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How much you save on your income can have an incredible impact on how fast you reach your big financial goals. Learn how you can boost your savings rate while still having some fun now!

Why Your Savings Rate Matters

Last week we talked about three key numbers to track and master your money and one of them was your savings rate

How much you save on your income can have an incredible impact on how fast you reach your big financial goals.

Here’s the thing, though, unless you have a stash of cash under house or an inheritance coming up soon, that money is probably coming out of your budget.

So how do you become a super saver without deprivation? Can you boost your savings rate and still have some fun? 

I believe you can find that balance, but you need a plan and a system to set things up. 

This is why I’m glad Joe Mecca from Coastal Credit Union is back. He’s the quintessential saver and today he’s sharing how he’s grown his savings while still having some fun. 

In this episode, we’ll dig into:

  • Finding out your current savings rate
  • Tax advantaged ways to save more to give you a double win
  • path to notching up your savings 

Let’s get started!

Open Enrollment: Finding Affordable Health Insurance Couple Money Podcast

Feel like your premiums are too expensive? Learn how you can significantly save money and find an affordable health insurance plan for your family! Choosing an Affordable Health Insurance Plan Like many families, we want affordable health insurance. Unfortunately, it’s not always easy. In 2019, the average annual premium for a family was over $20,000!  That’s quite a bit of money so it’s absolutely crucial that you’re 1) getting the most out of it and 2) if there is a more affordable option, you can make that transition easier.  The good news is with open enrollment, you can have some big wins with your benefits for next year. I want to make sure that when you two sit down, I want you to feel comfortable and confident about tackling your benefits. Of course, every couple is different, I’m grateful Andy Hill, the creator of Marriage, Kids, and Money and the co-founder of Thriving Families Facebook Group is here to chat with me about his and Nicole’s process with choosing a health plan.  We’re going to compare how each of us approached finding the best health insurance plan for our families.  In this episode we’ll get into: The differences between the most common options given What to consider when deciding if a high deductible plan is right for you Maximizing your available health care benefits Let’s get started!  Resources to Save Money on Healthcare Are you looking for more help with keeping health care within your budget? Here are some resources: Best Budget and Money Apps: Personal Capital, Tiller, Mint Grow Your Stash Faster: High Yield Savings with CiT Bank Free 401(k) Analysis: blooom Jumpstart Your Marriage and Your Money Simplify and Enjoy: Financial Freedom for Families 5 Days to $5K Course How to Save Money on Your Health Insurance and Expenses Hack the Affordable Care Act Guide Why We’re Switching to a High Deductible Health Plan How to Spend Less on Insurance Thank You to Our Sponsor Coastal! Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today. They have competitive rates on checking and savings accounts! Key Takeaways on Finding an Affordable Option for Healthcare Before we wrap up, I want to focus on a few key takeaways I got from speaking with Andy and preparing this episode.  Invest time in choosing your healthcare plan. Health care can be expensive, but simply going with the cheapest option can hurt you in several ways.  High deductible health plans aren’t for everyone. We have an HDHP and so far love it and so do many in the FI space, but that doesn’t mean it’s the best option for you.  Use tax-advantaged accounts to maximize your money. If you want to discuss this more, please come chat with us on Facebook in the Thriving Families Group. We’re supportive. We’d love to see you there! Support the Podcast! Thank you so much for listening to the podcast! If you enjoyed this episode and found it helpful, here are some ways to support it. Spread the word! If you enjoyed this episode and think it can help a buddy get on the path to dumping debt and become financially free, please share. Leave a review. Honest feedback and reviews make a big difference and gets the word out about the podcast. Leave your review on Apple or Stitcher. Grab a copy of Jumpstart Your Marriage and Your Money. My book is designed for a busy couple to set up their finances in 4 weeks. Get tips and tools that have worked for other couples on their journey of building their marriage and wealth together! Music Credit Like the music in this episode? Our theme song is by Gentle Regime. Additional music by Lee Rosevere and Logan from Music for Makers in this episode.
  1. Open Enrollment: Finding Affordable Health Insurance
  2. How to Boost Your Savings Rate (While Still Having Fun!)
  3. Three Key Numbers for Tracking (and Mastering) Your Money
  4. How to Reset and Knock Out Debt Together Before The Year Wraps Up
  5. How to Build a Budget That Actually works for You

And if you’re interested in how families can save, please check out my interview with Justin from Root of Good. He and his wife were able to retire in their thirties while raising three kids!

Handy Tools to Increase Your Savings Rate

If you’re looking to get ahead with your finances as a family, here are key resources to check out!

Thank You to Our Sponsor Coastal!

Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.

They have competitive rates on checking and savings accounts!

Key Takeaways on Growing Your Savings Rate

Before we wrap up, I want to focus on a few key takeaways I got from preparing this episode. 

  • Start as early as possible. Don’t worry about being about to sock away 20, 30, 40% of your income. Joe said it was closer to 3-5%, which is about where we began. 
  • Pay yourself first. Automating those transfers makes it easier on you and you’re more likely to stay on target. 
  • Minimize lifestyle inflation. Take any raises, bonuses, windfalls, or tax refunds and set aside a portion of that to go towards savings. You can still enjoy some fun now and save more, without  missing that money. 

If you want to discuss this more, please come chat with us on Facebook in the Thriving Families Group. We’re supportive. We’d love to see you there!

How much you save can have an incredible impact on how fast you reach your big financial goals. Learn how you can boost your savings rate while still having some fun now! #savings #fi #financialindependence #financialfreedom

How to Boost your Savings Rate

Elle Martinez: I think savings is such a foundational skill with your finances, no matter where you are in your financial journey.

Like you mentioned, emergency funds. That’s one of the first steps to have to give you that stability to help you when things come up like right now, we’re in the middle of a pandemic, but you know, even on a smaller scale have emergencies pop up, it’s good to have that safety net.

savings can also be important as we move further through our financial journey. When we’re talking about saving for goals, you know, whether it’s vacations, maybe a house down payment, or, you know, you’re saving up for starting a business or a family.

So I want to jump into that. Like how can we save more? first of all, let’s talk about savings rate because I think this is a number that isn’t discussed as much.

when we talk about savings rate, it’s how much money do you have that you’re putting directly towards saving, but you can get really nitty gritty on this. So, Joe, , how do you calculate your savings rate?

Joe Mecca: Oh, it’s going to be a hot topic. I hope nobody goes and tries to look up savings rate on like, Reddit afterwards. Cause you’ll get yeah, 150 different opinions .

So, I look at it. as simple division. That’s how I look at it. I take, what did I save this year? And I look at it year over year. I actually break it out paycheck by paycheck, but. The big picture is year over year.

what did you save this year? And then divide that by what you could have saved. So what that ends up looking for me, he is, you know, taking my retirement account contributions. I take money that goes into investment accounts.

anything that goes into cash, anything that goes into a savings account and then divide that by after tax income.

it’s your gross minus all your taxes. You’re going to have to not count ,your spending towards your medical premiums or those kinds of things.

The other deductions that aren’t taxes. Those are really. Spending. so it’s like, okay. So what did you, what did you contribute toward your savings and then what could you have saved?

yeah, so I look at 401k contributions. I look at IRA contributions, anything that I put into my brokerage account.

I then look at both of my HSA account and my money market account. And I just look at the net change on the year. So where did I start in January? Where am I now? Because those are accounts that money is going in and out of. but I just want to see, you know what’s the net on that.

Even though those are savings accounts. They’re more short term. So even if I was contributing a certain amount every week or every pay period in the, either one of those accounts, at some point during the year, there is a little bit that gets backed out and gets spent. So, I look at the net change for the year and then take that total and then divide that by. Okay. What was my gross pay minus all my, all the taxes that I’ve paid already. and then come up with a percentage. yeah.

So I do that two ways. One, I look at the actual for the year. But then I said earlier, I do look at what it is, paycheck by paycheck. So that’s kinda my target.

You know, I like automating one part, one part of the auto one numbers, part of the automation.

And one’s the real number that you hit. So, yeah, I aim to save like 55, 60% of each check, but in reality, the end of the year, that’s out to last year, I ended up about 40% savings rate. this year it’s been about closer to 50 so far.

Elle Martinez: that’s incredible. I think that that’s fantastic that you have a system. I think that’s important. wherever you are with savings to create a system, to make it automatic.

Automating it. makes such a huge difference. I don’t think you started saving like 50, 60%. How did you build up to that number? That wasn’t an overnight thing.

Joe Mecca: Not at all. I started closer to, you know, three or 5%. And I started, you know, when I was younger yeah. Was made it a point to, I’m going to contribute to my 401k plan. I’m going to make sure I get that match amount too.

and, Make sure I’m getting that every year. and then what I started to do is as, you get raises, as you get promotions and suddenly your incomes increasing, I’ve made it a point to first apply that difference into savings.

So, rather than have lifestyle inflation and suddenly it’s like, I can spend more, if I was suddenly taking home an extra hundred dollars a pay period, I try to figure out a way to make 75 of that go to savings and 25 go to my spending. so it’s, inflate the savings first, and then you can inflate the lifestyle later on.

Same thing as I’ve reduced expenses, you know, paying off student loans, paying off credit cards, paying off auto loans, those kinds of things.

As I’ve freed up that amount of money from them cashflow. I tried to apply it to savings first, rather than to spending.

and for me it’s all been about, you know, , how do I get those ratios? I look at, well, you know, what, what am I, what am I saving versus what am I, what do I need to live off of?

trying to get that closer to the point where eventually it could be what I have saved up is what I could live off of for.

A period of time, hopefully forever it’s just, as you find new sources of saving, be diligent about putting that into savings.

Elle Martinez: Yeah, I think you hit the nail on the head. AZ. Income increases, whether it’s, you switching jobs , get a raise, or if you’re paying down debt and now you don’t have that debt to, yes, you’ll have a little bit of a lifestyle increase. you don’t have to live like a poor college kid, your entire adulthood,

you automate some of that and funnel that into savings is I think that’s so important to kind of get into that habit. Cause you’re not going to miss it.

if this is a raise, you haven’t got it quite yet, but you funnel, whatever percentage you choose, you get the benefits. Yeah. We got a little bit more in our buffer, but now we also have much more or in our savings.

So I think that is absolutely key. And then, looking for opportunities, I think for us, when we paid off. Everything except for the mortgage. I mean, that’s an extra 600 a month. It was crazy. We had the student loans, the car loan and credit cards. That’s 600 now there’s that temptation.

Oh my goodness. I have 600. I can blow it. Or you can say, extra 200 for us is great. 400 to savings and that just keeps cycling or whatever number you decide to go with. So that’s a great point.

Joe Mecca: Something like that. It’s easy to start small too.

Elle Martinez: Yeah.

Joe Mecca: like I said early on it was maybe three or 5% savings. Right. and as you know, as things improved, you can grow that if you, if you add a percent or two every year, suddenly you get places.

Elle Martinez: Yeah. And I think some employers are starting to offer that. Cause I had that happen to me at one job where you set up contributions and I’ll ask you, do you want to increase it? Like after a year, do you want to automate that? And I thought, you know what, let me do it now because I probably will forget next year you get busy and , you put it off, but if you tell it, Hey, this year 5% next year, 6%, whatever it is you’re starting at and growing it.

Makes sense. And then I know for me as, okay, this will show you how much of a nerd I am, but I called to get a better deal with internet. And if I save even $15 a month, doesn’t sound like much, but throughout the year it adds up. I will immediately, as soon as I hang up that phone start increasing the transfer to savings by $15 a month.

That way it’s not just me. Saving money, but actually I can see the money being moved into savings that I can use for the goals I’m really looking forward to.

Joe Mecca: I am in the same. Yeah, I’ve tried to cut out. Cause we talked about paying now loans, but just trying to cut out different expenses along the way, too.

I ended up canceling my cable. It was my biggest bill, and it just kept going up, but I wasn’t getting the value out of it. I was mostly using the internet and watching streaming services.

So, I called up and said, Hey, you know, this is my biggest bill. You’re charging me more than what your competitor offers for internet. if I compare the two, I’m better off just switching, and they didn’t match it. They wouldn’t match it. So I left

I’m going to switch to your competitor. And now I’m paying a third of what I was paying. A year ago. and I’m enjoying it a lot more.

I’ve got better service and, and I’m not missing all the TV channels. Yeah. I’m getting what I want off of streaming.

I’m spending more time watching online videos or just reading and, you think being at home, I’d watch more TV. I’m watching less.

A lot of that probably has to do with the fact that there’s no sports right now, but. yeah. And then you could take that difference and then you could just apply that to savings.

So anytime I retool my spending, the first place I look is, Oh, we’ll kind of put a little bit more into my savings account. yeah.

You have to find a lifestyle that you’re comfortable with. And then a savings, right. That goes with it. And then, okay, well now figure out a way to fund that lifestyle for as long as possible, if it’s not quite as luxurious as is some people then, so be it.

if you can get your savings rate way up and suddenly you can like, okay, well, if I live off of this percentage of that for a long, long period of time, that means I could spend a little bit more.

So now you can adjust your lifestyle up because you know, you’re building to build a better, you know, to sustain a better lifestyle.

it’s all about doing the math and getting comfortable with where you are and then having the discipline or the. Automation to a, I’m always going to go to automating. but having the ability to continue to feed that savings and, and building that up year over year, over year.

Elle Martinez: Yeah, and I think you’re right. Savings really is about choices. moving your money to, you know, who and what matters most to you. And. There’s different ways to save. Like you’ve mentioned a few different accounts, almost sound like ABCs with the, the HSA and everything, but I wanted to talk to you, you know, a lot of families, couples, they are saving for several goals.

You know, they want to go on a vacation. Maybe they’re saving for a house in a few years, or they’re thinking of starting a business.

What are some. Different account options that they should consider? What are the differences, for example, like a regular savings account versus a money market account or a CD?

Joe Mecca: let’s talk specifically about savings and then we’ll put the retirement and longterm investment stuff aside, but for short term savings or near term savings, you’re going to want money that you’re going to have access to. It’s gotta be liquid.

so your options really are you can put it in a savings account, a high yield checking account, which is you a checking account that actually pays, pays you a dividend.

you can put it in a money market account, which, Yeah, it really is, is an enhanced savings account. And you’re gonna earn a little bit more, interest off of a savings or than you will on a regular savings account. May have some other restrictions around it, but generally they’re largely the same as a savings account.

or you can put it into a certificate account where you’re locking up that money for a period of time, in exchange for a better rate.

the beauty of all of those are your rate of return is going to be guaranteed. It’s going to be part of your agreement.

unlike an investment account where you’re in the market and you’re subject to things going up or down with time and having the potential to lose your investment. You’re not going to have that with a savings account.

You’re not gonna earn quite as much when on the rate as you could in a good market, but you don’t run the risk of losing that money either, which makes it ideal for the short term.

Elle Martinez: Yeah. I think that’s perfect too. Talking about your goal timeline. if you are wanting a down payment for a house, you want to make sure that that money that you put in is in there. You don’t want to take your chances.

Sure. It could double, or it could drop. I know this year, just the way it timed out we opened a brokerage account. we were putting money in, and this has been a roller coaster year. April was it’s a little bit painful, but you know, thankfully, you know, we’re thinking more longterm, so it did bounce back.

But if you’re looking short term for that, That money. You don’t want to have that volatility. You want to have that stability and then enhancing your savings. Like you mentioned, with accounts like money market or a certificate of deposit, at least, you know, that you’re earning a little bit more .

Joe Mecca: And you’re going to have access when you need it. So anything under, if you know, you’re going to need that money inside of, let’s say. Five years. You’re probably going to want to go with, with a savings or savings type account, versus, you know, longer term investment where you, you don’t know what’s going to happen.

You don’t know what’s gonna happen longterm either, but you know, in the longterm things tend to trend a little bit more positive.

Elle Martinez: Yeah. for example, when we talk about investing every year, it could be very volatile, but if you look at the longterm trend, it does increase. So , identifying about what the time range is for your goals can allow you to find. The right account for your money and your savings.

About Elle Martinez

Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..

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