We finally went over our finances from 2021, and we are so happy with the outcome! Our savings rate was over 50% – way past our goal of a 30% savings rate for the year! This means that on average, every month, we were able to save more than half of what we earned.
We calculate our “savings rate” as follows: Monthly Net Income – Spending, divided by Monthly Net Income, multiplied by 100 to get a percentage. So this number doesn’t even take into consideration the pre-tax dollars that my husband contributed to his 401(k), which he maxed out for 2021. And I also didn’t take into consideration cash that I earned from reselling items in person off of Facebook Marketplace or OfferUp. So this savings rate number is slightly below what we actually saved in 2021!
A 50% savings rate is pretty extreme, and it isn’t that easy. We worked our butts off in 2021, earning much more through new jobs, pay raises, and side hustles. Keeping a strict eye on the budget and sticking to it every month was crucial. We had to really think about our core values, and make sure the money we were spending was in alignment with those values.
But, like any habit, we got the momentum going, and we found that saving that much every month started to come more naturally to us. For 2022, we don’t have as lofty of a goal as a 50% savings rate, but with the more frugal and fulfilling lifestyle choices we made in 2021, we have no doubt that this will carry over into the new year.
Here are some tips for increasing your savings rate:
1. Increase Your Income
This is the most obvious, but certainly not the easiest, way to increase your savings rate. Maybe you ask for a raise. Or you quit your job and find a new job with higher pay. Or maybe you take on a side hustle that earns you extra money on the side. Making more money automatically gives you more to save versus making less money.
In 2021, I quit my full time job at an outpatient PT clinic and took on multiple part time PT jobs. All these part time jobs together still equaled to about 40 hours a week, but I made over $10,000 more than the previous year while still working the same amount of hours, with less stressful work environments! I also took on a couple side hustles: private pay clients, reselling stuff, my Etsy store selling digital downloads, and starting this blog. My husband, as a clinic director for a PT clinic, earned a significant pay raise for 2021, as his clinic did extremely well in 2020 despite the pandemic. This extra income allowed for us to put more towards our savings rate
2. Make a Budget To Account For Your Savings Rate
To know how you spend your money and where it’s going, you need to track your expenses. To start making a budget, I look at the last 2-3 months of spending and see what areas I spent in the essentials (rent/mortgage, electricity/utilities/water, groceries, internet, health/car insurance, etc) and the not-so-essentials (restaurants/fast food, clothes, streaming sites, etc.).
Once you do this, you may be surprised at some areas to see how much you’re spending and not spending. But by tracking your expenses, you’ll start to get a better idea of where your money is going.
I started making a budget on a good ol’ Excel sheet. But I have found that using Mint has been really good for my family! You can also track expenses on Personal Capital as well. There are so many ways to track your expenses. Find what works for you!
3. Focus on Values Based Spending and Decrease Non-Essential Spending
This takes a little digging into your newfound budget and seeing what areas you can cut down in, in order to make sure your money is going towards things you truly value.
For me, I could care less about cable television. So instead of paying a monthly fee for cable, I bought a $15 TV antenna off of Amazon and that gets us NBC, ABC, Fox, and CBS. Which we rarely use anyway, but it’s nice when football season comes around or we want to tune in to American Ninja Warrior.
Before we joined the FIRE community, we realized we were spending a lot of money on restaurants. We actually really enjoy cooking together, and we realized that we get more joy out of doing instead of going out to eat all the time. So we decreased our spending in our restaurants category, but our groceries we increased a little bit to accommodate our dining in adventures. We still eat out every now and then, but mostly it’s when we are meeting up with friends or celebrating a special occasion. And we are happy with our choice.
But remember, personal finance is personal. You will need to reflect on what brings you joy, and decide how to budget for what you value.
4. Find Free and Cheap Activities in Your Area
I’m lucky enough to live in Southern California where I can be outdoors almost every day of the year! I love riding my roller skates around the neighborhood, going for a long run on the beach, finding a new hiking trail, and packing a picnic and going for a long drive into a new area.
When the weather isn’t too great, I like to try a new recipe, play board games, have a movie night, and set up video chats with family and friends to stay connected.
Although we enjoy going to breweries, we now tend to buy more take-home beers from local breweries to enjoy at home. We save some money, the beer still tastes great, and I can enjoy it from the comfort of my couch in my sweatpants.
You don’t need to spend money to have fun! Our consumerist society has just made us think we need to spend money to have fun. Get creative! Or you can check out this post by Michelle at Making Sense of Cents: Fun, Frugal, and Free Activities
5. Set Short Term and Long Term Goals
Having a tangible goal set up will help you stay on track. But as a PT, I like to create short term goals to help me achieve my long term goal.
Let’s say your long term goal is to have a 30% savings rate for the year 2022. Here are some options for short term goals:
“For January 2022, I will cut my restaurant spending by $50 as compared to last month”
“In the first quarter of 2022, I will increase my income by $100 via *insert side hustle here*”
“For the first half of 2022, I will have an average of a 25% savings rate”
Having short term goals set up helps you to not only stay on track, but can help keep your momentum going. You may find that you’ll be more excited about meeting your short term goals than you think!
Here are more blog posts to read about savings:
- Paying Off Debt? Cut Down Expenses in These 4 Areas Starting NOW
- Values Based Spending – Determining Your Core Values
- 12 Tips to Save this Holiday Season
- Cheap, Non-Conventional Cell Phone Plans
- How I Curbed My Spending Habits As A New Grad PT
If you need help increasing your savings rate, or if you want mentoring in your finances, let’s work together to help you on your personal finance journey! Click here to sign up for your FREE 20 minute consult.
Note: I am not a certified financial advisor/planner or a certified financial analyst or a CPA or an accountant or a lawyer. Remember, I am an allied health professional, just like you! This website/blog is for entertainment and educational purposes only. Please consult with your financial advisor(s) regarding your personal finance, investment, and tax matters.
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