How to Save $50,000 in Two Years After Getting Out of Debt
I thought that title might get your attention. It just so happens, I saved $50,000 in the first 24 months after becoming debt free. My average salary throughout that time period was..... well... let's just say it was less than $55,000 per year. You can do it too, and here's how:
Track Your Finances
How do you think I came up with that $50,000 number and the 24 month timeline? The data is sitting in my Mint.com account, that's how. I have 3 and a half years of income and expenses sitting there for me to slice and dice and evaluate in any way I want. I can see how much I make each month after taxes. I can also see how much I spend each month after everything is paid. The difference that's left over is my net income, or if I was spending more than I make, my net loss each month. If you're going to save your money on purpose in order to reach big goals, you need to track your finances. How do you do this? You sign up for Mint.com, immediately. Here's how to get started.
Cut Your Expenses
Back in early 2010, I was well on my way to tracking my expenses. Once I realized how high my spending was, it brought on a lot of stress, because I spent a lot of money. My fixed bills were even high. I had that $350 car payment, my student loan payment, HD cable and internet, etc. Something had to give because I just wasn't making much progress. And then..... I planned a vacation. And then.... I had to get emergency dental work done (and I didn't have dental insurance). To make a long story short, I was spending as much or more than I made. Dammit, is what I finally said, because I was sick and tired of being broke. It was time to cut.
So I cut my cable TV subscription that I loved so much. I cut my eating out. I cut my free flowing entertainment budget. I just said, "that's it". I stopped spending my money. And during that summer of 2010, I didn't do much at all that required spending money. And you know what? I was out of debt 7 months later. It.... paid.... off....
Get Out of Debt
That's right, I made a decision to get the hell out of debt. I could have made excuses for why I should stay in debt. I could have said, "well, it's only $150 per month" or "it's a low interest rate", but I didn't. I listened to what the rich were saying, which was "get and stay out of debt". The truth is people, debt holds you down. As long as you keep your income tied up in payments, you're not going to build any wealth. In case you're wondering, "How do I get out of debt, Kraig?", boy do I have news for you. It's simple, you start listening to Dave Ramsey, immediately. He has a live radio show every day during the week from 2-5pm EST, which you can listen to in two ways:
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Live at DaveRamsey.com
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After the fact on iHeartRadio
Start Saving What Will Now Be YOUR Money
WOW, did it feel good when I was finally out of debt. It felt good because finally, it was MY money that I was saving. It wasn't GMAC's money. It wasn't the Federal Student Aid's money. Dangit, it was my money. And so I started saving it. I mean, it was on auto-pilot at that time. I had already cut my lifestyle. Now, I just needed to keep living the way I lived while digging myself out of debt. It wasn't that hard to do, honestly. A crazy thing happened while I started saving my money after being out of debt for the first time.... I got a couple of raises. Weird.....
To save 50 grand after getting out of debt there really is only one rule: SAVE.....YOUR....MONEY.... Pretty straightforward, isn't it?
Become Boring
Just last week while dining out at a very fancy and tasty restaurant for my 29th birthday, my friend's girlfriend once again called me a cheapskate. It'll happen when you're saving this kind of money. The truth is, I've been saving over half of my income for 3 years now. That doesn't happen while living the most exciting life of all your friends. It happens by being boring. Yes, I missed out on the joy of buying fellow drinkers at the bar a round of shots. Yes, I wasn't able to fly to Mexico last winter and to Tahoe for skiing last month. Darn, I even missed out on the fun of upgrading my car to a fancier SUV with navigation. Oh, and the most boring of all, I have stayed in my 800 sq ft run-of-the-mill one bedroom apartment for coming up on 6 years instead of buying a house of my own like many of my co-workers have done.
Gosh, I could have a yard for grilling out, a garage for polishing my car (or even parking a classic car or Harley in), but I don't. I have a one-bedroom apartment with a small deck (that I can't have a grill on). The point is, it can be a boring life when you're saving money. But by boring, I mainly mean that you won't be showing it all off. It's likely to be mundane. That kind of thing happens when you're doing incredible things.
Keep Going
The final and most important step to being able to save $50,000 in two years on a regular income is to keep going. I didn't quit when the going got tough. Saving half of your income is not easy. It's tempting to want to spend it. It's tempting to go buy a house when you reach a 20% down payment. It's tempting to go and get what you "deserve". But I had and still do have bigger and better goals in mind than "stuff" or "lifestyle". I am on a mission to change my future, reach financial independence and start and build a business of my own. You'll need to be willing to keep at it once you start if you want to make this happen in your own life.
That's how I did it. I saved half my income for over three years. I've also been fortunate in other ways by inheriting some money from my grandma and buying mutual funds before a major upswing in the stock market so I'm doing even better than the progress I'm mentioning here. Guess what happens when someone who's saving half their income receives a blessing such as a financial windfall or a major upswing in the stock market where they've invested a big chunk of money? They save it. Once the habits are formed, they are hard to break. If you're where I used to be, broke or in debt, you can change it. It will, however, take time (sometimes a lot of it), a significant amount of internal motivation and perseverance.
You can do it. I believe in you.
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44 Comments
- Jordann @ My Alternate Life says:April 9, 2013 at 6:31 AM
Wow this is such an inspiring story! I'm $12,000 away from being debt free and after that's done, I plan on saving the bulk of what I've been putting towards my debt. I can't wait to start saving like you!
- Kraig @ Young Cheap Living says:April 9, 2013 at 8:55 AM
Jordann, Good luck on your journey out of debt! If you do exactly what you're planning, which is to save what "would have been" your debt payments each money, you'll be at the 50k mark quite quickly. Keep us posted on your progress!
- Sabrina Moses says:September 13, 2016 at 2:51 AM
Yes this is so inspiring for me! I kinda kept thinking my problem was that I needed to make more an hour to afford a second house, i want to move so badly and I have a full time job and a weekend job. But I spend way to much on ordering out. It's funny I always find myself saying to my friends I'm broke but I make like $55,000 a yr with my full time job alone, there is no reason why I can't start to saving up like you did.
- Kraig @ Young Cheap Living says:September 13, 2016 at 10:53 PM
Hi Sabrina, That's the attitude. Yes, you can!!! Best of luck and keep us posted!
- Sabrina Moses says:September 13, 2016 at 2:52 AM
That is awesome! :-)
- CashRebel says:April 9, 2013 at 7:00 AM
Way to go Kraig, I just hit my 2 yr/ $50,000 mark last month and it's an exciting accomplishment. I would argue that just because you live a modest life doesn't mean its boring. My most interesting friends actually make the least money. Its all about creativity not visiting foreign countries every other month.
- Kraig @ Young Cheap Living says:April 9, 2013 at 8:54 AM
CR, Congrats to you too on hitting that mark! You're right, a modest lifestyle doesn't have to be boring. In fact, I don't believe my life is boring, but I do think that others "think" it is, looking in from the outside. I subscribe to the concept that happiness doesn't come from buying things or spending money. I think it comes from how you feel about yourself, your relationships and your health. None of those come from spending money. It doesn't take money to make those things either (unless you have health problems that need expensive care, but hopefully you have insurance for that).
- Alan@escapingmydebt says:April 9, 2013 at 8:15 AM
This is a nice post. I am having trouble with #5. Not necessarily me per se but trying to get the Mrs. to be boring is hard. I try to sell her on the fact the more boring we are now, the better off we could be in a year or two. Tough concept.
- Kraig @ Young Cheap Living says:April 9, 2013 at 8:51 AM
Alan, It's tough becoming "boring". I would imagine that it's even harder to convince your wife to subscribe to that lifestyle. From what I know, selling her on the "why" is the only way to get her on board. Like you said, your future will be better for it. Good luck continuing on this path together!
- Sabrina Moses says:September 13, 2016 at 3:01 AM
I love being boring, I do take my kids out alot which will definitely need to change if I'm going to be able to save, but when the kids go to grandma's for the weekend I stay at home and watch Netflix and eat my homemade tacos!!
- Dividend Growth Investor says:April 9, 2013 at 8:21 AM
Hi Craig, I was wondering, what are you investing the savings into? In addition, are you keeping them in a tax deferred or a taxable account? Saving money can only get you so far ( although your story is amazingly inspiring). You also need to learn to invest, in order to reach true financial independence. Good luck! DGI
- Kraig @ Young Cheap Living says:April 9, 2013 at 8:26 AM
DGI, I'm investing them in VTSAX, in a taxable account for various reasons I mentioned a few posts back. The main reason is that I want the flexibility. Of course, I realize I'll be paying extra for that freedom in the form of taxes on my capital gains and dividends. I'd love to hear your suggestions however, keep in mind that my main goal is freedom and flexibility. Thanks for stopping by and for offering your thoughts.
- Katie says:April 9, 2013 at 10:30 AM
Very inspiring. And I don't think you're boring! Or maybe I'm just equally as boring... Keep it up Kraig and it will be fun to see where your future leads you with such a big savings account in your back pocket.
- Kraig @ Young Cheap Living says:April 11, 2013 at 8:07 PM
Katie, Thanks for commenting and I'm glad you don't think I'm boring!
- krantcents says:April 9, 2013 at 10:53 AM
I save 35% of our income and I do not feel deprived! I have already achieved financial freedom and my children are grown. In addition, I already downsized and have all the things to make us happy. Be careful about extreme savings, you don't want to miss out on everything. Also, are you investing the $50K?
- Kraig @ Young Cheap Living says:April 11, 2013 at 8:08 PM
KC, I'm not surprised to hear you don't feel deprived with your lifestyle. I have the same feelings as it hasn't affected me much. Yes, at first it was hard. But once I got used to it, it became no big deal. Yes, I invested that 50k. I'm heavily bought into VTSAX.
- April 9, 2013 at 4:44 PM
The savings really add up once you get everyone else off your bankroll. For me and I think most people, keeping track of your finances is the best way to truly make progress. The best part about it is that whenever you get the urge to make a rash spending decision you have a reminder there of where you've been and how long it took you to get out from under the control debt. The visual stimuli are great too because they're a great quick reminder of how far you've come.
- Kraig @ Young Cheap Living says:April 11, 2013 at 8:09 PM
JC, Funny to hear it said that way, "bankroll". But yes, that's pretty much what it is. Yes, I do love looking back and saying "Wow, look how far I've come." It's quite joyful.
- Laurie @thefrugalfarmer says:April 9, 2013 at 6:16 PM
Kraig, LOVE this post. I wonder what your friend's girlfriend will think of you 20 years from now when your cheapskate ways have allowed you to be financially independent?
- Kraig @ Young Cheap Living says:April 11, 2013 at 8:10 PM
Laurie, Thanks for the encouraging words! I bet she'll still think I'm a cheapskate then, but at least she may understand why I'm doing it/did it at that point. Too bad it may take her that long to realize it.
- Cheryl says:April 9, 2013 at 7:01 PM
Hi Kraig, I found your site through my friend Jim's Blog, http://jlcollinsnh.wordpress.com. I think you could change the word "boring" to choosing to live "simply" and there can be a lot of joy found in that. It doesn't have to be boring. Many of life's greatest pleasures are free.......the outdoors, music, friends, a book from the library. At the end of the day, eating an expensive dinner out most likely doesn't bring greater happiness. People need to find what they are passionate about and pursue that. Now Jim (and your site) are helping me with the savings aspect in my own life. I have already chosen to live a simpler life in order to live life how I want. I only work six months a year and spend the other six months on my farm in Ecuador, South America---- so cuts have to be made in order to do that. It's all about choices!! And we are so fortunate that we have choices, when many don't. Keep up the great work and being an inspiration. I am logging onto Mint.com right now to work on my savings! Cheryl
- Kraig @ Young Cheap Living says:April 14, 2013 at 2:41 PM
Hi Cheryl, It's an honor to have you stop by and say hello (and to be linked to from Jim's blog for that matter). I do like your change in wording from boring to simply. I do like the simplicity of my lifestyle and believe that living this way enables me to change my future. I've read about you over at Jim's blog. Your lifestyle sounds pretty great. And yes, it's all about choices. Choices are pretty awesome, aren't they. I certainly have more of them since changing my perspective on what I really "need" versus what I really want my life to be like. Again, thanks for stopping by. I hope to see you around here again soon.
- Canadian Budget Binder says:April 9, 2013 at 11:18 PM
Good for you! This is very inspiring. The one thing most people (and I'm sure you will agree)will get their jump start to paying down debt is when they start tracking their expenses. It sounds tedious but knowing where the money is going is half the battle. Once you have that data you are armed with decisions that only you can make in order to work towards the desired outcome. Well Done.
- Kraig @ Young Cheap Living says:April 14, 2013 at 2:44 PM
CBB, Yes, I do agree. That's exactly why pointed out above that the first step to getting ahead financially is to track your finances (expenses are obviously a piece of that). You need to know how much you're spending before you can start making intentional cuts. Thanks for stopping by.
- Shawn @ Finance says:April 11, 2013 at 1:35 AM
Hi Kraig!! That’s exciting story. I have checked your Mint.com graph that’s looking good. I am very impressed with your saving $50,000 in 2 year that’s impossible for me. I have invested money in stock and Forex market so it’s impossible for me to save more than $10,000 per year, For increasing saving I had made this year New Year Resolutions, it’s on progress I am doing well, hope this year end I will save more money. Thanks for post this information with us.
- Kraig @ Young Cheap Living says:April 14, 2013 at 2:48 PM
Hi Shawn, As you know, saving money is about two things: income and expenses. The limits on anyone's savings are either: their income is limited, or their expenses are too high. In many cases, people aren't able to save money because of their expenses, not their income. Personally, I didn't ever take on a second job, which is what many people would do to save money. Instead, I cut my lifestyle. I feel that cutting expenses is the best way to save money, not to try to increase income. Of course, if you don't make enough money to both live on and save money, this strategy won't work for you. Good luck and thanks for stopping by and expressing your thoughts.
- Shawn @ Finance says:April 15, 2013 at 12:03 AM
Hi Kraig, Thanks for share your personal experiences with me, exactly here two things income and expenses always involved. Yes, if I cut expenses definitely I will improve own saving yield.
- Dividend Mantra says:April 11, 2013 at 8:40 PM
Kraig, Great post. You're an inspiration! I agree most with you on the "boring" part. Society doesn't validate anything that doesn't offer instant gratification. I rather enjoy reading about investments, maximizing savings, budgeting, writing, and free activities like relaxing on the beach. It's amazing how people automatically assimilate fun with spending money. How incredibly "boring" that is! I'll tell you what isn't boring, however: achieving financial independence at a young age and own all your time to yourself. Traveling the world at a young age isn't boring. Spending more time with family and friends isn't boring. Becoming a philanthropist isn't boring. Throwing the alarm clock away isn't boring. You know what is boring? Working a 9-5 till your 65. Yawn. Snooze. Best wishes!
- Kraig @ Young Cheap Living says:April 14, 2013 at 2:50 PM
DM, Thanks again for stopping by and saying hi. You're right, society doesn't validate anything that doesn't offer instant gratification. If we put away our surplus instead of showing it off, we aren't made to feel good about what we're doing quite as easily as when we show it off. Our friends and family sure love it when we spend money, because they usually get some benefit out of that. Now, when we save our money, what benefit do our friends get out of it? Um, it's hard to see, but I believe it's still there. I agree with you on your last point as well. :)
- anna says:April 13, 2013 at 5:23 PM
Hi Kraig, I have to agree with Cheryl. I think it's living simply instead of boring. Congratulations on your journey. Keep up the great work!
- Kraig @ Young Cheap Living says:April 14, 2013 at 2:51 PM
Hi Anna, Thanks or stopping by and for your kind words. I too, agree with Cheryl. She's got a good head on her shoulders. Thanks again!
- PurchaseBaby says:April 13, 2013 at 6:42 PM
Hi there I just wanted to let you know that your website kicks ass! Thanks so much indeed for your posts. I found you this weekend and I'm loving your articles and views - they are right up my street, so to speak. Keep up the good work and stay focused, focused, focused. And thanks for being an inspiration, too... L.O.V.E.
- Kraig @ Young Cheap Living says:April 14, 2013 at 2:52 PM
PB, Thanks for stopping by and for the words of encouragement. I hope to see you around again in the future!
- ES says:May 4, 2013 at 9:09 AM
One thing I struggle with is there is nothing that can represent one's diligent savings habits in a social manner. My husband and I live in a small house, and I hate hosting guests! Do people think we're struggling because of our small house instead of thriving--probably! I guess I just have to accept that a savings account and frugal living are not status symbols :-)
- jim says:May 12, 2013 at 2:48 AM
Buddy, Good luck to you and I'm hoping for the best. Don't want to discourage you, but seriously, where do you just let yourself off the hook - even every once & awhile? Wind yourself too tight and you'll snap. Just saying....
- Roger says:June 30, 2013 at 6:49 AM
Kraig, I enjoy the blog, but I am curious.... You mention going to a big fancy restaurant for your 29 th birthday. Did you pay the bill or did your friends treat? Do you reciprocate on their birthday?
- Kraig @ Young Cheap Living says:June 30, 2013 at 8:56 AM
Hi Roger, Great to hear from you. My g/f treated me to the fancy dinner on my birthday, which was her idea in the first place and a big part of her gift to me. For her birthday, we in fact did not go out to dinner, but instead enjoyed many other activities, in which many of her friends were also a part of. I reciprocated in ways other than buying her a fancy dinner, which cost just as much, if not more. For a friend's 30th birthday last fall, I took my g/f out with him and his g/f and family to a very expensive place. I didn't pay for his meal (because that would have been nuts of me), but I wouldn't have gone there in a million years otherwise, so I knew he appreciated us being there (our bill was close to $100 for the two of us). I know that relationships can't be built on only taking and not giving so yes, I reciprocate. At the same time, if it's not a birthday, I usually choose to not go out at all and stay in and cook. Thanks for the question.
- Roger says:July 8, 2013 at 5:16 PM
Extreme savers that I have encountered in my own life are actually NOT opposed to spending money. They are just opposed to spending their OWN money and will jump at the chance to spend someone else's money. If it is too expensive for you to pay for your dinner, then why isn't it too expensive for those that you care about to pay for your dinner?
- Heather says:July 9, 2014 at 10:23 PM
Hello! I just stumbled upon your blog tonight and have really enjoyed everything I've read so far! It's comforting when you find others with the same mindset - and who are also Minnesotan! (I'm in Mankato) At 43, I've finally come to my senses and admitted that how I've been living is NOT working and no longer fun. I want off the hamster wheel. I want to be financially free and have more options in my future. The last 4 months I've been living very simply (on a spending freeze except for necessities and bills) and paying off debt. I began $15,000 in debt and have just $8,000 left! I can see the light at the end of the tunnel! My downfall was eating out. You have to treat yourself every once in a while though-everything in moderation! My treat is a specialty coffee once every two weeks. It used to be a daily habit! Continued success to you and I will be back to explore and gain more inspiration from the rest of your posts!
- Kraig @ Young Cheap Living says:July 9, 2014 at 10:25 PM
Hi Heather, Glad you found us here. I'm very familiar with Mankato. Glad to have another fellow Minnesotan around here. Great job making progress and deciding to make big changes in your life to make your future better financially. Let me know if I can do anything to help and thanks again for the kind words. Talk to you soon,
- TJ says:April 1, 2015 at 5:03 AM
I agree about living boring while getting out of debt, but may I ask what the point is of saving all that money without living? Not travelling? Not doing anything interesting. The way I see it, if I keep saving I will just end up buying a house/apartment getting married, having kids and then that will be the end of it. I am not trying to be rude, I just want to know what your thought process is like? What's the end game? Do you have goals with that money?
- Kraig @ Young Cheap Living says:April 1, 2015 at 1:01 PM
TJ, Thanks for the comment. Those are GREAT, thought provoking questions (and I really appreciate your respectful tone). I took the time to respond to your questions on my podcast this week. Here's a link to listen to it: http://cmiold.wpengine.com/2015/04/01/cmi-40-whats-the-point-of-saving-all-that-money-without-living/ Hope that helps explain my reasoning for doing it. Take care,
- TJ says:April 1, 2015 at 4:44 PM
Thanks Kraig for answering my questions. I don't know how I ended up on your page, but I am glad and man am I impressed by how fast you put up the podcast. Honestly I personally haven't felt the pain of debt, but I have seen my parents go through it and learnt from their mistakes. I moved to Europe, got a free university education (actually made some money while getting my degree) and have never personally taken up a credit-line in my whole life. All the money I spend is money I have. However I've seen people that make more than enough money and choose not to use it which is why I asked. They blindly focus on the task of just making more money with the only goal being to see a higher number in their bank account and the possible retirement in the future. The people that keep chasing those numbers whose worth in today's world is so unstable and unpredictable. I am very glad you said that 'money' is not the most important and that chasing the goal of complete retirement as you get old isn't worth doing. Agree completely. I realize now though, after listening to your podcast that you are after what many of us are: personal freedom. Freedom for yourself, your significant other and some day your family. Keep doing what you are doing and don't be afraid to keep investing in yourself, it has paid out so far, it will only get better. All the best!
- Kraig @ Young Cheap Living says:April 1, 2015 at 4:52 PM
Tj, Well said. Freedom is what it's all about. Not just for me, but for my future family as well. Thanks for the kind words and again really appreciate the questions. -Kraig -PS: I got it up so fast because I was literally getting ready to record the podcast when I saw your comment. I then decided that answering your questions would be way better than the other topic I had picked out.
