savings goal

In a word, no.

But what a great experience! I always believe that you should shoot for the heavens because when you miss you will still fall among the stars—and the stars are a beautiful place to be. Here is a great example of this in action: in 2010 we had a personal savings rate (to permanent savings) of 29%…and this year we added an extra 9% to that, making our total 2011 PSR 38%! If we had not set this goal in the first place, we probably would not have made as much of a conscious effort to save a large percentage of our income.

A Few Large Purchases Held Us Back

Ultimately what happened is, well…life! We had several large purchases that we made with cash that would have gone to our savings account. These include a foundation repair, a second (beater) vehicle after ours broke down, and pre-paying the cruise portion of our Alaska trip for 2012 earlier than expected (due to my Mom finding a sale a week ago on the cruise liner we were going to use anyway for a savings of over $600!).

The great news about all of this is that we were able to preserve most of our savings by paying cash for these items. So while we did not meet our goal, being able to preserve and add to savings despite large expenses is a big accomplishment to me.  In fact, if we added in the large purchases we had, our PSR would have been 46.9%.

How We Put 38% of Our Income into Permanent Savings

While I cannot declare a victory, a 38% savings rate to permanent savings accounts (retirement/pension, long-term investment account, and a savings account we use as a last resort) is nothing to sneeze at. I’d like to mention a few ways we were able to achieve this.

You might feel the need to bop yourself on the forehead with a “duh” while reading these, but sometimes the truth is boring. If I can help just one person meet their financial goals while boring a few others, I will have done my job. So here goes:

  • We set the goal. I cannot stress enough how important it is to give your money a purpose, and setting a goal is a great way to do this. Dave Ramsey has been stressing for years that if you don’t give your dollars a purpose they will leave you.
  • Once setting the goal, we worked backwards to achieve it. This meant that we calculated what 50% of our take home would look like, divided it by 12, and figured out how much we needed to save each month to meet this goal. Then we worked out a spending budget from what was left over. Finally, we set up automatic payments to our savings and retirement accounts based on the pre-planned amount. This meant that if we needed extra money in a month, we would have to go through the painful act of withdrawing it from savings and putting it back into checking—a feeling of defeat that made us resort to this only if we had no other options and only if the expense was necessary.
  • We did not purchase a home that we could “afford” according to a bank’s pre-approved loan amount. We purchased one well below that, and within our comfort zone. Our home mortgage, insurance, association fee and property taxes are 17% of our overall income and not the 30% that many financial experts and institutions advise.
  • We paid off all of our non-mortgage debt in September 2010. This amounted to an extra $950 a month in cash flow for us.

Our Financial Goals for 2012

Paul and I discussed what we would like to accomplish financially in 2012. We both agree that we want a second go at achieving a 50% PSR to long-term savings/investments. On top of this, we want to continue with our donations to the causes we have chosen.

Did you meet your financial goals in 2011? Have you set any for yourself and your family in 2012? How do you plan on achieving this goal? 

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Amanda L. Grossman is a Certified Financial Education Instructor, Plutus Foundation Grant Recipient, and founder of Frugal Confessions. Over the last 10 years, her money work helping people with how to save money and how to manage money has been featured in Kiplinger, Washington Post, U.S. News & World Report, Business Insider, LifeHacker, Woman's World, Woman's Day, ABC 13 Houston, Keybank, and more. Read more here.
20 replies
  1. Bob says:

    Here’s hoping you make your goal this year. My household was able to save over 56% of take home pay last year. We don’t goal set in detail other than to try to save one of our annual salaries after tax. For my wife and I, the “trick” over the years has simply been to keep expenses rising at a rate much lower than income rises. This is much easier as household income exceeds 6 figure levels depending on where one lives. The problem remains in those big ticket periodic purchases regarding how much to spend and avoid the expense creep. At middle age, I’m now wondering if it’s time to move up our lifestyle and take a trip to Europe or buy that acreage. We get to the point where we realize we can’t take it with us. It’s a blessing to be in a position to consider whether we’re oversaving and a wonderful sense of freedom.

    • FruGal says:

      Hi Bob!

      56% is quite impressive–my eyes are lighting up:).

      I think it’s great that you realize you can also take a break with saving money and spend more of it. Paul and I will be traveling to Alaska in May, a very costly trip, but since we save so much and are non-mortgage debt-free, traveling can be a priority for us.

      Where in Europe would you like to visit?

      • Bob says:

        An easier question would be where in Europe do we not want to go. 🙂 London, Paris, Rome, Switzerland, Austria, and Sweden for sure but not all in one trip.

        I’m sure Alaska will be amazing for you.

        At first blush it is kind of amazing to save half of household income. Really, this is just mind over matter as we in the U.S. (assuming that’s where you are) live in such a rich country. The 2007 average household income in the U.S. was 62% above the OECD country average. We have so much room to be frugal and you, fruGal, are an awesome example.

        I was talking to a “millionaire next door” a couple months ago about this. His view was that there’s no excuse for most Americans not be millionaires. It just takes a little discipline and a desire to ignore the Jones’ rather than keep up with them.

  2. Paula @ Afford Anything says:

    38 percent of your income is still a GREAT savings rate! Keep saving at least that much or more, and you’ll be in a rock-solid position.

    • FruGal says:

      Thanks Paula! And good luck with investing 100% of your income in 2012.

  3. Melissa says:

    38% is amazing! By setting such an ambitious goal, you saved more than you would have by not setting that goal. At your rate of increase per year, maybe this will be the year you hit 50%. Congrats!

    • FruGal says:

      Wow–thank you Melissa! It would be super cool to hit the 50% next year. Who knows what 2012 will bring.

  4. Financial God says:

    Are we talking about gross or net pay? Either way, I think that 38% is quite impressive, and a very good savings rate to reach!

  5. BeatingTheIndex says:

    I hope you appreciate your 38% as it is a feat not easily reproducible by everyone out there!

    Congrats and good luck with your second shot.

  6. Don says:

    Congratulations! 38% still very impressive!!!

    Like the bit about falling among the stars, very clever… 🙂

    I wonder how much I saved this year… I know it was more than 20%, but I didn’t do the math yet. I’m sure it wasn’t anywhere close to 38% though!

  7. JP @ Novel Investor says:

    Big congrats on 38%! Don’t know too many people who are saving that much, let alone 50%. Good luck in 2012!

  8. Miss T @ Prairie Eco-Thrifter says:

    Congrats to you. That is great. We spend this year getting caught up and revising our budget to be more manageable. So far it has been working pretty good. More money is being saved which is great.

  9. krantcents says:

    I had my best year income wise as a teacher. I made a conscious decision to volunteer to teach an extra class. This year, I will try to increase my outside income.

    • FruGal says:

      Way to go KC! Thank you for sharing your 2012 resolution.

  10. Evan says:

    Wow 38% is amazing. It is very difficult for my wife and I to save because of all the renovations we are doing to our house. I knew what we were getting into so my goal for this year was to not dig into our savings, which I can say we accomplished. You have inspired me to set a similar goal for next year. Great post.

    Happy new year

    • FruGal says:

      Hi Evan–thank you! And that is great you renovated without dipping into savings. Savings preservation is a worthy goal in itself.

      I actually forgot to include that we also renovated two bathrooms and a garage this year (doing all the work ourselves with big help from my husband’s brother who taught us to tile and such).

      Even though we didn’t make our 50%, I am very happy with where we are. I also think it’s good to blog about not meeting a goal because everyone can learn from it, including the author (me!)–I find writing to be very therapeutic.


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