The FIRE (financial independence & retire early) equation does not only consist of investing to generate additional income. That is only one side of the coin. The other consists of low expenses ie a high savings rate. But to whom am I writing this. Most other FIRE bloggers actually have higher savings rates which I see as a motivation for myself. In fact, I am working on my savings rate only since a couple of months. Making and keeping a budget is actually part of my 2017 goals and this post is my second monthly update of my savings rate.And to be honest, working on the savings rate has thrown off some fruit. Over the course of 2016, I only had four months with positive savings rates and all of them were below the 10% level. Now, 2017 started nicely and I am actually a little proud of myself. I achieved a savings rate of 17.2%. You can see all of this in the chart below.
So, how did I do this? Well, January 2016 had one big charge which was the final payment of our utilities bill. We had unexpectedly much higher monthly usage than what we paid on a monthly basis. In the Netherlands, utility companies charge you at the end of a twelve months contract period for the difference of monthly payments you already made compared against your actual usage. The result was a big surprise then. This year we had much better payments of our monthly utility bills already, so this lump sum payment did not occur.
The second big driver was much better handling of a lot of small items. Saving little sums here and there. Really, apart from the utility charge it was not one big charge that changed the savings rate. It was a question of taking good care of every cent and euro ie not buying a snack here and there and paying a bit of attention of buying a cheaper version of a product in any given category.
However, I believe that I will not be able to achieve a similar savings rate in February as I have in January. The main reason is that we plan to book our summer holiday this month which will take a big bite out of my pay check. But this is something for the next update.
What was your savings rate in January? Did you improve vs last year? What are your ways and tricks to increase your savings rate?