How I Doubled My Monthly Savings by Dropping My Ego
Like many, I’ve been pursuing the idyllic life of financial freedom for a couple of years now. Spurred on by the likes of Rich Dad Poor Dad and the 4 Hour Work Week, I’ve tried and failed at a few ventures to increase my income.
However, I’ve learnt a couple of things from these failures:
- It’s nowhere near as fucking easy as books or YouTube make it seem
- Failure is a constant part of growth
- Achieving small and consistent steps is the most likely path to financial freedom (we can’t all smash day trading in 6 months).
Towards the end of last year, I decided I needed to change how I looked at financial freedom, I wanted to see some growth now rather than wait to see if one of my ventures succeeded and made all the money I needed. So, I looked to reshape my current finances: after all, it’s not just about making money but managing money.
0. Saving £800 per month
At the start of this project, I was able to save £800 a month , which I was unwisely putting into your generic run-of-the-mill savings account. This is after all outgoings including £1100 for my mortgage.
1. Saving £1210 (£410 increase)
The timing for this was perfect. The contract on my leased car was up and I have been working from home for eight months, so I decided it was time to let go of the flash Audi A5. I must admit this was a hard one to do but I couldn’t justify it any longer: it cost £340 per month plus £100 in petrol.
I’ve now been using my fiancé’s small red hatchback for three months and it’s not so bad. Not quite the same feeling of an Audi but it’ll do, I also get on the bike where possible.
That’s an extra £410 per month saved with £30 aside for petrol
2. Saving £1260 (£50 increase)
I give myself £50 a month to spend on clothes. This doesn’t seem like a lot, but do I really need £600 a year for clothes when I swear I wear the same stuff every day anyway?
This was an easy one to cut out.
3. Saving £1560 (£300 increase)
I allot £700 per month for “social” spend. This is anything from the pub and restaurant to gifts and nights away.
Again, the timing to reduce this was great being in the height of a pandemic as there’s literally nothing you can bloody do except to get takeaways and drink on the sofa. The tricky one with this is to continue it post-pandemic but I’ll reassess then. I still think £100 a week, if spent wisely, should keep me going fine.
4. Saving £1570 (£10 increase)
Yeah, I know it’s only a tenner but every little helps, right? I always multiply it by 12 to get the true idea. Anyway, this was a simple one: I moved broadband provider getting better speeds and saved £10 a month.
5 Saving £1600 (£30 increase)
Again, another small jump but £30 a month is £360 a year. This was another ego hit. I’ve always loved technology, but it’s fucking stupid to always get the latest iPhone because O2 dangle it in front of you like you’re some tech-crazed addict.
There you have it! I found £800, which I could save by losing the car, keeping the same clothes and phone and not going so nuts on my social spend.
Bonus £1700 (£100 increase)
Another thing I wanted to do was look at what I had already, was there any way I could make money without having to build something new. My parking Space!
I live close to the station and parking around here costs a fucking fortune because of this. So, I listed my space on a few of the car parking sites. For the first couple of months, I had people use it for the odd day, this pulled in £5 here, £8 there, nothing to write home about. In the third month, I had someone take me up on my monthly rental price of £100 a month. MY FIRST (I hope of many) STREAM OF PASSIVE INCOME.
Yes, I have to pay tax on this but to keep the maths simple I’m not counting that.
Total £1700
Now to really hammer home the possibilities through compound interest*. I invest this additional money into an exchange-traded fund (ETF) tracking the S&P 500 . The S&P 500 is a stock market index that measures the stock performance of the largest 500 companies listed on stock exchanges in the United States. By investing in an ETF that tracks this I’m in essence investing in the top 500 companies in America.
* Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest. — Wikipedia
The average annual return for the S&P 500 can be anywhere from 5% to 11%. If we assume a return of just 7% over 30 years my monthly investment of £900 will turn into £1,020,176** when I retire. If you’re in more of a rush, £442,751** after 20 years.
**investor.gov calculation
There you have it. If everything goes to plan, that’s how by reassessing my finances, dropping the stupid ego and investing what I found, I can now look to retire a millionaire, absolutely nuts!
