At this time of year, I get antsy to figure out where we are on the path to Financial Independence. It’s been a year since I did my last analysis of our larger financial picture. We also did a lot of money moves – setting up our first rental property, refinancing our primary residence, and buying a new, much nicer home.
If you’ve been in the FI world at all, you’ve probably heard how important it is to have a high Savings Rate. Saving 50% of your income will get you to FI in no time! I figured I should calculate this, and The Fioneers happened to post this amazing blog post just as I was getting started.
I figured that we had this in the bag – 2020 was a pandemic, so what were we spending money on? Surely we had a 20% savings rate!
….
Then I did math…
….
Then I did the math again….
4.57%
That’s right. A 4.57% savings rate. That means we have to keep working for another 66 YEARS! So much for early retirement!
I was blown away. This has to change.
My goal for 2021 is to get that to at least a 15% savings rate. How? I’m not fully sure, but here’s what I’m thinking:
- Invest 50% of my free spending allocation. Over last year, I spent over $4,000 on my free spending. Free spending is our guilt-free category that I and Mr. FI Value Engineer can spend however we like. I get 5% of our income, and so does she. This should increase our savings rate by 2.77%
- Do the 34-day YNAB Reset Challenge. I’ll write a full post on this later, but it’s a challenge to minimize discretionary spending for a short period of time.
- Cut out needless subscriptions and reevaluate recurring costs. I’ve had a lot of money things that I wanted to clean up, but I haven’t gotten around to it. The big one has been switching my cell phone to Visible from Verizon. More data, same coverage, less cost!
- No big projects. This year’s focus will be to invest not start ANOTHER business.
I’m also interested to see how some of the things we put in motion last year will impact our savings rate. For example, we’re now on a High Deductible Health Plan that allows us an HSA. Right now there’s $800 sitting there, waiting for qualified health expenses.
What ideas do you have?