I was shocked to learn that roughly half of Americans are saving 5% or less of their incomes. That blows my mind! Only about 15% of the population is saving over 15% of their income. This saddens me especially since technology makes it so easy to set up automatic deposits and many companies are offering some type of contribution-matching. Dave and I have been married 5 years now and saving has been part of our lifestyle since our engagement, so this is an area where I’ve seen great progress as we knock out financial goal after goal. I want to help people figure out simple, practical ways to save more money like we’ve been able to.
One of our goals for 2015 is to pay an additional $12,000 toward our mortgage principal on top of our regular monthly payments. A significant factor that will help us reach this goal is that I started working part time for my church doing admin tasks mainly from home. We have continued to live off of my husband’s income and every penny I make after tithe, tax, and a few hours of childcare each week (which another staff member splits with me so I only have to pay $5-$6/hour!) goes toward our goal. My salary certainly doesn’t add up to $12,000 in take home pay so the rest of the income that contributes to our goal comes from these two unique ways to save up money:
1. Tax refund
Our 1-year old helped us out this year by getting us a heftier tax return. We decided before we even figured out how much we would get back that ALL of it would go toward the mortgage. If we hadn’t agreed on the decision to put all of it toward the mortgage, you can bet we would be looking into something like new patio furniture, new clothes, or padding our vacation fund.
2. Third paychecks
This is our other unique way to save up money, and I didn’t realize I even did this when we first created our budget spreadsheet in Excel 5 years ago: I set our monthly budget to come from 2 paychecks each month. Since there are 2 months a year that yield a 3rd paycheck, we end up with what I view as two big bonuses! We’ve been taking our momentum from paying off $30,000 of student loans in 9 months and have kept plowing through one financial goal after another. These third paychecks have offered a big boost to our student loan payoff, 6-month emergency fund, new(ly used) car savings, and savings for our delivery-related medical bills. This year these two extra paychecks we’ll get are going toward our $12,000 mortgage principal pay-down goal.
I’ve heard some folks try to get ahead of their mortgage payment by scheduling additional mortgage payments each year. We thought about doing this but since we are motivated to pay off as much as we can, we take advantage of the one additional payment we are allowed to make toward our principal every month. I’ll note that actually having a budget is pretty important if you want to set a financial goal; how else will you know how much extra you can save each month if you don’t even know what your monthly expenses are?
Some of you may not be as zealous to pay off your mortgage for various reasons. I think we can agree Derek was VERY zealous and saved up over $50k to put toward paying off the rest of his mortgage in 2014. We won’t have ours paid off that quickly, but I find great comfort and get excited when I think about our mortgage being paid off before our 1-year old daughter reaches her 10th birthday! Financial freedom is on the horizon and I’m excited for the opportunities that will arise when this mortgage is gone.
What methods do you use to save up extra money?
This post has been written by Jessica from BudgetForHealth.com.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.