notice patterns and probably be really floored by how much you spend on things like going out to eat, coffee, monthly memberships, etc. After cutting some of these expenses, you’ll be feeling pretty great! And yes, you can reward yourself with a home workout. I’ll allow it! 

Cancel those unused memberships, cut your dog’s hair yourself, and commit to eating out less. Whatever you think you can eliminate, great! But here is where I’m really going to rock your world. Although those savings will add up, they won’t be enough, not if you want to be financially independent. You ready for more? 

STEP 3

Save Big On The Three Biggest Monthly Expenses

Saving money on the little things can surely add up, especially if you’re in a relationship and that savings is doubled. However, the BIGGEST expenses are still eating up the majority of your budget and unless you’re willing to make bigger changes, you won’t be able to benefit near as much from my future posts on finance. The name of the game is SAVINGS RATE. I’m not talking about 10% of your income, rather we’re shooting for 30-50%!

Saving 50% of your income may sound extreme, but I’m not alone in thinking this savings rate is essential to becoming financially independent. Feel free to read more about the importance of a high savings rate here or how to calculate your savings rate here. Or, if you’d rather have something to go back to regularly, buy a copy of “Two-Income Trap: Why Middle-Class Parents Are (still) Going Broke.” 

How Can I Save Money Fast?

Now let’s get back to the how. How can you save more money? The three biggest line items in your budget are HOUSING, TRANSPORTATION, and FOOD. Most families spend more than 50% of their income on these three categories alone, so there’s obviously some room for improvement.

Let’s take a closer look at these 3 big money suckers.


HOUSING COSTS

Housing: For most people, housing is their BIGGEST EXPENSE averaging around 30% of their monthly expenses. Imagine getting that number down to 20% or even 10%. That changes the math, doesn’t it?

HOW DO I LOWER MY HOUSING COSTS?

Downsize 

  • More likely than not, you’re living in a home that costs you more money than necessary. It’s not just the money you spend on your mortgage or rent you need to consider, but the cost of maintaining it as well.
  • Are you living in a home where some rooms are never even used? Can the kids share a room? Do you NEED an office? Be honest with yourself.

Move to a lower-cost-of-living area

  • Is your location costing you a fortune? Are you able to work somewhere else? Is your job flexible? Can you work from home? Is commuting an option? When you move to a lower cost of living area in order to save money, it’s called geoarbitrage. It’s something I’ll talk more about in a later post.

Consider low decorating costs

  • (ie: repurpose, reuse, trade, Facebook Free Your Stuff groups) – Think about it. Every single thing you put in your home requires upkeep. Be mindful of what you bring into your home. Do you NEED it? Does it make you happier long term? If not, you can probably live without it. 

Roommate or AirBnb

  • This may not be for everyone, but it’s a HUGE opportunity for those of you who are open to the concept. Renting out a room, basement, garage, or even your backyard (gamping anyone?) can offset your housing costs big time. 

Shop around for repair costs

  • When hiring contractors, SHOP AROUND! The estimates may surprise you. We’ve had estimates for our garden recently and the cost comparison was shocking! Some experts charged double their competitors! 

Solar, slow flush toilets, etc.

  • Not only is caring for our planet the right thing to do, it can usually save you tons of money. You can find several great money-saving ideas for your home at Tread Lightly, Retire Early. It’s her area of expertise. I love her Q&A posts, like this one.
I kid.

TRANSPORTATION COSTS

Transportation is the next biggest expense. Families spend as much as 20% of their monthly salary on their cars. Remarkable, if cars aren’t even one of your valued spending items. That just seems like a big waste of resources, don’t ya think?

HOW DO I LOWER MY TRANSPORTATION COSTS?

Fuel efficiency

  • Purchase the smallest car you can and make sure it’s fuel efficient. Most families DO NOT need an SUV, truck, or minivan. Next time you’re driving around town, take a look at the vehicles beside you. I think you’ll be surprised to see that the majority of cars have just ONE PERSON inside. Are you one of them? Are you driving around a bigger car because of the eventual “what if”? As in, “what if our kids’ friends want to come with?” or “What if we buy a large item at Ikea?” or “What if we have family in town?” I relate, but then again, let’s think about this logically. Doesn’t it make a lot more sense to rent or borrow or a car for those oh-so-seldom instances where a bigger car is necessary? Of course it does!

Don’t spend more than $10,000 on a car 

Own your car until it dies

  • Car ownership is expensive, but getting every last mile out of your car can save you tons of money over your lifespan. This podcast from ChooseFI about cost of car ownership will motivate you to keep your car for as long as you can. 

Rent out your car

  • Have you heard of Turo? It’s a platform you can use to rent your car when you’re not using it. I think it’s a great solution for two car families who seldom use their second car. Which leads me to the next point…

One car family

  • Eliminating a car adds up to HUGE savings, particularly if you have a monthly car payment. Below you’ll find some alternative ways of getting around town. 
  • Ride a bike – (Looky there! We’ve just eliminated that monthly gym membership, too!)
  • Car Share – Is there a family member or friend that would be willing to split the cost of their car with you in exchange for driving time?
  • Carpool – Aw, good ol’ carpooling. Ride to work with a colleague, even if just for a couple days a week or for half of the commute. Every bit adds up!

FOOD COSTS

Depending on where you live and the types of foods you buy, your food bill can vary greatly. My bill can fluctuate monthly depending on how conscientious I am with my purchasing habits. Here are a few easy ways to lower your monthly costs on food.

HOW DO I LOWER MY FOOD COSTS?

Buy in bulk

  • Not only is this a more earth friendly option (because of less packaging), but it will save you some big money! Check out the bulk bins at the grocery store and don’t forget to bring your own bags!

Buy more when it’s on sale

  • There are specific items I use every month, and when these items go on sale I buy more than I need. It will save you time later on because you won’t have to make a trip to buy it later, but you’ll also save money. 

Eat less meat

  • Fact is, meat is expensive. Check out some of our budget-friendly vegan recipes, if you’re ready to replace some, or all, of your meals with meatless options. 

Double or triple the recipe and freeze it

Photo by: Katrin Kuellenberg Photography
  • Not only is this a huge time saver, (and time is money, my friends!) it’s often the case that a recipe only requires a quarter of what you’re forced to buy. For example, a bundle of radishes, a carton of mushrooms, a bag of carrots? Sometimes a recipe only calls for half of that. Rather than possibly throwing it out because it’s gone bad, use it all and enjoy the meals later on!

Buy fewer processed foods

  • It’s unhealthy and expensive. Look for ways to make your favorite things at home. Granola bars, anyone?

Ditch delivery services

  • They are convenient, yes. Healthier? Mostly. But what they aren’t? Cheaper. The cost per serving is pretty absurd. If you love the recipes, try the app KptnCook. It’s similar to the delivery meal services, but you can shop for the ingredients on your own, and therefore, pay less.

Drink less alcohol or none

  • Guys, alcohol is expensive! You can really make a difference in your grocery bill by drinking less and/or alternate beverages. I hear water is delicious. (wink, wink)

How Can I Maximize my Savings Rate?

Some of these ideas may seem obvious to you, and individually they don’t significantly help move the needle. Fortunately though, it’s the collective implementation of these money saving tips that counts! If you’re able to save on several of these items (particularly the big 3) I’m certain you’ll improve your overall savings rate drastically. Even if, for the time being, you’re only able to find a $100 of savings each month by implementing a few of these tips, that’s $1200/yr. of savings you’ll put to work for you. (which I’m gonna show you how to do in this series)

Take the Leap

Okay, so now that you’ve hopefully learned some powerful ways to drastically improve your savings rate, tell us how you’ll increase yours.

What was your biggest takeaway from this post? Has it encouraged you to take the first step toward financial independence? What can you do today? How will you positively impact your financial goals?

If you’ve read this far, I already can tell you’re committed. And guess what? I am committed to helping you!

Up Next

In my next personal finance article, I’ll explain how finance became a passion of mine and how it’s changed my life. You’ll get a deeper look at my own personal finance journey and find out why I’m so excited to share it all with you.

It’s Your Turn

For accountability purposes, come share your “valued spending” & “not-so-valued spending” lists on social media. Use the hashtag #theeclecticmotherfinance! We want to see your progress!

Do you know someone who could benefit from reading this post? Here’s the link for you to easily… Copy. Paste. And, share. https://theeclecticmother.com/2019/07/27/3-ways-to-supercharge-your-savings-rate/

If there’s something I missed, let me know! I’ll add it to this post. We want to make this post as helpful to others as possible. #communitygoals #sharingiscaring

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Hey Guys! I'm one of the writer's here at The Eclectic Mother. I have two children, 9 and 11. I'm on a mission to create the world's best community of women who want to see one another succeed. I like empowering women to be the best they can be. It's a privilege to hang out with you guys. Please let me know if you ever need anything! I've got your back!