I’m going to be frank with you, being able to save is fun but being able to save a lot is even more fun. If you look at the big picture, savings brings you freedom; freedom from stress and the confidence that money is something you can control.
One of the main reasons I write about our journey to financial independence is because I love playing with numbers and if you are a numbers guy, you know numbers don’t lie. Some years ago I started tracking our savings rate, overtime it felt pretty good to see a gradual increase in our savings.
Our Numbers Last Year
In order to have a solid savings foundation I had to start somewhere, so I started by tracking our savings on a simple excel sheet every two weeks. Nothing fancy, plain and simple as you can see below. I thoroughly documented all our investment income and deductions and stuck to “pay yourself first” principle day in and day out.
Our Numbers This Year
This year our projected savings rate is 82%, which is 22% higher than last year. Aside from manually moving cash to Fundrise and Vanguard Brokerage IRA (e.g. cash on hand), all other investments are automated. Therefore, when our annual income increased so did our savings rate.
Our Numbers Next Year
Even though 22% increase in a single year is a significant number, I foresee more of a gradual increase next year. This is simply because most of our investment accounts are already maxed out with the exception of my Roth 401k. That is not to say I can’t increase our contribution to the brokerage IRA and Fundrise, however we are not big fans of keeping more than 1% cash on hand in our brokerage IRA money market account. In terms of Fundrise, I plan to increase our investment from $3,000 to $10,000 overtime.
Kids Roth IRA is another account we can potentially increase contributions next year. Which mean, we have to increase their salary if they are to invest their “earned” income. I then have to report their earnings as business expense, under miscellaneous income on our annual income tax filing.
Additionally, we can “gift” each child $15,000 per calendar year but they can’t invest it because it is not an “earned” income. So their money will end up in their Roth IRA money market account earning tax free interest, which is not bad outcome either.
Summary
What more can I say, the numbers speak for themselves. Even though 82% sounds great, we are still 18% short of reaching our goal. Like everything in life, this is an ongoing experiment. Whatever the reason you are saving, it is a valuable lifelong skill. Get started and have fun!
Until then, happy saving!
