Saving 60+% of my income is discretionary

Most months this year, I’ve been indicating my savings rate of my net income along with my spending, net worth changes, and what actions I took with my finances that month. It’s solidly been sixty something percent, except for the month where I had no income and I thus had a negative savings rate. I don’t expect you my readers or anyone else to save that much of your income. I don’t expect myself to either. I don’t need to save this much money every month.

My goal is to let myself spend freely (but consciously) while living below my means, having no debt, and not increasing my lifestyle with my income.

I didn’t start out intending to max out all of my retirement accounts out of college. I found the lifestyle that worked for me the first year out of college while contributing enough to get the full match in my 401(k) and I have maintained it for the subsequent five years, even though my income has mostly increased.

This works for me because I’m naturally a saver. I’m also in my twenties and so to retire at a normal age, I really don’t need to save that much.

I started working around 21.5, which would give me 38 years until I can withdraw with no complications from retirement accounts. A savings rate of 19% from age 21.5 would be enough to retire on at age 59.5. A savings rate of 14.5% from age 21.5 would be enough to retire on at age 65. I’ve saved far more than that though, so I only need to continue saving 12% going forward to retire at age 59.5.

If you’re willing to commit to working until you’re in your sixties, you don’t need to save a lot for retirement in your twenties. Money is a tool that you can use to make your life what you want. Early retirement is one way to spend it, just like travel, experiences, and stuff are also ways to spend your money. We all need some balance in our money lives. Don’t overexert yourself trying to save too much too quickly and burn yourself out.

There is this sense in the early retirement community that we should keep working our high paying jobs until we have saved enough to retire completely and then no one seems to be able to pull the plug. And yet there are lower income people quitting their jobs to freelance every month, with $20,000 in the bank and people with hundreds of thousands of dollars saved up can’t seem to quit their jobs they don’t like. If you don’t like your job, find a path to a different job. Don’t just stick it out at your job for the money. Life is too short for that.

Networthify has a great calculator that shows you how much you need to save per year to be able to retire in X years. This works great no matter what age you’re starting out at.

I make enough money and have enough money now that when I take a pay cut, it’s my savings rate that gets cut and not my spending. My gross income this year will be about 15% less than 2014 and my spending will be about the same. I grossed about 15% less in 2014 than I did in 2013 and my spending was about 7% more. I would happily take a lower paying job and reduce my savings rate if it was for the right job. And this is a great place to be in.

If you’re a natural saver, live your life consciously. Save the rest. Don’t fret the little things if you’re meeting your goals, enjoying your life, and living below your means.


28 thoughts on “Saving 60+% of my income is discretionary

  1. DH was able to quit a job he disliked and to look for a better fit leisurely because we had a lot saved up. He probably could have quit sooner, but having that big amount saved made it way less stressful for me and for us than it could have been.

      • Yup, that’s a benefit of having $$ saved up. But you guys also had your income to fall back on, which covered most expenses. Having $$ definitely makes things less stressful. But if all you “need” to save for retirement is 20%, then saving 30%, 40%, or 50% would be sufficient to make things less stressful. Saving 60%, 70%, 80%, is really very discretionary.

    • I think you missed the point of the post! Roth conversions create all sorts of other complications with the ACA like GoCurryCracker wrote a post about recently. You don’t want to need to rely on them. I will happily keep saving 60+% but it really is a discretionary choice.

      • What?

        I get the point of your post. You’re deciding to saving 60%+ as a discretionary choice.

        All I’m saying is you shouldn’t let the 59.5 rule stop you from retiring early if you want to do so. Yes, ACA makes it complicated. But it’s completely manageable.

        • I’m not going to let the 59.5 age stop me from retiring early. I will retire when I want. I just don’t think everyone needs to want to retire early. I’m not going to figure out how to get the money out of accounts until it’s a more realistic idea though. For now, I just keep saving a healthy amount. Also, if i retired early while married and my spouse was still working in a high tax bracket and we had a prenup keeping our assets separate, I wouldn’t be able to do Roth conversions for example. I don’t want to rely on any particular path at this point.

  2. I would wish the calculator you linked to would account for the fact that I stop paying mortgage at some point. This requires my own calculation. It isn’t a hard one, but haven’t done it yet.

    • Same! It’s great of a simple calculator though. What I usually end up doing is giving it my estimated investment balance for the year my mortgage is paid off and my total savings rate now. Not quite ideal though as now it looks like it’ll take me 8 years to retire since I include my mortgage payment in my expenses and then once the mortgage is paid off, I can retire within a year! A bit annoying.

  3. I swing between being relaxed about it like you, here, and being a bit obsessive wanting to make the same kinds of gains over the next decade as I did over the last decade: 3x increase in income, 7-10x increase in NW. It won’t happen without some equally significant changes, though, and probably at least the same amount of effort, which honestly isn’t very likely. The realistic part of me is happy with our life now, the dreamer/worrier wants to work harder and save more to be sure we can keep it.

    There’s also definitely something to the idea of taking more risk when you’re giving up less income though. I’m not nearly as willing now to give up my current salary for some untested venture.

    • In the last decade, I have saved basically my entire net worth and made all of my income! I had all of $2000 to my name a decade ago, had netted $10,000 including allowance and all I really spent my money on was food and clothing. It would be really hard to see this kind of gains over the next decade! Although, honestly, I do expect my net worth to increase a lot in the next 10 years. Even if I didn’t add anything to it in the next 10 years, it’d probably still more than double.

      • You know, that’s actually true for me too. In the same time span, thinking back, I’d quit my job w/only about $5K saved. I had intended to save $10K before quitting but the job wasn’t in my field and not worth hanging onto at the expense of finding a job where I was going to start building my actual career. I suspect that, unlike you though, the next ten years won’t hold the same rate of growth without some major changes in lifestyle that I’m not prepared to make. My health is bad enough without sacrificing it for more money, at this point :/ I think I should have picked a better field ;D

        • I’m sorry you feel like you didn’t pick the right field! I have been having a bit of an introspective phase over the last few years trying to find the right niche within my field and so far, I haven’t had the best of luck. There will probably thus be some changes in the next decade, which will very likely affect my savings rate. Assuming that my net worth was to compound at ~5% per year, it would increase by about 70% in the next 10 years, if I don’t add anything.

          I’m glad you won’t sacrifice your health for more money though – that’s a good decision to make, even though it’s unfortunate you have to make it.

  4. I agree with you 100% and I think I have the same problem of not letting myself spend more. Sometimes there does seem to be this cult-like feel to some of the forum users/bloggers where if you do not want to “retire early” there must be something wrong with you. I don’t think there’s anything wrong with that thought process, but no need to be dogmatic about it.

    I honestly think I would be bored if I was not working in some capacity at this age, and indeed I was bored during a stint of unemployment. I’d like to think that I would spend my free time being more productive if I was in a better financial position and “not working”, but I absolutely envy those people who quit jobs with a few grand in the bank and then just try something else and figure it out. I feel like it’d be irresponsible to quit and go work in a surf shop or or a music venue, even though I think that might be more fun than what I’m doing now, yet according to that calculator, based on my current assets and my current expenses, I can retire in less than 10 years with only a 54% savings rate. That seems a little far fetched to me. And knowing me, I’ll blow some of it on travel, but I feel like that is acceptable and not really a big deal..

    • I hate the cult feeling of everyone should want to retire early! I really don’t think you should. I also think that most people that retire early find different work, so maybe they might have been better off just looking for different work to begin with?!

      I’m not sure if I would be bored if I wasn’t working on some capacity. I had two months off between jobs and I had tons of projects I did in addition to traveling. I would probably do some traveling and some projects, but you’re right, it’s possible I would end up bored. I want to give it a shot at some point though. I only use calculators like that to estimate things for now. I would do a more thorough analysis if calculators like that and my back of the envelope calculations are telling me that I could possibly retire.

  5. We’re in much the same boat wrt our savings – we established our baseline lifestyle spending when we graduated from college and haven’t changed it all that much since then. But we’ve significantly increased our income – so that pretty much all goes straight to savings. Right now, we’re kindof aiming for a long adventure sabbatical (which will more likely turn into entrepreneurship instead of early retirement) in a few years, but with an understanding that if we really want something in the short term, we should just do it.

    • A long adventure sabbatical seems like a great idea! I know a few people who have done those, but then they’ve gone back to work, so either they’re not FI yet or they missed work! I like Mad Fientist’s idea of 6 months in Scotland with his wife’s family, 3 months in the US with his, and 3 months traveling. Not his specific idea, but having a mix of working, traveling, and family that is more evenly split than today.

      Part of why I enjoy following your journey must be that we have similar ideas and you guys are just a few years ahead of me :)

  6. By saving so much up already, you’ve given yourself a very real sense of financial freedom, which I think is the best thing money can do for us. How amazing that you would happily take a pay cut for the right job, and afford to keep spending the same amount even with less pay. That’s a wonderful achievement!

    As for those folks who save up enough and then keep working, we will NOT be among them! We’d quit tomorrow if we had just a little more in our accounts. :-) But we’ll get there soon!

    • I have! It makes me not care about my job sometimes when it’s being annoying though overall it is a wonderful feeling – very freeing.

    • Goals are definitely super helpful for me! I’ve stopped caring about the pay off the mortgage goal quite as much as I got distracted by wanting to go to grad school and having access to more retirement account room with my new job.

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