How I’ve saved 30% of my Income for the Last 5 years

Financial independence is a daunting goal. It’s years (decades, honestly) of consistently living below your means to save and invest your money on the hopes of no longer relying on work to live a prosperous life. At the beginning, it feels like an impossible goal. Time flies, however. To make this a possible outcome, I’ve built a sustainable system that enabled me to save 30% or more of my income for the last 5 years. 

2017 was the year I learned about financial independence. I was 26 years old, 3 years into my Data Analyst corporate career and a newlywed. I bought a car the year before. You know, once you’ve made some success, you can’t be driving the college beater much longer! I also had consumer debt because when you’re a newly married couple, you go rent a home and fill that home with new furniture. I am an adult now and I need something NICE! I financed a new couch, a soundbar (wtf was I thinking?!) and a king sized bed. I also had student loan debt, but hey, I could afford all the payments! 

One morning, on a commute to that corporate job that afforded me the salary to make these payments, I would listen to a podcast that would change my life and the way I see the world. Listening to this was my Neo Red Pill moment from The Matrix.

Episode #221 of Tim Ferriss’s podcast – ‘Mr. Money Mustache – Living Beautifully on $25-27k per year.’ 

I was an avid listener and reader of Tim Ferriss’s content. In fact, the 4 Hour Chef for fundamentally changed how I learn things. It was a game changer that taught me the skills I use to excel in college and my corporate career. Every Tim Ferriss podcast episode was a can’t miss listen.

Before my epiphany, I never gave much thought to retirement. I knew I wanted to retire one day, and an early boss and mentor emphasized to me the importance of saving early for retirement. I just knew “compound interest” was a good thing, and it’s what retirement accounts did, so I saved money into my employer 401k since I was 20 years old. I just assumed if I continued saving 6% of my paychecks that, adding in the 6% employer match, would basically mean I’m set to retire whenever that age is when it’s time to retire. 

Mr. Money Mustache blew my mind. The Godfather and influencer of a frugal generation preached about financial independence and minimalism. This premise changed my life forever:

“All you need is 25 times your annual spending invested in a broad based index fund. Once you have that, you can retire from work.”

This was a guy whose family of 3 lived off $27,000 per year. And happily at that! I won’t rehash his story, but you can read it here.

His story was so out of the ordinary, it almost felt like I couldn’t compute it. It was like an alternate reality I had been shielded from my whole life. 

He preached about how debt is an emergency that shackled you from freedom. Transportation by bicycle is way cooler than an expensive truck or SUV.

Mr. Money Mustache “retired” after investing $700k. There’s no way I could happily live off that. I would need 2-3x more than that before even considering retirement. Which meant, I couldn’t retire until I became a millionaire. I assumed I would never be a millionaire in my lifetime. Therefore, financial independence = impossible. 

I wasn’t deterred though. I became OBSESSED. First stop – speed reading the Mr. Money Mustache blog posts. This led me to Dave Ramsey and his baby steps, the ChooseFI podcast, Graham Stephan, The Money Guy and it goes on and on. All I could think about was what I needed to do to reach financial independence and leave my corporate job. 

This powerful motivation made me realize this corporate job is not what I wanted to do with my life. I’d never really thought about that before. This career was the responsible thing to do for a decent life. This was not work I wanted to spend my life doing. It’s a means to get to the next level. 

IT’S TIME TO LIVE OFF RICE AND BEANS AND RETIRE ASAP!

My beautiful bride was not as excited. She was NOT psyched to live as lean as possible and save all our money to retire early. Yes, the early retirement part sounded nice. But not the part where we stop spending on fun things, become minimalists, pay off all our debt and invest 70% of our income. 

We were not totally aligned on our goals. I became dead set on saving as much money as possible and she thought it sounded like a good idea. But, she still wanted to live like a person. Living like a “person” flooded me with guilt, as I look at my year old SUV in the driveway and the debt I’ve racked up in my 20s. 

We made good progress. In the next 3 years, we paid off the couch/soundbar debt, we paid off my student loans (which surprised many friends, as they expressed their plan to either hope the government forgives them or pay the minimum payment for the rest of their existence.)

We had knocked out about 50% of our debt, while continuing to put the company match towards retirement and saving for a home down payment. 

2020 – The Inflection Point

Fast forward to 2020, and by this point we had a sweet little baby and became home owners. Some of the fire I had in 2017 had waned, but still had the goal to finish paying off our debt and then max out all our retirement accounts for FIRE. 

Kids and homeownership are expensive!

The home we bought was a fixer-upper built in the ‘80s. We resisted the urge for the typical suburbanite HOA McMansion and bought a home in a location we loved under our budget to give us more saving flexibility. 

The major job to spruce up this fixer-upper was to remodel the kitchen. Our goal was to do this within a year of buying our home in 2019. We worked hard and saved the amount we needed for a kitchen remodel without taking any debt. A small part of me wanted to take that cash and throw it into the S&P 500. But a new kitchen was a priority to us and our living situation would be much happier with a modern kitchen. 

Then February 2020 happened. The world shut down from COVID. 

We started working from home. The financial markets were crashing and frankly, everyone was scared of the effects COVID will have on the world and our lives. 

I saw what was happening around us. I saw our bank account, with a good emergency fund and a full kitchen remodel fund. I saw our outstanding student loan debt and a car loan. Our debt equaled how much our kitchen remodel would cost.

My inner voice was telling me that this was our opportunity to get ahead. Like those who stayed the course in the dot com bubble and the 2008 financial crisis. I believed COVID was not the end of everything. I believed there was hope after this. I believed this was our opportunity to take a big step towards the goal of financial freedom. 

I expressed this to my wife and she was skeptical. At the start of COVID, Dave Ramsey was offering free 7 days of his ‘Financial Peace University’. I thought this could be a good opportunity to get on the same page financially, with the hope we would go through the courses, see each other’s perspectives and align our finances with our life goals. She agreed and we sped through all the courses before our free trial ended (I wasn’t going to pay for it 🙂). Through these courses we learned and understood, for the first time, both of our feelings on money. We grew so much from taking that course together, it was fundamental for our marriage. 

Once we finished the course, we made the decision to pay off our student loan and car debt with our kitchen remodel fund to be completely debt free (minus our mortgage). 

We wouldn’t have been able to go through a kitchen remodel during COVID anyway with an 18 month old baby. However, we replenished that fund in 12 months so we could do the remodel in 2021. 

Getting that BIG Savings Rate

It turns out, when you don’t have any debt payments, you can save even more by directing those payments into a savings account. We then increased 401k contributions to 20%, opened a Roth IRA and began maxing that out, opened a 529 account for our daughter and contributed to a brokerage account. After paying off debt, between retirement accounts and building our kitchen remodel fund back up, we now had a savings rate closer to 30-35%, not including our employer 401k match. 

We took the 50/20/30 plan and modified it for our goals, by switching the 30 and the 20. Our system is 50% of our income goes to needs, 30% goes to saving/investing and 20% goes to wants. 

That’s the system we continue to follow. Saving 30-35% of income over the course of 5 years exponentially increases your wealth. In 2022, we had a bear market, yet we had already built a system we were confident in and continued to save and invest. Having a system and sticking to it is the key. 

By the end of 2024, we hit our CoastFIRE goal and reached 25% of our total FIRE goal. 

Over the course of 7 years of learning and implementing a system that works for us, we are closer to FIRE than I ever would’ve dreamed as the young buck listening to Mr. Money Mustache.