My New Year’s Resolution Is to Save 70% of My Income. Here’s How I Plan to Do It
I can’t count the number of times I’ve thought to myself: “I need to save more money.” But that’ll end soon, because in 2018, I’m going to make it happen.
I’ve always been a pretty good saver, but this year I’m setting an ambitious goal: save 70% of my income. My plan is to split the savings between three goals: my emergency fund, my retirement accounts and a new home down payment fund.
My main motivation is wanting to feel more financially secure, especially because I’m now in my late 20s and feel like I’ve stepped into the “real adult” phase of my life. I want to see more of my money go toward saving and investing rather than, say, bar tabs or concert tickets.
I work as a freelance writer, which means my income varies from month to month. And while I can’t always control when an editor will approve a story or when I’ll get paid, I can control my spending and saving. Saving at such a high rate puts more of the power in my hands when it comes to my finances.
My Savings Targets
Specifically, here is how I want to split up the money I plan to save.
Emergency Fund: I keep my rainy-day stash in a high-interest savings account, and currently have about eight months’ worth of living expenses saved. I know what you’re thinking; that’s way more than what a lot of people already have. But ideally, I’d like to boost my fund by another $5,600 so that I can comfortably cover a full year of expenses, if needed.
Retirement Savings: I plan to max out my IRA contribution — that’s $5,500 — by April and want to contribute at least $8,000 to my solo 401(k) by the end of the year.
Down Payment Fund: Like my emergency fund, I keep my down payment fund in a high-interest savings account. I’d like to get that to between $15,000 and $20,000 by the end of the year, so that I can put at least 10% down on a house in the future.
My Game Plan
The are two main ways I plan to meet these goals. First and foremost, I intend to keep my living costs down, which should help me get most of the way there.
Every month, I’m sticking to a roughly $1,400 budget, which should cover my rent, health insurance, groceries, utilities, internet, Netflix subscription and gas money. Every six months, I also have to account for an extra $400 for my car insurance premium.
I already do a good job of saving on housing because I live with my boyfriend, which cut my rent and utilities in half compared with when we lived separately a year and a half ago. Not having an office to commute to also means I only plan to use my car one to three times a week, getting around mostly by bike, and eating most of my meals at home.
I know it will take the full year to hit my savings targets, which means I’ll have to strike a balance between living frugally and still having fun — it’s about tradeoffs, not deprivation. For example, I live in Austin, so riding my bike in 100-degree summers sounds like torture. So in the summer, I’ll plan to shell out a little more for gas and scale back in another area, like eating out. When it gets cooler, I’ll bike and enjoy a meal out more often.
My second strategy for saving: Upping my side hustle cater waitering for large company events, which I do anywhere from 10 to 20 hours a week. (I’ll put in more hours during the busy seasons — spring, fall and winter.) Because I’ve budgeted in such a way that my essentials can be covered by my freelancer income, my catering money is all bonus money (translation: cash that can be saved). In 2018, I estimate that my side gig income will help me get to 20% of my savings goal. I’ll also use that income to cover my car insurance bill, so I don’t have to dip into freelance income that could be going toward savings.
Tracking my spending will be crucial over the next year. I do it every month so I know if there’s an area that’s getting out of control. If I see that eating out is creeping up, for example, I can scale back or pick up an extra shift at my catering gig.
I feel confident I can save 70% of my income because it’s something that I care about deeply. I want financial stability more than anything else, and starting fresh in the new year is a good chance for me to work toward that.