Mr. Savemycents and I finally finished tallying our spend in 2018 and are happy to announce that for the 3rd year since our costs went up with a mortgage, for all costs that are 100% under our control (e.g., property taxes are not under our control), we have stuck with the budget!!!
The formula to Early Retirement LOOKS simple, but requires a lot of work. What is it?
Income – taxes – spending = savings. Hit a savings rate of 50% pre-tax ideally.
Savings invested in tax sheltered accounts, in investments that beat inflation = wealth growth
And a third formula, that I’m now adding to the mix: Health = wealth. Both of us are of sound mental and physical health that allows us to pursue any career we want, and I know that is NOT possible for everyone.
In practice this is a lot harder than it looks. And we do not have it perfect. While we did hit 50% savings rate in 2018, there were times when it didn’t look like it would happen. When I worried that I’d been too extravagant, or I wonder if we SHOULD be spending on discretionary things. I’m going to highlight below the top things we did in 2018, and things we’ve always had as quirks, that help us achieve a very, very high savings rate in New York City.
Tax shelters
We maximized our contributions to 401K. We started backdoor IRAs for the first time. We donated appreciated stocks for the first time. We forgot to contribute to our 529 (there goes ~$1,000 in tax savings OOPS). We had our typical tax deductions (mortgage interest and will hit the $10K maximum on SALT), and fought hard to get our co-op real estate tax credit corrected (update: We still don’t have the money for tax year 2017 and it is frustrating). In the picture below you can see what tax shelters we planned for 2019 – your individual situations may vary, consult a tax accountant before making assumptions of your own
Travel savings
We travel hacked every trip we took. By conservative estimates we probably saved $20K or something in money we would have SPENT on travel if we had paid full retail rates, using instead work travel, credit card points, and airline miles. You can follow what we do on Instagram via the #saavvytravels hashtag for the nitty gritty details
Health savings
Our health insurances covered the majority of our infertility treatments in 2018. To the tune of 5 figures.
Food savings
We worked longer hours in 2018 (boo) so work paid for food (yay).
Living expense savings
We continued to do the following
- Negotiate our internet bills each year
- Not use all the lightbulbs in our fixtures (in the far future we will do a big renovation and switch to LED)
- Had friends and family house sit for us for ~50 of the days we were out of town. At a rate of $25 / day / cat, this saved us $2,500 in cat sitting costs
- Did not buy additional home decor
- Did not have major appliances break
- Continued to take advantage of WageWorks for our MTA subway passes (estimated ~$900 in tax savings a year)
- Rarely buy any liquids (this includes juices, teas, alcohol. Hubby has a coffee budget)
Discretionary expense savings
As we have been doing for years, we continued to practice the following habits
- Work out with what we have – our body weights, mats at home, running up and down our apartment stairs, and outside (average gym membership is $100 pp a month, so call this $2,400 a year in savings)
- Not pay for TV. Our BIL covers Netflix for us and I pay $8 a month for Hulu
- Not pay for Amazon Prime. I’ve discussed this before. Amazon Prime doesn’t save you money – it preys on your impatience and lulls you into paying higher prices on Amazon. Shop on Walmart
- Buy clothing used, borrow clothing (for hiking), and I learned how to do minor repairs and alterations (probably saved $100-200 there)
- Don’t take cabs unless work paid for it. One small exception was for health reasons when I visited my doctor for tests
- Just say no to activities that cost too much
- Be conservative about eating out. We continue to hold to a maximum of $50 pp on a fancy meal, only broke it once when we treated a very thoughtful friend to dinner at the Penn Club
- Say no to entertainment costs about $25 pp (we don’t go to Broadway shows, for example)
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