It’s easy to get caught in lifestyle creep and spend money on things rather than just increasing your savings rate.
I’ll go through my expenses so you can see just how to save more as you earn more. To retire early on a fixed income ,you need to save most of your income because is a lot easier to save money compared to earning more money because of how the tax system works.
I’ll go through my monthly costs here, so you can see how I save most of my income:
I make £41,000 a year, which brings my post tax income to £2355, this is after a 10% pension contribution to take advantage of my employer match.
Rent: £200 (I have a two bed flat, where I rent the larger, en-suite bedroom to my house mate which makes up almost all of my mortgage plus bills )
Council tax: £95 (can’t do shit about this)
Internet: £35 (Threatening to cancel each time the contract ends usually ends up with you getting the best deal, though it’ll only work if you’re actually prepared to leave)
Sim-only plan: £8 (same as above)
Netflix: £7 (shared with my housemate)
Groceries: £210 (Learning how to cook really saved me a lot of money, combined with fresh meals and taking lunches to work – it saves a ridiculous amount of money)
Holidays/Travel: £200 a month on average but I tend to travel mostly during xmas to see my family and one other break with some friends once a year – these things are almost always booked in advance and we’ve started using AirBNBs wherever we go rather than hotels and it’s served us very well in terms of both cost and convenience.
Bars/Restaurants: 0 (This might change after covid – but usually, trying to limit spending money on outings, I try to meet friends at my place or theirs, maybe cook and just have good fun times without the insane markup)
Transport: £20 on average (I bought a bike on the bike 2 work scheme and the interest free repayment is £20 a month for 2 years – I use this bike to get to work and I plan to keep using this for transport as long as possible)
Gifts: £20 a month on average (Birthdays and Xmas – on average I end up spending £240ish each year on this by bulk shopping during black Friday deals)
Total spend: £755 a month.
Savings rate : So, (((755/2355)-1)*100) = 67%, plus and additional 10% from my pension contribution brings us to 77%.
Breakdown of my salary against savings.
Breakdown of my spending, surprisingly, even after taking such drastic steps to reduce my housing costs, rent still makes up 25% of my spending! Groceries and holidays make up the other big chunks, and those three combined account for 77% of my costs.
Hope you liked my breakdown showing how I save most of my income, it’s possible to not live like a monk but still save have a high savings rate. Please share your savings rate below.