Hey everyone! Our streak of incredible guest posting continues!!! Check out this post by Des over at HalfBanked.com.ย Please how some love in the comments and share your thoughts on saving money. Enjoy! ~M$M
If I told you there was a risk-free way to reach your financial goals faster, it would sound sketchy, right? Like Iโm the embodiment of all that is wrong with the shady side of financial advice. Like you should run screaming from this article.
But uh, donโt. Because as sketchy as it sounds, there is a risk-free way to reach your financial goals faster.
Itโs called increasing your savings rate.
Thereโs a lot of talk about how your savings rate can help you retire early, or reach financial independence. If youโre a millennial like me, those things can seem dauntingly far off, and you might be tempted to skip all talk of savings rates.
Donโt.
Just because youโre not about to retire and live off the proceeds of your investments quite yet, doesnโt mean that you can ignore your savings rate.
Increasing Your Savings Rate Is a Perfect 20-Something Survival Strategy
Your twenties might be the most expensive decade of your life.
I canโt think of any other time when youโll be juggling paying for your education, a wedding, a home, a car and maybe even kids. There are just so many goals competing for your income – which is probably at the lowest point itโll be in your professional career.
Awesome.
Thatโs why increasing your savings rate is the perfect way to cope with the juggling act that is millennial money. Even if youโre saving for big purchases, not just for retirement, increasing your savings rate can help you achieve your goals faster – and keep you far away from the Dread Pirate Debt.
Hereโs a real-life example of how your savings rate can slice your goal timeline in half – without relying on any sketchy investment advice or unsustainably high interest rates.
Buy a House Faster By Increasing Your Savings Rate

Hey…nothing wrong with dreaming right?
I donโt have a house yet, like many of my millennial peers. I want to own a place someday, but buying a house requires a down payment, and with the prices in my area, Iโm looking at a minimum of $20,000 – plus closing costs.
I realized this about a year ago, so I set up a savings account specifically for my future down payment, set an automatic $250/month contribution, and calculated how long Iโd need to save to hit that $20,000 number.
If I saved $250/month in a high-interest savings account that pays 1% interest, Iโd need to save for just under 7 years to hit my goal.
Whoa. Seven years?
Then I ran the numbers. If I was really diligent about cutting back on my expenses and increasing my savings rate to $500/month, Iโd have my $20,000 down payment ready to go in just over 3 years.
That sounds much better. Thatโs the magic of increasing your savings rate, and it applies to every financial goal you have – not just housing or retirement.
How Can You Increase Your Savings Rate?
If you want to get serious about bumping up your savings rate, no matter what youโre saving for, youโll need to do these three things.
1) Track your spending
This is basically step one to optimizing just about any part of your finances, but itโs even more important when youโre trying to optimize your savings rate. When I first started tracking my expenses, I was shocked to see that my seemingly-herculean savings efforts had only bumped up my savings rate by a few percent each month.
That said, I also noticed tons of areas where I could make small changes that would have a big impact on reducing my spending, like making coffee at home instead of going out for $6 lattes every weekend.
The bottom line is that if youโre serious about increasing the amount you save, you need to track what youโre spending. Theyโre two sides of the same coin, after all (the pun was right there, I had to.)
2) Set your goals
Once youโve got a handle on where your money is going each month, you need to set your financial goals. Trust me when I say that thereโs a huge difference between โItโd be nice to own a house somedayโ and โI will save $20,000 for a down payment by April 2018.โ
One of those statements will remain a dream forever, and one of them will give you the power to say no to that grande toffee nut latte with coconut milk. At least 90% of the time, it works every time.
I know you donโt just want to save for a car, or just want to save for retirement, or just want to save for a wedding, so when youโre setting your goals, make sure to get it all on the table. Once youโve done that, you can start to prioritize. If your timeline for a wedding is a year, but your timeline for a house is five years, itโll impact how much you should be saving, and when, to hit your goals. On the other hand, if the house is way more important to you than the wedding, you might want to save more for that goal regardless of timing.
3) Cut back on things that donโt matter
The fun part of all this attention youโre paying to saving is that you get closer and closer to your big financial goals, they really start to feel real – and attainable. The shift from maybe-home-ownership-one-day to โholy cow, weโll be buying a house in two and a half years!โ is a big one, and it feels pretty great.
Youโd think that for all the drooling I do over my cherished lattes, Iโd miss them a lot more than I do. Thatโs the thing though: as your financial goals start to seem real and attainable, it gets even easier to say no to spending on things you donโt value as much.
So as youโre setting your goals and tracking your spending, look at each category really closely. Is there something you can do to cut back on spending in an area that doesnโt matter all that much to you?
It doesnโt even have to be as extreme as moving into a camper van to save money on housing – unless that aligns with your priorities, that is!
At the end of the day, the trick is there really is no trick. To increase your savings rate, just pay attention to your spending, pay attention to your priorities, and cut back on the spending that doesnโt match your goals.
Thatโs it.
It sounds simple, but by doing those three things, Iโve managed to cut my spending and increase my savings rate to almost 50% of my income. Iโm not on track to retire anytime soon, but I am funding an emergency fund for myself, an emergency fund for my dog (I know, Iโm that girl) a house down payment, a vacation fund and a fund for bigger house purchases.

Yep, I even have an emergency fund for my dog.
Oh, and Iโm saving for retirement. Because you canโt just skip out on that sweet, sweet compound interest in your 20s.
So there you have it. Increasing your savings rate is the risk-free, foolproof way to survive the competing financial goals of your 20s, and actually reach them in your 20s.
Comments
Sarah Noelle @ The Yachtless
Wait, are you saying that my $6 latte habit has an impact on my savings rate?? ๐
I couldn’t agree more about the value of tracking one’s daily spending. This is the #1 step I’ve taken that has changed my priorities, and (I don’t think this is an exaggeration) changed my life. it’s funny because I always thought I was sort of passively checking it by glancing over my credit card bill each month, but that didn’t account for all the cash purchases I was making or any of the checks I was writing, and I wasn’t really looking very closely at my expenditures anyway (mostly I was just checking for fraud, which I did find once!). So anyway, yes yes yes yes yes to tracking spending in a proactive and careful way.
I think something I still need/want to work more on is figuring out my goals. Right now my goal is mostly to PAY OFF MY STUDENT LOANS, but this isn’t really a goal in and of itself…it’s more like I want to pay them off so I can focus on other stuff, but exactly what that other stuff is has yet to be determined. ๐
Des
Oh come on now, your most recent post had some amazing insights into what you value – goal setting from there is just a fun formality ๐
Like travel! If you know it’s important and valuable to you, the goal part is where you get to dream up a destination and set a savings goal and daydream about the inevitable beaches / mountains / adventures in your future. I think you’re closer to that than a lot of people, especially with what you know about your priorities based on past spending. Plus paying off student loans is an amazing, admirable goal – you get major credit and kudos for that!
Also, let’s just never speak of those months when I spent over $150 on coffee. There were more of them than I care to admit, haha. I’m right there with you on tracking spending being life-changing – otherwise, I’d probably *still* be spending that on coffee without valuing it at all!
Millennial Money Man
Paying off student loans is a GREAT goal!!!!! Since I’ve paid them off, I’ve been able to focus on a ton of other things in my life. It allowed me to change careers, I can travel with my wife now, and we can put more money away.
Maggie @ Northern Expenditure
Fabulous post! Great examples of the possibilities and excellent, simple advice. I’m convinced! Still working on slowly upping my savings rate each month.
Millennial Money Man
Me too Maggie – since I started my business I realized that my spending on stuff I didn’t really need went up (probably because I have way more free time now).
Des
Thanks Maggie! I think that impending raise will probably help out ๐ (PS. That was the best-ever story of how to ask for a raise. Seriously, I love it. We could all use a little push (…jump?) sometimes!)
Tyler
I tell people all the time that early retirement is possible, having money in the bank is possible, traveling around the world is possible even with a low income if you just prioritize what you spend it on. They than all agree with me and buy $12 lunches that sit and get cold before they can actually eat them. I love this article because it doesn’t once say stop doing what you love or stop trying to buy this or that it’s simply figure out what you want, what you REALLY want, and stop spending on everything else. For me my problem is I like to eat and the food I like is expensive but I’ve stopped feeling guilty because I cut costs in other places in order to afford that nice Tuna steak, Lobster or whatever else is on the menu that night. Even finding ways to cut the costs on those items as well. Great article
Millennial Money Man
Good point Tyler – Des does take a really cool angle here. No lecturing, just really solid advice. Thanks for stopping by my man!
Des
Thanks Tyler! I’m so glad the article doesn’t come off as “deprive yourself of everything and then saving will be easy!” because that is soooo not what I think, haha. If I did, there’s no way I’d have a dog – they are *not* cheap! But since it’s my priority, I’m willing to spend on it. I feel you on the food thing too – when I first started looking at my spending, I realized that fresh food and produce was a big chunk of my budget, but there’s no way you’ll catch me just eating bread and pasta instead of vegetables because it’s cheaper. It’s all about optimizing for the things you value ๐
Sofia @ Currentlylovingsimplicity
I started tracking my spending a few months ago and as soon as I did, my spending habits changed and and my savings rate incrased. Now, like you, I also pay attention to only spending money on things that matter, which again increased the savings rate. Every word in this post is great advice!
Millennial Money Man
^^^ PREACH ????????????
Des
Right?! Tracking your spending is like, the silver bullet of finances. As soon as you do it, you really start to notice how much you value things – if only by the reaction you get when you have to write it down! It’s either an “Of course I spent money on this, it was worth it” reaction, or an “Oh my gosh I wish I hadn’t spent so much on this.” Makes increasing savings way easier when you look at it that way. Thanks so much for the kind words!
Alyssa @ Generation YRA
Tracking my spending has done WONDERS. Each month I have automatic transfers set up to all my money goals (almost all of which you listed above!), but since I have been diligently tracking my spending – all of the sudden I have some major roll over from month to month. Last month I was able to throw an extra $500/deposit towards one of my goals on a random evening, because I am fully aware of my spending & saving trends (thank you, Mint & Personal Capital). That ability to do so is incredibly empowering & gives a bit of endorphin rush because increasing your savings unexpectedly will get you to your goals that much faster. Great post, Des!! ๐
Millennial Money Man
I guess I need to jump in and give Personal Capital a try, seems popular with the blogging homies. I have transitioned to spending everything on my Amex for points. They have some good spending tracking tools that I like a lot, and it makes it easier for me because my business card is Amex as well.
Des
Thank you so much Alyssa! And major, major kudos on the extra $500 towards a savings goal – that is a big win! (Also, I’m totally with M$M and leaning more and more towards trying Personal Capital. If everyone says it’s this great, it must be!)
SarahDVM
Kudos on the emergency fund for your dog, that literally brought a smile to my face! It is so common for me to see dogs that need emergency care that their owners aren’t financially prepared for. At times we can make it work, but at times we can’t. Its a bad situation to be in all around.