04 Oct How I Saved $100,000 in Five Years
Here’s a little known secret, I didn’t always use to be a super saver (according to Money.com, that’s a person who saves more than 20%). When I started my job at the university, I was making about $36,000 a year. This was barely enough to pay my rent, my bills, take care of my two small dogs, cover my books, and try to have a decent social life. I also volunteered for two local non-profits and they wanted me to sign up for monthly donations. I nearly laughed/cried when my parents urged me to save money. What money? It was usually gone before I had a chance to enjoy it.
The Day Everything Changed
I decided against my better judgment to set up a session with one of the university’s retirement specialists. She asked me about my goals and I explained that I would make retirement a priority… next year. Hopefully, I would have a raise or a promotion and be able to afford to start saving. Never mind I was in my mid-thirties and the clock was already ticking away. She asked what my salary and typed a few times into her calculator. She looked at me and said that because I hasn’t made the basic 4% contribution, I missed out on over $12,000 in employer contributions for the last 3 years. You could have knocked me over with a feather, $12,000 might as well have been $112,000 for me at that time. However, saving just 4% to get that money back also sounded like something that might be obtainable.
The Light Bulb Moment
I realized I just needed to move around enough in my budget to contribute 4%. I had a budget line item for groceries, but I always went over it. I used Mint.com and was shocked when I noticed one month I spent over $600 just in groceries. Talk about an Army of Me, who was I feeding?! =( No wonder I didn’t have enough for my retirement; I was literally eating my savings away. I would buy expensive items from the hot bar telling myself it was cheaper than dining out instead of preparing meals at home and wash it down with $20+ wines every week because “I deserved it.”
After I identified the $600 groceries hole in my budget, I realized it was a gold mine I could use to supercharge my savings.
The Big Cut
I decided things needed to change. NOW. I poured a big glass of wine, pulled up my big girl pants, and put everything into an Excel spreadsheet to get the full view of my finances. After I identified the $600 groceries hole in my budget, I realized it was actually a new gold mine I could use to supercharge my savings. I also decided to really take saving for retirement seriously and took the following actions.
- I got a co-worker to move it with me and he added $500 a month to my income. He also cooked a few nights a week and ended up enrolling in the same master’s program as me which was another awesome benefit.
- I stopped buying items from the hot bar at Whole Foods and prepared my meals at home to save $300.
- I asked if I could take personal calls on my work phone. Once I was told yes, I eliminated my cell phone and saved $68 a month.
- I programed all of my bills (except electric) into my phone. If I was stuck in traffic or at a red light, they got a call or as I would put it… an opportunity to keep my business for a lower rate. I was able to negotiate my alarm monitoring to $15 a month instead of $39.
- I finally cut the cord. I went from paying $90 a month for cable and internet to $39 a month for the economical internet-only plan.
- I started to bring my lunch to work and saved $7-$12 a day.
- I started to schedule more meetings closer to my home to save on gas. This saved me about $60 a month.
- I started to do mystery shopping to supplement my income. One mystery shop had me check out a new gym that was closer to my house. Not only did I get paid to do the shop, I switch from my older gym that was 3 miles away and charged $29 a month to a new gym that was 1 mile away and charged $10 a month!
- I developed a super savings system whenever I need to buy clothing or items online and found a way to get paid 4x when I shop online. Buying online is my favorite thing to do because you can stack discounts, save gas and time, and avoid tempting sales on items you don’t need. I buy almost everything online because staying out of the stores is a huge way to avoid spending unnecessarily. This helped me save about $50 a month.
Here’s what my savings looked like after the Big Cut. Show this to your friends when they tell you it’s too much of a hassle to negotiate your bills. Yeah right! I was shocked when I checked the savings over five and TEN years! Thanks to a glass of wine and a simple Excel spreadsheet, I found my retirement fund in my monthly expenses.
I did everything from major cuts to smaller cuts and they all added up. Cutting out all of these expenses was exciting and liberating. I didn’t “have to” pay $90 a month for cable. I had no idea how much money I was throwing away because I didn’t negotiate better rates. The next thing I did was work to maximize my income so I could increase my contributions past 4%.
- I signed up for banking and credit card bonuses to supplement my income.
- I signed up to do mystery shops.
- I worked hard, got certifications, demonstrated my value, and asked for promotions
- I used reward cards to get cash back from my expenses
- I freelanced and designed websites for local businesses
- I bartered with my hair salon to get free haircuts and color in exchange for website updates
In less than a year, my retirement savings rate went from 4% to 38%.
The Big Results
I started with a humble $605.14 in July 2011. One of the first things I did after trimming my expenses was log into my online retirement manager system and bump up my contributions to the first 4%. Over the next 5 years, I added to my income, grew my base salary, and cut back on additional spending.
I used data visualization tools like Mint, Personal Capital, and Next Capital to watch my money grow almost every day. Seeing my money grow every day was a huge motivator for me. Watching my money grow visually encouraged me to continue to look for ways to reduce spending and find new opportunities to grow my income. As each year went by, I saw days with small to big gains and days with losses. I looked for other opportunities to save outside of my 401k and started a Roth IRA in 2011 with $65.52. In 2012, I saved $326.62. Five years later I finally maxed out the full $5,000 contribution for the first time ever and in April 2016, I hit my goal almost “overnight”. I went from $99,830 on April 10, 2016 to $101,457 on April 17, 2016.
Saving $100,000 in five years is definitely possible. I’ve seen people do it sooner depending on how much they earn and how much they can save. It was the biggest financial milestone I’ve hit to date. I’m working on reaching $180,000 – $200,000 by 2018.
What is your biggest financial goal? Share your thoughts in the comments below.