There comes a time in every FIRE starters blogging career (career – really?) where you have to make a post about, how you – in your infinite wisdom – manage to save up all that money, which you then use to invest, and ultimately retire early, living off of your investments!
Since I’m a FIRE-light’er (GET IT?!), following my savings rate is really boring! (I have a fixed amount that I save each month – 5.000 DKK) Which is why, I’ve decided to start tracking my NSD (No Spending Days). I actually have no idea how many NSD I have today on average, but I’m guessing I should be able to reach at least 20. Ultimately, this should enable me to up my monthly savings goal to, lets say 10.000 DKK…
OK, grandpa – was that the (infinitely wise) advice you were going to give us?!?
No – but actually, you should add it to the list (if you have one). Tracking how/when you spend your money will/should ultimately lead to a greater understanding of where you have the greatest savings potential.
The best advice I (n)ever got for saving money, was to hide my money from myself!
There you have it. B’bye now.
Wait? There’s gotta be a little more than that. Come one?!
OK, OK. Why does hiding your money from yourself make sense, and what do I actually mean by that?
Well, I’ve always been good at tucking away money, but I’ve also always been equally good at finding ways to spend that money at a later point in time. Whether it be on gadgets, cars, fancy restaurants or nice vacations, I’ve made piles of money “disappear”. Don’t get me wrong – I don’t regret it, I’ve just realized that if I wan’t to dedicate a certain amount of money, to a certain (future) “project”, then I have to move that money “out of sight”.
There’s always gonna be projects around your house that you can spend your money on. What I’ve come to realize though, is that a new kitchen or a new bathroom (or even a new car!) doesn’t actually make me fundamentally more happy. Which is why I decided to start pursuing FIRE (to become more happy).
“Out of sight, out of mind” tends to be a phrase that works on many levels. In my case, once I decided to start taking a certain amount of money every month (on the 1st of the month!), and move AWAY from my everyday account(s), I could spend every single dollar (or DKK) in my account, and I would still have managed to boost my savings that month.
A lot of my friends seem to be operating in the opposite pattern, in that they spend and spend and spend, and then they see if there’s anything left to put into their savings account at the end of the month. More often than not, there won’t be. And then, I’m the idiot, right? – Because who knows if there’s even going to be a tomorrow?!
My wife and I used to follow the danish TV program called “Luksusfælden” (The Luxury Trap) where you follow a couple on the brink of financial ruin. I quit watching it after a while, as it was pretty obvious to me that these people were lacking the fundamental understanding, of how operating on a budget works. Most often these people had exorbitant spending habits, and lacked the ability to simply live within their means. It makes me really sad, because I have the feeling that “the consumerism” is really what drive our youth (and the society as a whole) today.
This really made me wonder, how I could prevent my daughter from adopting this kind of unfortunate behavior. My conclusion so far, is that we have to keep talking to her about money, and explain to her (regularly – because she will keep asking for that stuffed animal, whenever we go out to a store that just so happens to sell stuffed animals – and it seems they all do these days!) how you can’t just spend your money on “stuff”, because then you won’t be able to buy food and clothes etc.
The other day, I got direct feedback from my daughter on this approach. We were driving somewhere, and I pointed out an electric car driving by, and told her that I would really like to buy one of those. She replied: “NO, dad! No more new cars for you! If you keep buying cars, we won’t be able to afford buying food!”. She is 4. I guess my work here is done! 😀
Anyway, back to hiding your money: What I did, was I opened a savings account with Norwegian Bank (this is not a commercial – you can open an account in any bank you feel like – the point is just to keep your savings account separate from your everyday account), mainly because they were the ones offering the best interest rate. As an added bonus, because it’s not a domestic bank, it takes me 2 days to transfer money to- and from the account. This way, I’m sure that I can’t make any impulsive purchases with my savings. It just so happens that the only way to actually get the money out of the account, is to transfer it back to the account it came from (this is unique for the savings account in Norwegian Bank I guess – normally I would be annoyed by that limitation – but in this case, I don’t mind).
Smart, huh? Like daughter, like father 😛
There are plenty of other ways to “hide” money from yourself – like buying a house for example (the payments on your mortgage basically works like a “hidden” savings account). I know that Robert Kiyosaki wouldn’t agree with me on that though. Anyway – that’s a story for another day 😉
What’s your best savings advice?