I am going to be honest, July was a brutal month when I look at my spending and my resulting savings rate. Twice per month I automatically transfer $250 to our savings account. This helps to make sure that no matter what I am putting some money away. At the end of the month I will transfer any additional money over into savings. Well when the end of July rolled around I had no money left to transfer. My heart sank a little as I looked at my dismal savings rate of only 26%. Last year I saved an average of 42% of my take home pay and yet here I was saving only 26% of a much higher amount. WTH? Has lifestyle inflation really gotten the better of me?
When I got my promotion last fall initially thought I would be save almost 100% of of my raise which would amount to a nice little sum of money by the years end. Yet it appears that lifestyle inflation has hit me a little as I am not saving as much as I should/could be.
Last week I sat down and looked at not only my July 2017 numbers but also my total savings for the year. One thing that isn’t taken into consideration when I look at the dismal 26% number is the fact that I have been slowly increasing the amount I am contributing to my 401(k) this year. As I started to receive commissions in addition to my increase in my base pay it can be hard to estimate how much more I will make this year and as a result, how much I can save. I have increased the percentage of savings in my 401(k) three times this year and the most recent increase, which was in July, was pretty big and should max me out for the year (assuming my commission estimates are close). This will be the first time in my life I have made enough to fully fund my 401(k) and I am psyched about this. But one of the results is my after tax savings is lower than I had originally targeted when I set my goals in December. This is where looking at the actual numbers is pretty helpful, at least to my psyche.
First I looked at my spreadsheet to see how much I have saved year to date out of my paycheck (these numbers don’t include rental income saved or Mr. SFF’s savings). Year to date I have saved $10,090. I then looked at my spreadsheet for last year and noticed I saved a total of $11,926 all year. OK, starting to feel a little better. My savings has actually increased by a significant amount. Next I looked at my 401(k) savings. Year to date I have saved $10,027.14 while in 2016 I only saved $9,397.95 in my 401(k). So in only 7 months I have saved more in my 401(k) than I saved all of last year. I am definitely feeling better now! If I am able to max out my 401(k) and keep my after tax savings even close to my current (slightly lower than I want) level, I should be able to save another $15,800 this year. This should bring my own total savings to more than $35,000 for the year. Add this to what Mr. SFF is saving and our rental income saved and the numbers start to look pretty darn awesome!
Have I let lifestyle inflation creep in a little? Yes I think I has. Some of my expenses are slightly higher this year but I going to not let this get me down as when I look at my savings numbers I realize that we are just fine. I am still driving my 2007 Honda Fit, we don’t dine out very often (except for on vacation in July), we don’t try to keep up with the Joneses, and most importantly we love our little life. FI will happen and I can’t let one month and slightly higher expenses get me down.