Just like Mt. Everest’s peak can be reached from two different sides − Nepal or Tibet − the summit to huge savings can be reached from two sides as well.
- Side #1: Suppress your expenses below your earnings
- Side #2: Out-earn your expenses
It sounds really simple − even repetitive.
But where the money tends to get lost is in the translation from concept to the bank.
None of these efforts matter until you actually move the excess money over to a savings account and not touch it (unless your goal all along was to use it for something in particular).
You Have to Be Different if You Want to Reach Your Savings Climax
For people who do save, their tendency is to focus on just one of these.
You either out-earn your spending (not focusing on frugality, but having a seriously nice income where as long as you don’t go Lady Gaga-crazy over things then you know you’ll have enough in checking to cover), or you use frugality to suppress your spending on an average income, saving the little bit that’s been sacrificed.
Let’s face it though: with a national personal savings rate hovering around 5.6% (that includes retirement savings), we know that most people don’t incorporate even one of these sides of the equation.
But you’re different. Or perhaps you want to be different. You want to acquire savings in the most rapid way possible.
Last Year Was a Bummer Savings-Wise for Us
It turns out, my husband and I are different as well. We looooovvvvveeee to save money. That’s why this past year and a half has been kind of a bummer (savings-wise, not life-wise) for us.
Following my husband and mine’s own journey with money, over the last two years we’ve experienced five months of unemployment, followed by 19 months of making less than half of what our household used to bring in (i.e. underemployed).
It’s been tight. Not undoable, but tight.
By incorporating the “spend less than you earn” side of savings, on less than half of our previous income we were able to pay all of our bills on-time and even managed to save up $5,000 for expenses associated with the birth of our son (turns out, our hospital bills were much higher! So thank goodness we saved what we could).
I really became intentional with our money − even more so than normal − because I wanted us to sock away as many Benjamins as possible. I took the time to figure out ways to skimp on spending that I may not have bothered with had our income stayed what it was:
- Cloth Diapered: I’ve got a post about our cloth diaper experience with this coming up.
- Fought a Medical Bill: We got mixed results (read about it in the post), but I certainly know how to do this now.
- Cut Our Cell Phone Bill in Half: It’s so easy − especially with saved contacts, photos, and already knowing the interface − to just stay with your current cell phone plan. But I’m glad I didn’t, as I’m literally pay half of what I used to for the last year!
- Slashed Our Personal “Mad Money” Each Week in Half: This was an easy fix to a subpar income, though sometimes it’s a bit tight since we also take turns purchasing things like kitty litter, oil changes (when I’m not mystery shopping them), and haircuts off of our budgets.
- Repaired Instead of Bought New: When Paul’s beloved Timberland boots he purchased almost a decade ago started flapping at him, we were going to just buy a new pair (even though the rest of the boots were still in excellent condition). That is, until I found out a new pair was going to set us back $139. Instead, I took this pair to a local shoe hospital. For just $16 they were fixed! They’re still going strong over 5 months later.
- Travel Hacked Our Way to My Brother’s Wedding: We wanted to make my brother’s wedding, but cringed at the thought of paying $500 for our tickets. Instead I opened a new credit card, met the spending limits, and used the bonus offer of free airline tickets on Southwest Airlines to pay just the security fees.
- Turned to Cash-Only Spending: We used to run all our spending through credit cards to reap rewards points. But when our income was drastically slashed, I knew we had to pay better attention to what was leaving the account. So we went to an all-cash diet (except for automatic withdrawals for bills). Then we used our credit cards only for bills that were unavoidable to reap the reward points with making sure we were doing no extra spending. It’s worked well.
And while we were able to save up for the birth of our son, we were not able to put anything into long-term savings.
Focusing On Both at the Same Time is Your (and Ours) Savings Climax
Here’s the sweet spot where savings magic occurs: suppressing costs AND simultaneously increasing your income. Tweet this.
Seriously, magical things start to happen. Okay, perhaps unicorns don’t pop out of your account statements, but money sure does pile up a lot faster.
And we’re in the perfect position to make this happen, as my husband landed himself a sparkling new job in December complete with higher pay, a matching 401(k), and that uses half the amount of gas it took him to get to his other job. Score!
So while we may not keep our personal spending budgets slashed at half forever, continuing with our frugality for at least half of the next year will enable us to turbo boost our savings and play a little “catch-up” from when our income was suppressed.
Treading water this year in the savings department has at times felt discouraging. I’m a true saver at heart − the way some people collect shoes, I collect dollars. So I’m looking forward to playing a little catch-up and reaching our money climax with both an increased income as well as continuing to suppress our spending and expenditures.