We reached a total savings rate on average in 2016 of 52%. We achieved this savings rate in the combination of Pre-tax savings & Post-tax savings. For example, in January 2016 our take home pay was $8,625.67 and saved $3,323.67 after expenses.
|PRETAX SAVINGS||AFTER TAX SAVINGS||2016|
|Contributions||% Saved||Net Pay||$avings||Rate||% Saved|
**I could not fit in the table above the monthly gross income ($184,793.01)
We would like to continue savings at this rate for 2017, but we know the ebbs and flow of life can be challenging at times. For instance, December savings rate was 34% that’s because of we cash flow all our spending and Christmas.
How did we do it?
Our savings rate also jumps exponentially with no debt. By tracking your spending, every budget items has a name and a purpose. By automating the savings, makes it easier to save even more. We never see the money going into the checking account. Our taxable and Roth contributions are automatically taken out and invested.
We sold our home last year in September and moved into a new home in October. This home has more in square footage, bedroom, bathroom, and higher mortgage payment with Mello-Roos tax. Our goal is to pay down in 15 years or less. This amount represents about 25% to 50% of our income. We can throw more payments towards principle reductions. It just depends on income coming each month. At the minimum, our mortgage payment is $2,700, but we pay an extra $500 each month to $3,200 or more. In January & February we put an extra mortgage $1,410 & $1,428 extra principle payment. We probably won’t be making large payment until January of 2018.
Our total monthly budget expenses with a mortgage are about $6,500 at a minimum. In reality that numbers are much higher since we also have discretionary spending. This part of our budget needs improving. I know we can do MUCH better to try by not adding additional expenses whenever possible.
In 2016, our net pay average about $8,966 a month. That’s $2,466 extra spending in discretionary spending but varies on a monthly basis. We cash flow all of our discretionary spending like; birthdays, vacation, gifts, Christmas, etc. That’s why we carry no consumer debt. We pay everything in cash.
Incidentally, this is when people tells us;
“Oh, why don’t you try to earn points/travel?”
Our reply, “Why don’t we?” No, not really.
I think our biggest fear is not to be able to trust or control ourselves once we start using credit again. We are a Dave Ramsey fans and viewed as “hypocrite.” Many of our friends know who Dave Ramsey is (since we gave them his books “The Total Money Make Over” last year and are familiar with Dave Ramsey 7 baby steps approach.
I admit it’s very hard to change “habit.” Change is difficult once you develop a good habit of paying your bills on-time and complete avoidance of credit card. That just make sense to us. After all, it was our careless used of credit cards that put us in bad financial shape. We’ve done a great job over the years. Because of that our family finance is 180 degrees better that it was ten years ago. Our Net Worth has shot up over the last 4-5 years because of our intentionality towards savings and debt avoidance.
Overcome Fear – Pay your credit card balance every month.
That’s exactly we are going to do.
Our new plan is to challenge ourselves and to overcome our fear. As long as we pay off our credit balance on a monthly basis, we should be okay. We’ll approach it with caution. It’s a start to travel hacking.