Oh 2017…this definitely has been one of the most rewarding and most challenging years of my life.
Ever since we embarked on this personal finance blog journey, I’ve decided that at the end of every year I want to share with you the most impactful tips and strategies my wife, Vania and I used to help us save as much cash as possible. So, here we go!
As I’ve mentioned before, we track everything on my master spreadsheet. We are 15 days away ’till the New Year and we’ve saved nearly $60,000!! While I’m very excited about the cash we have saved up, I want to focus on what’s more valuable for you and that’s HOW and WHAT exactly we did to save this amount of cash this year.
So, I’m dividing each tip/strategy by a “lightweight” and “heavyweight” decision, lol.
Here are the “lightweight” decisions we made:
The lightweight decisions are those that contributed to our savings goals but had a relatively smaller impact compared to other significant decisions we made.
Food and Coffee
At the beginning of the year, Vania and I agreed that our spending on coffee in 2016 was outrageous. We adjusted our coffee consumption and limited it to our Keurig and cafecito maker at home. I’ll admit, at times we gave in to Starbucks and Panther Coffee (as a couple of my friends like to point out and bust my chops about). Looking back at it, we could have done better with our coffee consumption outside of our home but this is a work in progress. Either way, a substantial amount of our coffee consumption was at home and it saved us tons of money.
As for our food, we used to shop 100% at Wholefoods. That came out to be extremely expensive, but this was also before Amazon acquired the supermarket. However, the acquisition won’t get us back to grocery shopping. Then we tried a combination of Whoolefoods and UberEats but that QUICKLY became an unrealistic strategy for our food budget.
Then we found CateredFit! An amazing service that delivers healthy foods freshly made to your home during the week. Since we found CateredFit, we don’t cook and we don’t do groceries. We’ve been eating CateredFit since August and we absolutely love it and we have maintained our food consumption below budget since we started with them. On average, every meal comes out to $9 and this was our sweet spot to maintain the food budget.
Here is more about my rant about the coffee strategy.
Cutting Our TV Provider
Eliminating Comcast was a funny moment because it was more in spite of their terrible customer service and expensive packages. Since then, we’ve switched to DirectTV Now and it’s a big game changer. No equipment rentals. No stupid setups. No complications. No ridiculous cancellation policies or hidden terms.
DirectTV Now is a subscription model and all you need to do is download the app on your phone, have high-speed internet at your home, and have a smart TV where you can project what you’re watching on the app. We’ve gone from paying $166/month for Comcast and $14.99/monthly for HBO to now just paying $45/month for DirectTV and HBO. Yes, this does include HBO!
High Yield Savings Account
Prior to this summer, we kept our emergency fund in Bank of America’s money market savings account. For the amount of money we kept in that account, just sitting there, we were earning cents. I was frustrated every single month until we decided to open a FREE account with American Express’ high yield savings program. We transferred 100% of our funds to this new account and from earning silly cents, now we are earning 1.35% APY!
Since this decision, we have made hundreds of dollars in interest and I couldn’t be happier! Of course, there are other ways to make more interest on this money but I highly discourage you to invest your emergency fund in the stock market. Keep it within arms reach, keep it liquid, and keep it in a risk adverse account. That’s why a high yield savings account is a perfect match.
Here are the “heavyweight” decisions we made:
I consider these decisions to be “heavyweight” because they had the most significant impact to our financial planning and overall strategy.
Retirement and Investment
As for our retirement and investment strategies, Vania and I contributed 12% of our combined incomes to our retirement accounts. This amounted to a significant boost to our retirement accounts and to our balance sheet/net worth. It does help that the stock market has performed favorably, so the 20%++ gains have been helpful. 🙂
As for investing in ETFs and stocks, we recently implemented this strategy to our financial lives and it all started with the Stash app. We’ve contributed a small amount to this account, but the 9% gains in our account have been worth the decision. Next year, one of our priorities is to become more aggressive with our investment contributions so I’ll have more to say about this and our successes (hopefully!). However, I am considering a mixed investment strategy by utilizing Stash for our ETF investments and maybe Robinhood for our individual stock investments. I don’t know yet, so we’ll see how I feel next month.
We Downsized Our Home
As I’ve mentioned in previous posts, we are doing everything possible to cut down our 30-year mortgage to 15 years. But there were a couple of pain points with having our home and it’s location…
Our home’s location was nearly a 2-hour commute for my wife every morning and evening to and from work. ouch!
This commute added to high fuel consumption and payments for the highway tolls
But most importantly, this commute contributed to high-stress levels for Vania and was affecting her health
All of this made us realize it was a no-brainer to move closer to her job. Since I work from home, it wouldn’t have an impact on me. Recently, we downsized from our 3 bedroom 2.5 bathroom home to a 1/1 bedroom apartment in a neighborhood that’s closer to my wife’s job. Now, she walks to work, we have rented our home (the rental income covers the mortgage, so that’s a wash) and our monthly rent is cheaper than our mortgage! This decision alone is allowing us to save nearly $800/month! This was a big win for us and the most calculated decision we made this year.
What’s interesting is that it created a circumstance where we have an extra car and we don’t need it anymore. LOL. I’m the only one driving as Vania walks to work now. But It’s tough to get rid of my lease, especially when you’re only halfway through the lease agreement and the dealers don’t make it easy on you to get rid of a lease…sigh. So getting rid of my car is still a work in progress so I’ll figure it out… I hope.
We Lived 27% Below Our Means
Lastly, our general philosophy was to simply live below our means and this all starts at the beginning of the year when you create your budget. What this means for us is when we earn $100, we challenged ourselves to live with just $60 – $75 and save/invest the difference. It’s EXTREMELY tempting to overspend and to tap into the cash you’ve got in your bank accounts. But, Vania and I worked really hard on accountability and sticking to our budget. Thinking about it, we can live even more conservatively than we did in 2017 but we tried our very best to find the right balance of enjoying our earnings and being aggressive with paying down our debt, saving, and investing. I’m bolding these words and sentences for a reason because they are the keys to our success this year.
Here’s a tip to measure yourself for living below your means…when you create your budget, create a line item that indicates the percentage of which you are living below your means.
Something like this:
The formula is simple: divide your total savings by your income.
This will give you the percentage that you are saving against your income. In this simple example, saving $10K from $50K of earnings is living 20% below your means. Include this in your budget and keep this number visible. It will consistently remind you how you are performing against your savings goals. This is also a good benchmark for you to live more conservatively. As an example, our goal at the beginning of this year was to live 15% below our means and we ended up living 27% below our means. It feels great!!
Bottom line is, if there is anything you should walk away with today, no matter how much you earn, is to challenge yourself to live below your means. Take this time to create your budget and create accountability measures so you can stick to it. Also, sometimes to be able to save aggressively you’ve got to make radical and tough decisions.
What can you downsize in your life? What expenses can you cut? Or what current spending habits do you have that can be adjusted?
Talking about adjustments, recently I’ve gone to the chiropractor for a couple of sessions and the doctor told me that my spine was out of line. In fact, my hips were slightly bent which caused one of my legs to be longer than the other. GO FIGURE! So after a couple of sessions and adjustments, my spine is as straight as it can be and I feel taller and like I have a new perspective on life. This is exactly how I view my finances. Every year, we make adjustments to get us healthier and closer to our goals and it all starts with a budget and setting goals.
Ok, I think that’s enough for today 🙂
Cheers and happy holidays to you and to your family.
Originally published on MoneyQlip.