About two months ago, Lanny wrote about why he aims to save 60% each month. His article got me thinking about saving a large portion of my income and you know what, if his Italian self can do it – I can too! See why I am now also aiming to save 60% of my income each month.
First things first. Am I insane? What am I getting myself into? Those are the thoughts that continue to cross my mind as I read my first introduction over and over again. But I know this will be good for me. I am a terrible accountant, in the sense that I have never really monitored my expenses that closely. Each month I look at my bank account and give it the “ish” test. As I comb through my history, I know about how much salary/income and dividend income I received in the month, and about how much of that I spent. I never know the exact amount, but I approximately know how much I make. But is that good enough for me anymore?
To answer my last question, no. For the first 24 years of my life (Okay, probably actually the last 8 since I started working. 24 just sounds better), I saved a lot of cash and focused on building a strong reserve. But over the last couple of years, I have focused on building my income producing portfolio by purchasing dividend growth stocks. Why? Because I want to achieve financial freedom as soon as I can. And man have I purchased a lot of stocks over the last two years, which has put a pretty large dent in my capital reserves. I’m not complaining; I’m just stating a fact. As my reserves dwindle, I need to continue to find ways to turn cash into income producing assets. As Lanny always says, there are two ways to increase your cash: either increase your income or decrease your expenses. Hopefully both will come into play during the year, but I guarantee I can achieve the latter by turning my “ish” monthly expense analysis into a firm savings analysis. I have become addicted to dividend growth investing and I need to continue to find the means to keep purchasing stocks. There are a lot worse ways to spend my money, so I want to start turning some sunk costs into income producing assets.
There is one problem, as I mentioned before, I have never tracked my expenses and calculated a savings rate. So I really don’t have a firm benchmark to monitor my progress. If I had to guess, I would say that I save about 40%-50% of my income every month. Recently this number has increased since I moved apartments and cutting my largest monthly expense (rent) in half. So to develop a benchmark, I have begun to track my income and expenses for September. With a lofty goal of 60% in mind, discovering my actual savings rate is critical so I can trim the red from my checking account. I know where I stand in how much I save, but I’m not going to tell you just yet. Where is the fun in that? All I will say is that I have begun my journey towards saving 60% of my income and trying to save more than Lanny each month! This is going to be a fun journey and I am going to learn an awful lot about myself and my spending habits, which hopefully dwindle and causes me to save more. But I know I will be much better at living frugally and investing, ultimately becoming a better person.
Watch out Lanny. You are no longer the only Dividend Diplomat taking the 60% Savings Challenge. Who wants to join me?
Bert