New Year’s Resolution update time.  As the year has progressed, I was thinking about the New Year’s Resolutions of many people.  You know, lose weight/get in shape, be money smart, and/or be a better person (somehow).  We didn’t do that stuff actually, but I was thinking about the money resolution…

Over the years—OK, decades—we chose to live a little further below our means and save an extra say 25% of our income.  We did not deprive ourselves too much with the these savings.  Actually, we weren’t deprived at all. We were conscious of our spending and really paid attention to our wants, to be sure we really wanted the items.

This extra saving activity (yes, I think of this as an activity) resulted in reaching FI/RE fairly quickly.  Once we became FIREd our time became 100% our own, for ourselves—freedom.

This made me think about “savings rate.”  Yes, there are discussions and formulas available for calculating “your savings rate.”  I’m well educated and I can’t seem to solve, or actually figure out which formulate is correct, or even best.  But, I do know our “saving return.”

Sacrificing saving 25% (more), therefore returned 100%.

I’ve been reading a lot of FIRE articles everywhere lately.  It seems we are the news-worthy buzzwords to get views/readers.  It doesn’t matter if you are in your 20′, 30’s or 50’s, the thought of retiring “early” and the process involved is extremely intriguing.

We’ve all heard the advice to save 10% of your pay.  That seems like a long slog for FI people.  However, to many/most of our country, saving so much is unheard of, an impossibility, to the point where you can’t make the car payments, or pay the cell phone/internet bill, never considering the restaurant totals embedded in your bank account each month.

More and more financial planners are giving people the (stretch?) target of a 15% savings rate.  Some planners include the company match in that amount.  While other advisors may hope the match is an additional amount beyond the 10-15%.

Let’s say someone is awesome, they are saving 15% themselves, there’s a 5% company magic match, maybe future social security income and a future pension/employer plan of some sort…now you’re getting close to a total amount of 25%. That is off-the-chart crushing it.  Hopefully, this person’s lifestyle hasn’t risen drastically on the hedonic treadmill (I love typing “treadmill” as a runner, fitness person…) and they have room in their monthly cash flow to absorb this increased savings.

So, wouldn’t the above be great?

Here’s how we ended up taking it to the next level, almost instinctively.  We pushed to save an additional 25% of our income.  As a dual educated professional household (small house, 10 yr old used cars) we enjoyed ourselves just fine after we saved large chunks of income each month.

Within a few years of saving this “extra” amount, we started to look at our cash flow as a “live off one of the two income” strategies.  It turned out increasing our savings another 25% from a great 25% base savings rate, we hit close to 50% savings.  There was a point in 1999 where my company outsourced our department to an IT company.  That was a strange uncertainty for future employment and a little scary as an employee, but I was not stressed on the money side— we had savings and we could live on the one remaining income.  Amazingly, as this employer event was unfolding it was the exact timeframe we were stepping up our conscious savings rate with a vision of the future.  I believe most people envision the present, the “I can afford this much for my monthly XYZ payment.”

We knew based on decades of understanding our spending—it was worth spending the hour every month—what our lives cost.  We knew we had the money set aside for whatever.  We knew our cash flow like a well-run business machine.  We knew if we wanted to work for “playchecks” that we could.  Today we know there are so many variables out there, ahead of us, and that we have no idea what’s in store for our future.  But, we are planners, adjustors, and smart enough to know we don’t know.

After 20+ years of saving and then 10 more years of saving a great amount, we FIREd ourselves. 

We saved 25% more than a great rate (of 25%) to get 100% of our time returned to us.  I cannot think of a better return for your efforts.

I ask you, how could you change your life enjoyment vs spending?  Do you have to sacrifice items, or not?  Can you do everything, or even many of your desires and still have an early exit from the daily grind?  I can answer one question, will you be less stressed about money.  Yes, money will be different when you have it stockpiled, rather than worrying about how to send it out to people/companies.

*** Nothing in this article is to be construed as financial advice.  I am not a financial planner, nor do I pretend to be.  You should always consult your own professional when seeking advice.