“Who can possibly save $24,000 a year?”

I recall being at a luncheon after a relative’s funeral when another relative made the above statement. I didn’t have the heart to raise my hand, or speak up. But in the car on the way home, my wife said to me “you do!”.

It is true that I was able to save more than she was, but I also earned more than she did, so it was comparatively a little easier. But besides that, how CAN someone save that much?

First, it was done through 401k deposits, so the money was never really in our possession to begin with. It is easier to save it when it isn’t in your possession to begin with – and it was done automatically and money didn’t have to be moved from one account into another. Also, it never got to “well, we could save this, or buy / put it toward ________.” We budgeted around what the take-home amount was.

Second, we didn’t go from zero to $24K overnight. Having always been a saver, it was easy to start saving when I started working, and keep it going as I changed employers. Then as I got raises, I increased the contribution rate. A 2% or 3% raise resulted in a 1% or 2% increase in 401k savings. By not saving the entire amount of a raise, there was a little increase in the take-home amount – so the previous year wasn’t for nothing. Eventually, I got to my goal and it was a matter of adjusting – reducing, actually – the deduction rate to accommodate a slightly higher salary.

I recall suggesting to someone I managed years ago – who told me they wanted to try to save more – the exact process of saving a little more each time they got a raise. It was almost a running joke (though joke isn’t exactly the most appropriate word because saving isn’t really a laughing matter) that I would periodically ask him “did you increase your 401k yet?” The response was always “not yet”. Years later, after I left that employer, at a lunch get together, I asked him again – I don’t have to tell you what the answer was…

Third, we lived within our means. We either budgeted or saved for things, or just did without them. We never really lived the “keeping up with the Joneses” philosophy. With not over spending, we were able to pay off our credit cards every month – or at least almost every month (and I mean not paying it off once every couple of years or three). And those few times when we had an unexpected expense, we would either take it out of savings to cover it so as to not revolve credit card debt, or we would consciously spend less the next month (or two) to make up for it.

With all the information that is available on the internet touting how much one needs to save to live comfortably, or cover expenses, or what have you, it is easy to see that the message is to: save, save, save. And when saving for retirement (without even discussing Rate of Return [ROR] and compound interest), it is a LOT easier to save $500 per month for 500 months (just over 40 years) netting $250,000; than it is to save $2,000 per month for 125 months (just over 10 years). So I started early because you can’t wait to start to save.

I’ll get into some of the ways that we saved in the next post.