I recently realised I am now saving at almost triple the rate I was just five years ago. A lot can happen in five years. Back then, I was partly saving to go travelling – a year of wandering South America. I was busy feeling free.
Back then I was able to save 25% of my income for that trip, despite living in a relatively expensive city (Dublin), not making that much money (<€45k), living it up at the weekends and on holiday. I didn't care about money and knew little about personal finance. It simply wasn't much on my radar nor part of my background.
Today I am saving 72.9% of my net income per month. It has been a bit of a journey.
During that time I made a complete career change too. I’m glad I made that change – along with living simply it has enabled this dramatic shift in savings.
So how is that the case if my income hasn’t really changed?
Combined with living simply, my job has given me options to make choices centered around downsizing and flexibility and even where I get to live. For me, flexibility is more important than money (to a certain point of course). A relatively inexpensive location, the choice to work from home, live close to my work etc are much more important than having to chase extra € to make up for these things.
I don’t really believe much in hoarding vouchers, not spending when on a night out, following ’50 ways to be frugal lists’ or generally scrimping and saving to the nth degree either.
I’m a big fan of the 80/20 rule however, and most of the change has come from a few big ticket items summarised below.
- Going car free. I have previously written about this estimating savings to be over 10k for 3.5 years. In reality it is probably quite a bit higher as insurance has shot up in recent years where I live. With that rise, I estimate the monthly savings from not owning a car to be in the region of €200-250.
- Moved to a less expensive part of the country, not as congested, competitive, or hectic. Cycling is a great way to save money in expensive places. Expensive places tend to be cities and cycling in extremely busy ones without proper cycling infrastructure is a risky and dangerous daily undertaking. In Dublin, I was saving money by cycling, but taking on the gauntlet of its congested streets each day. I still cycle, but am less at risk on a daily basis where I now live. Making this move enabled me to do the next thing too.
- Buying my own small, affordable apartment – almost in cash, much cheaper than previous location. Close to my family home. We are currently living rent-free as a result. Obviously, this makes a big difference. If I was paying rent, with a contribution from my partner, my savings rate would drop to about 60%. Paying rent in my previous location would hammer this number. People all around the world are being badly screwed over in the name of a decent roof over their heads. Housing and real estate, even modest first homes, are all about being an investment. Most people who struggle with the affordability of property (and that’s most people) would be sickened to know the true cost of building a decent home in which to house themselves. It’s an issue close to my heart. Anyway, I digress. Owning certainly makes sense in our situation, and I am fortunate enough that it is something I can do. Choosing to live in a smaller space, whether renting or buying, can often mean substantial savings too. Our previous rent money (€650) is going directly into paying down the small amount left outstanding on the apartment.
- Simplifying what I eat and batch cooking. Whole foods. Cooking stuff once. Avoiding microwaves (I have my partner to thank for that). Buying stuff from discount section at the supermarket. We live right across from a huge one, so I effectively outsource much of my refrigeration to that shop. My evolving eating habits mean I’m generally eating better than ever, at a lower cost than ever. My ‘beans on toast’ student years were cheaper perhaps. I still like beans on toast, but I’d probably be dead if I continued eating as I did when I was a student. Our food budget for two people, comes to about €350 per month. About half the food we buy is organic.
- Make a monthly budget and stick to it – I cannot emphasise what a difference this is making to me over the last six months. I reckon the act of budgeting itself and the decisions it makes me consider is probably worth €100-200 per month to me. Use a simple excel sheet, use a notepad, whatever. Keep it simple. Two very good tools on this front are EveryDollar and YNAB (You Need a Budget). I am currently using YNAB, and after a short learning curve, find it to be excellent. An even simpler, but great alternative is Toshl Finance.
- Use transport that works for your wallet – I built my own commuter bike up from an old steel mountain bike frame. It’s tough as hell, comfortable, and perfect for everything I need it for. All in, I’ve spent about €200 on it. It’s the highest ROI-value item I own. I still drive a car every now and then (rented or borrowed if needed) but I find buses to be pretty good way of getting around. Coupled with cycling it means transport costs a fraction of what it would otherwise. Plus I get some exercise or the chance to read/sleep/do nothing at all whilst in motion. I’ve even tried to get a bit tactical with a snazzy Brompton-like folding bike that I actually don’t even use.
- Choose free habits and hobbies – play music, go for cycles, go for a run outdoors, make models, learn how to build stuff. Volunteer. The world is full of people and places that need time and help, not money. Expensive habits/hobbies/interests make it hard to save. Those weekend blowouts all add up. I know from experience.
- Pay yourself. I love this expression. By all means go for dinner, go for a night out but try to get into a situation where you are paying yourself in terms of your savings, your investment, your family etc before you pay anyone else. It feels good.
- Sell all your shit. Because that’s what most of it is. If you are anything like me and most people, you own lots of crap you never even use. The more things I sell the more genuinely free I feel and the more € in my pocket.
- Cancel subscriptions, avoid contract phones, avoid repayment contracts in general. Switch energy suppliers. Get a zero fee current account. Don’t bother using a credit card (much). Get serious about it – I had about €150 per month coming out of my account in the past for such things I didn’t event need. Daily spending using a credit card might make sense for you (points, bonuses etc), it doesn’t for me. So – bye bye.
All of the above tips are worthwhile and we can all implement such changes. These are kind of tactical measures though. We need a coherent view of where all these are going, otherwise it is very easy to slip up and fall back into old habits. A strategy. Minimalism and simple living can keep things on course, even as the strategy changes.
Simple living and minimalism force us to consider choices in a different way. Deliberately choosing to live this way really does make considerable impact. Focusing on our consumption is also where the biggest gains can be made for the environment.
From Better To More
At some point modern consumerist culture crossed a threshold of seeking quality, to actually seeking quantity. More and more of everything. Everyone wanting to own one of everything. There’s just so many ways to consume, almost every experience and item is consumable. Every product we purchase, every yoga class, music lesson, spiritual retreat, holidays. Whilst there is nothing wrong with any of these, when consumption is seen for what it is and how it forms your own habits, it can be revelatory.
Do it not strike you as strange that many of us work circa 48 weeks a year, when in theory as a global society we are supposedly many times more productive than 50 or 100 years ago? Our productivity is simply balanced by consuming faster. People buy cars, but then end up living much further from where they need to be.
Focusing on needs first is a good place to start. I gave away about 4/5 of my clothes, now I only have what I need. Sold most of my guitars. Sold my car. Real things, that impacted my life for the better. Make an excel file of all the crap – sell it!
Marshall McLuhan, the great Canadian intellectual, once said “the medium is the message”. Consumption itself, and how deeply ingrained it is in the modern consumerist culture, is the message.
Gathering up coupons to blitz a supermarket is missing the point if you want to make big changes.
Focus on Creation
Create value. Spend time creating something. It’s why many of us work. I create stuff at work. Blog. Build things. Build your own home if you can. Learn. Put aside time to think and plan. Consume consciously.
Spending time creating adds value to the world. It adds value to your own life. Be a net producer. Explore life’s interests. Don’t be a one-trick pony.
None of these things has to cost money. It’s like a reverse form hedonic adaptation.
The interesting thing is that by doing so, either voluntarily or involuntarily, it’s possible to appreciate things you previously took for granted in a different way. Life on a certain plane becomes simpler, kind of more colourful, and quite possibly happier.
Living well below your means is something well worth pursuing if you are fortunate enough to be able to do so. You might just be quite shocked at how much money you can save, and the life-changing perspectives it can generate.
That alone can be enough to set you on a path to happiness and good fortune you never imagined were on the menu.