How To Save Money On Groceries

At A Glance – Groceries can be a real budget buster. Here are 15 ways to save money on your groceries.

Food is one of the essentials of life. We have to eat. And food is considered one of the BIG 3 in any budget. Those three are Housing, Transportation, and Food.

Groceries can be one of your largest monthly expenses, so it’s important to save money with every frugal tip you can find.

15 Money-Saving Tips For Groceries

1. Make A Plan And A List…Then Stick To It

This is my top tip to save money on your groceries. Make a meal plan and grocery list before you leave the house. When you get to the store, stick to the list. Don’t give yourself any room for budget-breaking surprises. If you go shopping as a family, let your kids help plan the meals and find the items (it’s like a grocery store scavenger hunt!). It’s much easier to stay on budget when you’re shopping with a plan and working as a team.

2. Don’t Shop When You’re Hungry

I’m sure you’ve heard this before and it’s true. We do crazy things when we’re hungry. “Please step away from the family-size pack of Little Debbies!” For me, it’s the junk food at the check-out. If I’m hungry, I feel I need to reward myself with a bag of chips or a candy bar.

So grocery shop on a full stomach!

3. Look In The Pantry First

This is an overlooked tactic, but a great one to help save money on your groceries. Challenge yourself to check through your pantry and fridge to see what meals you can put together with what you already have. Better yet, set up a 30-day challenge to use what’s in your pantry and only buy the essentials like milk and produce. You probably have items you’ve forgotten were there or are about to expire.

4. Batch Cook And Cook Ahead

This can save you time and money! Buy ingredients for your favorite recipes in bulk when you find them on sale. Take a Saturday, batch cook, and freeze the meals to use in the next few weeks. Or make freezer bags with your raw ingredients to pop in the crockpot or Instant Pot. You can find recipes at The Family Freezer and other websites for freeze-ahead meals. Or just use your family’s favorite dishes. Most meals will freeze for later use.

Examples of what I batch cook and freeze are Spaghetti sauce (using the large $3.00 can of tomato sauce from Sam’s), any type of Mexican casserole, Chili, Tortilla or Vegetable soup, Taco meat, Chicken Pot Pie, and Meatloaf.

Be sure to research the proper containers and methods to freeze food for the best results. Here is the Taste of Home Guide to freezing food.

Pro Tip: When you cook a casserole to freeze for later, line the pan with foil and cook according to directions. Then freeze the casserole in the pan. When frozen solid, remove the food and wrap it well for freezer storage. Then you get your pan back! When you are ready to reheat, pop it back in the pan it was originally cooked in.

5. Simplify Dinners

Dinner is your most expensive meal of the day. Look at how you can simplify to cut costs (and time). You don’t need a three-course meal every day. Try sandwiches, omelets, or a big salad a few times a week. Kids think breakfast for dinner is cool and eggs are cheap. One of my favorite dinners as a kid was bacon and eggs with biscuits. You can try frittatas or quiches for something a little fancier. I chop enough veggies for several salads and store them in plastic containers. That way I can make a salad for dinner in minutes.

6. Use Your Calculator While You Shop

If you keep a running tally of how much money is in your cart, you’ll save yourself from any surprises when you get up to the checkout line. Pull out the calculator on your phone and keep track of everything you’re putting in your cart. This might make you stop and ask yourself if you really need that fancy $5 sparkling water that isn’t on sale?

7. Buy In Bulk – Or Not

Many items are cheaper if you buy them in bulk. Especially at a big box store like Sam’s or Costco. The key to shopping at these stores is to know your unit price. Is the 35-roll pack of toilet paper really cheaper than the 12-roll pack at the grocery store? Maybe, maybe not. You need to know your unit price at both stores to decide.

Also, don’t assume the larger container of an item is cheaper without checking the unit price. The price per ounce on the smaller box of cereal is sometimes cheaper than the larger one sitting next to it. Use the calculator on your phone or check the per ounce price on the shelf sticker. (Beware, I’ve found the stickers aren’t always correct.)

Pro Tip: When freezing items bought in bulk, freeze them as flat as possible. They will thaw in a shorter time and you can remove individual pieces without thawing the whole container. For example, I split up a large package of ground turkey into one-pound portions and freeze in ziplocks. Flatten the meat and squeeze out the air. Then you have a flat package to stack in the freezer. Other items like fruit or pork chops can be pulled apart while still frozen so you don’t thaw the whole ziplock bag full.

8. Know When To Shop

Many grocery stores start the new ads on Wednesdays and some stores will honor both last week’s and this week’s prices on Wednesdays. Check if your store does this.

Time of day plays a big role with bargains too. The early bird gets to hit the clearance shelves first! Find the section in your grocery store where the clearance items are. There may be separate clearance areas for produce, meat, and non-perishables. Find out what time of day those items are put on the clearance shelves.

9. Use Your Leftovers!

I’ve heard many people say “My family won’t eat leftovers.” I’m sorry, but that’s just silly. I can’t imaging cooking a new meal from scratch every day! OK, enough of my rant.

Even now that there are just two of us at home, I still cook large batches or full casseroles and either freeze the leftovers for another day or for lunches. Buy containers that will hold individual servings and take your lunch to work. BIG SAVINGS. Freeze leftovers servings of a casserole for another meal. (Be sure NOT to refreeze a meal that has already been frozen and thawed once.)

10. Use Cash

I know many people use credit cards for the rewards points, but you can save money by using cash at the grocery store. When you buy with a credit or debit card you don’t feel the pain of the purchase. You feel the emotional consequences of handing over a Ben Franklin or two! It makes you think about what you have in your cart!

11. Use Curbside Pickup

This can save you time and money. Most stores are not charging an extra fee for curbside pickup. Order your groceries online from home and pick them up at your convenience. You will not be tempted to “graze” through the store and buy budget-breaking items, plus you can check your pantry as you order.

This is a great way for moms of young kids to shop without losing your mind or your patience!

12. Shop In Season

Fruits and veggies are available year-round in our grocery stores, but we pay a premium to buy out-of-season items. Strawberries can be twice the price in the winter or oranges and apples don’t taste so great right before the new crop comes in. Buy in season for the best deals.

13. Try Different Grocery Stores

I know that spending hours going to different stores is not your idea of a good time! But if it’s possible, shop different stores. When I lived in Texas, I had Kroger, HEB, Sprouts, Walmart, and Aldi within minutes. I learned who had the best price on what kinds of items. I would use the ads to plan which stores to shop for that week’s groceries. Time may not allow you to do this on a regular basis, but try it a few times until you learn the layout and items stocked in each store.

14. Learn The Sales Cycles

Most true grocery stores run their ads in cycles. Six, nine, or 12-week cycles. Find out if your store does this and plan your menus accordingly. If you know that frozen veggies will be on sale this week, you can plan to make a few batches of soup or pot pie for the freezer.

15. BYOB

Nope, it’s not what you think.

It’s time to bring your own bag to the grocery store. Lots of stores will give you a discount on your total grocery bill just for bringing in a reusable bag. How easy is that? Your savings will usually run somewhere between 5 and 10 cents per bag. Keep some reusable bags in your car so you don’t forget them at home.

What Our Readers Say

“Eat simple, full meals, and no snacks. Snacks will blow up your grocery budget like Violet Beauregard.” – Andrew

“Make a list!” – Angannette

“Don’t go to the store when you’re hungry. You’ll buy everything. Also. Don’t buy perishables in bulk.” – Stephen

Key Takeaway – Don’t let food bust your budget. You can save money on your groceries by being intentional and doing a little planning.

Assignment – Pick one of these tips and use it on your next trip to the grocery store. Then add another with each shopping trip until they are your new normal. Keep track of your savings just for fun!

Coming Soon – The tax advantage of an HSA. Are you getting all you can from yours?

What’s On Your Plate?

At A Glance – Do you find yourself over-extended or wanting to quit? What’s on your plate now and what will get added this fall? Sometimes we need to stop and ask what the Lord wants us to do today.

Have you ever found yourself overwhelmed with tasks because you said “Yes” too many times? If you’re like me, it’s not a matter of “Have I”, but more like “How often!” I find myself there too often!

The other side of that coin is to have something on your plate that has become hard or frustrating. Do you have an assignment or task you want to quit?

Been there, done that! I’m sure I’m not alone. You have probably found yourself in this position, too.

A New Season

We are entering a time of year when lots of activities start. Even though some of us are not tied to the school calendar anymore, many things still operate with this cadence. Start in September and run through the spring.

What are you being asked to do? To add to your plate?

My experience has been to pray about my choices beforehand and to let the Lord guide me. Multiple times I’ve had that nudge from the Holy Spirit that says “This is not for you.” Or I’ve felt the pure joy when I’m aligned with what the Lord wants and I can tell “This is right!”

I want to share a post from my good friend Brenda Koinis who writes at Smoother Sailing – How to’s From the Big Book. She shares some wisdom from Paul in the book of Colossians about this topic.

Think about this as you make your plans for this next season of serving.

What’s On Your Plate?

Raise your hand if you’ve:

  • Already read the book of Colossians several times.
  • ‘Done a Bible study on it?
  • Heard countless sermons where the text is taken from that popular letter of Paul’s?

Then join me in being somewhat astonished that there’s always something new to learn there. Here’s what I read today:

“Tell Archippus: ‘See to it that you complete the work you have received in the Lord.’” (Colossians 4:17).

Now, I’m just guessing here, but since Paul saw fit to include that line in his letter, maybe Archippus was tempted to quit. Quit what? Who knows? But whatever it was, it was a task the Lord had given him, and one he was meant to complete. And, evidently, he needed a bit of solid encouragement and direction to do just that.

The Work You Have Received From The Lord 

What work have you received from the Lord? Ah, yes, we all take on tasks we shouldn’t, maybe out of pride or greed or simple American ambition-on-steroids. That’s a lesson for another day. I’m talking about work you know in your heart the Lord wants you to do. It might be a life’s work. It might be an afternoon’s calling. Some versions of Colossians 4:17 use the word “ministry” instead of “work” to describe what Archippus needs to keep doing. I believe all work the Lord calls us to do, whether lofty or lowly, is really our ministry. So, no matter what the task might be, don’t quit!

  • Is it slow going? Don’t quit. God’s timing seldom matches our own. Be patient. Trust. Worship as you wait.
  • Is it hard? Hard is okay. Hard just reminds us that we need Him. Ask the Lord to equip you.
  • Is it obvious that the outcome will be far different than what you expected? That’s okay, too. ‘Better His outcome than yours, even if that’s a tough truth to swallow.

Paul’s directions to Archippus don’t make it onto many Bible memory programs, but I hope you’ll work on committing his words to memory this week anyway. Let them soak into your soul so they can pop into your mind just when you need the encouragement to persist. Here they are one more time:

“Tell Archippus: ‘See to it that you complete the work you have received in the Lord’” (Colossians 4:17).

Here is the direct link to this article on Smoother Sailing.

Key Takeaway – Give any long-term request for your time thought and prayer before you say Yes. Be open to the small opportunities to serve and encourage.

Assignment – Evaluate what’s on your plate now and what is coming for the Fall. See what your “work” from the Lord is.

Coming Soon- How To Save Money On Your Groceries

My Recent Used Car Buying Experience

At A Glance – Most of us don’t purchase a vehicle that often. Here are some lessons I learned while buying a used car.

Show of hands…how many of you like the car buying experience? NOT ME! Oh, don’t get me wrong, I like the end result; a new-to-me vehicle. But I don’t like buying a car. I don’t enjoy all the shenanigans at the dealership. The haggling, the “I’ve got to go talk to my manager,” and the time it seems to waste.

But, there are times when we have to do it. Whether we like it or not.

I recently found myself needing to buy a car. I liked the car I had, but now I need a car that will tow a trailer, and my Highlander will not do it.

My previous car purchase was done at CarMax. It wasn’t too painful. We shopped the lot and found the Highlander we wanted. We traded our current vehicle and drove out. It took a few hours. Not too bad.

I knew this experience might be different. We had a specific need that not too many vehicles would meet. This meant probably going to a dealer.

The experience was actually rather pleasant. I learned a few things in the process and thought I would pass them on.

Lessons Learned From Buying A Used Car

2021 Covid Weirdness

As with other consumer products in 2021, used cars are overpriced.  It really wasn’t a good time to buy, but since I was trading one used car for another, I hoped all would even out.

Lesson Learned: My opinion is not to buy a product that has become overpriced because of Covid shortages. I had planned on a home remodel in 2021, but am waiting till lumber prices stabilize. New vehicles are part of these shortages, which is causing used cars to be overpriced. Be aware of the price of both your purchase and your trade-in.

Do Your Homework

We found the right vehicle for our purposes the first day we looked.  This was unexpected.  The right model, year, and price range was on the lot.  We made a deal that day.

Lesson learned:  We had already gone through our numbers.  We had determined how much we would probably get for our trade-in and how much we could spend in addition to that.  All the research we had done prepared us to make a decision quickly.

The Benefits Of Being FI

When the right vehicle was found so quickly, the process was easy because we were ready with the funds.  No financing needed! Being FI made this experience stress-free!

Lesson learned:  Being FI gave us the flexibility to act quickly and to make the decision that was right for us.  And, we didn’t have to spend a painful hour or two in the finance office! We were confident about our numbers and this deal met the criteria.

Look At Everything On The Car Before You Finalize The Deal

This was our biggest lesson. We looked at the car, but not in great detail.  We found a few things that needed to either be replaced or cleaned.  The dealership agreed to everything we asked for.  Including replacing all 4 tires and shampooing all the carpet a second time.

Lesson learned: We should have looked closer.  The dealership agreed to all our requests.  I’m sure there would have been a point where they said no, but we might have gotten more out of the deal. After we got home, we discovered other things we should have asked for.

Your Choice of Dealership Matters

Our personal experience over the years is that dealerships matter. Several years ago we bought a used Toyota Matrix from a Lexus dealership. We were treated well and given a very fair price for our trade-in.

Another experience did not go so well. After negotiating a price on purchase and trade-in, we decided not to buy. It wasn’t the right deal for us. When we were ready to leave, they suddenly “lost the keys” to our trade-in. We finally had to get nasty to get our keys back so we could leave!

Lesson Learned: If you are buying a vehicle from a dealership, sometimes a high-end brand will give you a better experience. But, no matter the brand, if you are not being treated well – they don’t need your money! If the deal is not good for you, be prepared to walk away.

Key Takeaway – Do your homework before you purchase any depreciating asset. Know what you want, what you can afford, and why you’re buying it!

Coming Soon – Saving Money on Groceries

What Is A Sinking Fund and How To Use It

At A Glance – a sinking fund is a way to save ahead for large purchases and smooth your monthly cash flow.

What Is A Sinking Fund?

A sinking fund is a way to save for a future purchase or bill by setting aside a little money in your budget each month. It can allow you to make a large purchase with cash.

An example would be to set aside some money each month to pay for a large dental bill that you know is coming. Or you could save some money each month to purchase a couch without putting it on a credit card.

Sinking funds are great for things that don’t come out of your regular monthly budget, like:

  • Vacation
  • Large home repair that you know is coming soon, like a roof or air conditioner
  • Wedding
  • Tuition/Books
  • New tires or brakes for your car
  • Yearly bills like insurance, property taxes or income taxes
  • Furniture
  • Kids athletic fees

Sinking Fund vs Emergency Fund

A sinking fund is different from an emergency fund. An emergency fund is to cover the unexpected. Those things you don’t know are coming, like a flat tire. A sinking fund is for something planned. You know the approximate cost and when you will need the money.

Benefits of A Sinking Fund

There are several benefits of using a sinking fund.

A sinking fund smooths out your budget and monthly expenses. If you know you are going on vacation next summer or the water heater is about to go out, you can smooth your cash flow by saving a little each month. This is easier on your finances than paying a big bill all in one month.

You can avoid fees or interest. Saving the money ahead and paying cash won’t cost any credit card interest. That saves you anywhere from 18-29%! And the “90 days same as cash” almost always costs you something. Either because you don’t pay it in 90 days, or because the price has been inflated to cover the cost of financing.

Planning purchases ahead sets you up for wiser spending. If you are saving for an item over several months, you have time to evaluate if you REALLY want that item. Or maybe you can find it cheaper in the meantime.

You can spend without guilt! If you have evaluated what, when and how much you are spending on an item, then you can purchase with no guilt. There shouldn’t be any buyer’s remorse!

Cash gives you the power to negotiate. If you are paying cash for a large item, ask for a discount. Many businesses, including doctors’ offices, will give you at least a small discount for paying cash. They don’t have to pay the credit card transaction fee.

How To Create A Sinking Fund

A sinking fund is easy to set up and use. You can set up a sinking fund for anything you like, and have as many as you like. The money can be kept in cash or in a savings account. I put mine in a savings account and then use a spreadsheet to keep track of what is in each fund. You could also just use a pencil and paper.

First, decide what item or bill you want to save for. In the sample chart below, I am saving for 3 things. The next car I will buy, a vacation and a roof.

Next, determine their price and how long you have to save. In the example, I’m planning on spending approximately $20,000 on a car in 6 years (72 months), $2,000 on a vacation in 12 months, and $5,000 on a roof. I’m guessing the roof will need to be replaced in about 5 years.

Then divide the price by the number of months you have to save. In my example, I will need to save $275 per month for the car, $165/mo. for the vacation and $140/mo. for the roof.

I have a line in my spreadsheet for each fund to keep track of how much I have accumulated. In the example below, I have been accumulating for the car for 15 months, the vacation for 3 months, and the roof for 6 months.

ItemMonthly depositTotal So Far
Car (20k, 3 yrs)$275$4,125
Vacation (2k, 12mo.)$165$ 495
Roof (5k, 3 yrs)$140$ 840

Be sure to put the monthly amount you are saving for each sinking fund in your budget. If it is for a one-time item, delete the line item when you are done. If it is for something like Christmas, determine how much you want to spend, divide by 12 and add it as a permanent budget item.

My First Sinking Fund

The first time I used a sinking fund was years ago for my car and homeowners’ insurance. My insurance company let me pay by the month but charged me $5/mo. to do so. At that time I didn’t have several thousand dollars to pay it in full. So, I made the monthly payment and then set aside a little more. It took a few years for me to accumulate enough, but eventually, I paid the bill in full for the whole year and have been doing so ever since.

As an example, let’s say the policy costs $2,400 per year. I paid the bill of $205 ( 1/12th of the policy + $5 charge) and also saved back an extra $50/mo. It took 4 years of saving, but I was eventually able to pay in full. I had “caught up” with the extra. During those 4 years, I paid the extra to the insurance company at the beginning of each policy period and shortened the time it took to pay the policy off. That way I eliminated a few of those monthly charges as I went.

Key Takeaway – A sinking fund is a great way to save for future items or bills. This allows you to pay cash, avoid interest or fees and smooth your monthly cash flow.

Assignment – Look at any large purchases you have coming in the next few months. Selecting one of them to try out a sinking fund. Determine the price, the number of months till purchase, and the amount per month you need to save. Try this on one upcoming item and see how good it feels to pay cash for something large!

Coming Soon – My Recent Used Car Purchase

Where To Start With Your Money

At A Glance – Are you feeling stuck with your finances? Do you wonder where to start with your money? Here is a step-by-step guide to help get your finances in shape. No matter where you’re starting, this guide will help.

Getting your finances in order can be a scary task. Where do you start? Who do you trust? What if you get it wrong?!

Don’t worry, I’ve experienced all these emotions, and I did sometimes get it wrong! After all, most of us weren’t taught any of this personal finance stuff.

So, I’ve put together a step-by-step guide to help you get on track with your money. This is based on my own experiences and what I’ve learned. It’s not complicated and it is totally doable.

For me, the first step was changing my mindset about money. I learned to be in control of my money decisions and not let my money control me. I learned to be intentional. Every dollar that left my hands was scrutinized. Now, most of my money decisions are on automatic.

There are stand-alone articles related to most of the steps below. If you’d like to dive deeper into any of these topics, just click the link.

Step 1: Evaluate Where You Are Right Now

The best place to start managing your money is to evaluate where you are now. No guilt, no shame. Just look at where you are. This involves adding up all your debt (what you owe) and all your assets (what you own). The difference between those two numbers is your Net Worth. This gives you a feel for where you stand.

Here’s a guide and spreadsheet to help you determine your Net Worth: Figuring Out Where You Are Right Now.

Step 2: Track Your Spending

Your next step in evaluating your current situation is to track your spending. You need to know where your money is going. Every dollar that leaves your hands needs to be looked at. Track your spending for at least 3 months. Six would be even better. Life is lumpy and no two months will be exactly the same.

This article includes a spreadsheet to show you how to Track Your Spending: Tracking Your Spending And Why You Should.

Step 3: Use A Budget (At Least For A While)

I know, I know! For some people, budget is a dirty word. But it sets up your mindset and your money for success! You don’t have to use it forever, but for a season, it’s a good plan. There are many good reasons to use a budget. I still use a budget and track my spending. For me, it puts guardrails on my decisions so I don’t lose focus. Put together a budget that you will actually use. It can be pencil and paper, a spreadsheet, or an app. You choose.

Budgeting articles with spreadsheet: 1. How To Do A Budget and 2. Benefits Of Using A Budget.

Step 4: Set Up An Emergency Fund

An emergency fund is essential for you to be successful with your money. At first, it can be a baby Emergency Fund of $1,000. Then later your can fully fund your 3-6 months of living expenses in your EF. How good would it feel to have $1,000 in the bank!

Most Americans cannot handle a $400 emergency. If your car breaks down and you have to put the repair on a credit card, you have just unwound all the good you’ve been working for. An EF helps you get through life’s bumps.

This explains the Emergency Fund: Why You Need An EF And How To Get One

Step 5: Get Your Employer Match

If you have an employer plan, like a 401k, you need to get the match. Deposit enough money in this fund to get whatever match your employer offers. This is free money!

Step 6: Get Out Of Debt

All your non-mortgage debt needs to be paid off. Debt is the enemy of wealth and you will not be successful with your money if you are paying out 10, 20, or even 30% interest on your debt. It needs to be paid as quickly as possible. This is a Hair On Fire situation!

Debt Pay-Off Articles: 1. How To Pay Off Debt, 2. How To Pay Off Credit Card Debt, 3. How Credit Card Debt Can Get Out Of Control

Step 7: Start Saving Money

After all non-mortgage debt is paid, look at your budget and see how much you can save. How aggressively you save is up to you. The higher your savings rate, the faster you will reach a place of comfort with your money. How much you do or don’t sacrifice now is up to you. Put your savings on automatic whenever possible. That way you’re not tempted to spend the money on something else.

A getting started guide to Saving Money: How To Save Money

Step 7B: Save For Large Purchases

Along with saving for retirement and your awesome future, save for large purchases and pay cash. This is another tactic for financial success. Save up for the next car, set of furniture, or home remodel and pay cash.

The Sinking Fund: Coming Soon!

Step 8: Don’t Buy New Cars

A new vehicle depreciates dramatically in the first few years. According to industry experts, the value of a new vehicle drops by about 20% in the first year of ownership. Over the next four years, you can expect your car to lose roughly 15% of its value each year – meaning the average car will be worth just 40% of its purchase price after five years.

Buy a good, clean, and well-maintained used car – for cash. Let someone else take the depreciation hit!

Step 9: Start Investing

Your money can grow and work as hard as you do. The most common places for investing your saved money are in the stock market or rental real estate. I personally invest 100% of my retirement savings in stocks, bonds, and treasuries.

Investing: How To Start Investing – A Beginners Guide

Step 10: Keep Learning!

Keep learning. I do. Read books, listen to podcasts, and get an accountability partner. You know, that person who is willing to say the hard things because they care about you.

One great resource for someone just getting started is the ChooseFI Foundation’s FI 101 course. It is a self-paced online course that covers the basics. The best part is you’re not alone. There is a great online community where you can ask questions and share your wins.

If you haven’t already, please consider signing up for my monthly newsletter. It includes tips, life hacks, info about my latest articles, and a frugal and healthy recipe. I promise your email address will not be sold and I will not spam you!

What Does The Bible Say?

Here are a few examples of verses on frugality, saving, Emergency Funds, and wise money management.

When they were filled, He said to His disciples, “Gather up the leftover fragments so that nothing will be lost.” John 6:12

Then let them gather all the food of these good years that are coming, and store up the grain for food in the cities under Pharaoh’s authority, and let them guard it. Let the food become as a reserve for the land for the seven years of famine which will occur in the land of Egypt, so that the land will not perish during the famine. Genesis 41:36-36

There is precious treasure and oil in the dwelling of the wise,
But a foolish man swallows it up. Proverbs 21:20

She looks well to the ways of her household,
And does not eat the bread of idleness. Proverbs 31:27

Key Takeaway – Use these 10 Steps to help get a handle on your money and build a better future for you and your family.

Assignment – Start with Step 1 and work your way through Step 10. Your future self will thank you!

Coming Soon – The Sinking Fund

What Is FI or Financial Independence?

At A Glance – Financial Independence gives you freedom and options. FI can mean work is optional and YOU choose how to spend your time and money.

Definition of FI

FI or Financial Independence means having enough money saved and invested to cover your living expenses without having to work again.  This means your assets and investments are generating enough income that you are no longer dependent on a paycheck.

These assets could be one or more of the following: money that is invested, passive income from a business, or rental real estate.

Why Would You Pursue FI?

Being financially independent means you have choices. It means the freedom to pursue your dreams. To spend your time the way YOU choose.

FI could mean traditional retirement, but it doesn’t have to. FI can provide a multitude of options.

Having the ability to pursue a passion project. You might have a hobby, charity or project that lights you up, but you don’t have enough margin in your current life to pursue it.

Having time to spend with your family. I don’t think anyone ever reaches the end of their life and says, “I wish I’d spent more time at work.”

Having the freedom to travel. Are there places you’d like to visit, but you can’t fit it into your limited vacation time at work? How would you like to spend a month living like a local in your favorite destination?

Being able to take a job you love, but with lower pay. Is there a job that you know you’d love, but you can’t take it on because it won’t pay enough? With financial independence, you can have a job you love no matter the pay scale.

Being able to walk away from a toxic job, or not being afraid of the next layoff. If you are living paycheck-to-paycheck, a layoff is a catastrophe. If you work in a toxic situation, you might feel you have no choice because you NEED the job. Fi gives you some cushion to find another job or negotiate a better situation at the one you have.

How Does FI Compare To The “Normal” Path?

The Normal Path

Most of us have drifted into the “normal” path for our lives. It’s what society expects and what everyone around us is doing.

Here’s the scenario. Get good grades so you can get into college. Get the college degree that will usher you into a good job – along with the five or six figures of student loan debt. Get the big house, buy 2 new cars, and trade those cars up every few years. Then remodel the house to be HGTV worthy. Buy the boat and the toys, but you won’t use them much because you’re working 50-60 hours/week. Work for 40 years and retire.

It’s the American Dream, right? But with the payments and stress that comes with that lifestyle, it can easily become the American Nightmare! I know – been there, done that. Read my story here.

Stephen and I started our lives on the typical consumer treadmill. We had good jobs with middle-class pay. We immediately bought a house and a car. Then a boat and a yacht club membership. Because we started out with a card table and a hand-me-down loveseat, we thought we were being frugal!

Everyone around us was in the same consumer trap, so we didn’t think there was a problem. We were like the frog in the boiling water – we didn’t notice we were getting cooked.

The FI Path

What if you could turn the “normal” path into one where you are in control of your destiny? What if working was an option. What if vacation was on your terms?

Financial independence offers you SOOO many options. In addition to those stated above, it brings peace and joy. You have the time, the mental bandwidth, and the resources to pursue your dreams and your goals. You can align the way you spend your time and energy with your values.

How Do You Calculate Your FI Number?

As I mentioned above, being FI is when you have enough money saved and invested to cover your living expenses without having to work again. So how much money is that? How do you calculate your “FI Number?”

There is a rule of thumb that is generally accepted as the way to calculate your FI number. It’s called the 4% Rule. The 4% Rule says if you withdraw approximately 4% of your invested assets per year, you will not run out of money. You can calculate the amount of money needed in investments by multiplying your annual expenses by 25.

Annual Expenses x 25 = Amount needed in savings

OR

Savings x 4% = Amount you can withdraw per year

For example, if you have annual expenses of $40,000, you will need $1,000,000 in savings. Or, stated another way, if you have $1m in savings, you can withdraw approximately $40,000 per year and not run out of money.

Calculating Annual Expenses

This means you need to know what your annual expenses are. If you already know what you spend per month or per year, Great! If you don’t, you will need to look at your spending to find out.

One way to get this number is to Track Your Spending for a period of time. You really need to track your spending for more than one month to get a good feel for what your life costs. Life is lumpy and no two months will be exactly the same. I would suggest you track for at least three months. Six would be even better. Then you can catch big things like insurance premiums or property taxes.

Another way to get a feel for what your life costs is to look back at your expenses. Look through your checking account and credit card statements. Any place that shows where money has left your hands. Add it up for a period of time and then see what that would be for a year. For example, if you have tracked or looked back for a six-month period, multiply that number by 2 and you will have what an entire year costs.

Now, take that yearly number and multiply it by 25. This gives you your FI number!

If this is a much larger number than you were expecting, you may need to evaluate your current situation. Can you cut back on your spending? Can you increase your savings rate? Either of these tactics will help get you to FI faster. For every $100 you can cut out of your overall spending, you will need $2,500 less in your investments.

How Do You Achieve FI?

Reaching FI is about your mindset and your savings rate. You can increase your savings rate by increasing income and/or decreasing spending. If you are young, you can manage with a lower savings rate and take a little more time. Or, you can increase your savings rate and get to FI sooner. If you’re not so young, like me, you need a hefty savings rate to get to the goal line. Either way, YOU choose, because YOU are in control.

Be aware, I am NOT suggesting that you live a life of depravation to get to FI. That is not the point. I don’t want you to be miserable for the next 10 years while on the path to FI. Enjoy your life as it comes. But with a few modifications and some intentionality along the way, you can optimize your life now in order to build a prosperous and meaningful future.

There is a cornerstone article I’d like you to read on the Mr. Money Mustache blog that explains how your savings rate and FI are related. It’s called The Shockingly Simple Math Behind Early Retirement. The first sentence in this post says, “This is the blog post that shows you how to be wealthy enough to retire in ten years.”

Again, FI is not necessarily about retirement. It can be, but it’s more about choices and freedom.

Types Of FI

There are as many different types of FI as there are people in the FI community. Here is the description of a few.

Half FI

Half FI is just what it sounds like. This would be your yearly expenses x 12.5. Congratulations! You’re halfway there.

Lean FI

Lean FI is when you have 25 times a “lean” budget saved. You could stop working, but you would be living lean.

Coast FI

Coast FI is defined this way. You have enough in savings that if you never added another dollar to it, you could retire at a normal retirement age. This means you have enough to “coast” into retirement. You only need to earn enough to cover your current expenses without saving any more.

Barista FI

Barista FI loosely means you have enough money to be “mostly” FI. It could mean you work a part-time job to have something to do or to supplement the amount of money you are withdrawing from your investments. That way you could withdraw something less than 4%. Along with your part-time pay, it will provide enough income to give you the lifestyle you desire.

Another reason for pursuing Barista FI is health insurance. Some folks have enough in savings to retire to the lifestyle they choose but would like help with their health insurance. There are a few companies that provide healthcare insurance coverage to part-time employees. In the past, one example of this has been Starbucks. I believe this is where the term “Barista” FI came from.

FI

Regular FI is our normal definition of 25 times annual expenses saved. You don’t have to work again if you don’t want to.

Fat FI

Fat FI is when you have more than you need for regular FI. This would be defined as, say 30 times annual expenses, instead of 25 times. You have enough saved to have a life full of richness and generosity.

What Does The Bible Say?

God calls us to be good stewards of all He has given us. The bible tells us God loves a cheerful giver. It also says we are to be wise managers. I don’t want you to think I’m endorsing accumulating wealth just for the sake of wealth. Or that we should accumulate wealth only for our own comfort and pleasure. How much can you do for the Kingdom if you have the freedom to use your resources and your time for Him? How much can you do for the Kingdom when you are free of debt and financial burdens? We can’t do much for God if we are living paycheck-to-paycheck. That is bondage that affects our family, our witness, and our own relationship with the Lord. God wants us to give generously. Not only of our money, but of our time, our resources, and even our skills and talents.

Reader Responses

I recently asked my Started At 50 Facebook group, “What does FI mean to you?” Here are a few reader responses.

Randall: Freedom to live and give. I’ve discovered that giving to worthy causes and individuals in need is a lot more fun and fulfilling than spending.

Ashley: Having enough money that I don’t have to work if I don’t want to.

Brenda: I had time to enjoy my newborn grandchild this week, without thinking about a work schedule.

BL: Freedom and peace of mind.

Diana: Able to book one-way ticket to help someone and not worry about having to be somewhere to cut stay short.

Michelle: Being able to retire and not have to worry.

Key Takeaway – Financial Independence gives you freedom and options. FI can mean work is optional and YOU choose how to spend your time and money.

Assignment 1 – Calculate your annual expenses. Then find your FI Number. Congratulations! Now you know where you’re headed. You have a goal to work towards.

Coming Soon – What To Do If You’re Just Getting Started

How To Start Investing – A Beginners Guide

At A Glance – Learn how to start investing and growing your money. Investing in the stock market is easier than you think.

What Is Investing?

Investing is when you purchase assets that you expect to earn a profit in the future. These assets could be anything you believe will rise in value, such as a home or collectible. Although investing commonly refers to buying stocks and bonds.

The goal of investing is to put your money to work today so it will grow your money over time.

What Is The Stock Market?

First, let’s define a stock. A stock is a type of asset that represents fractional ownership in a company. When you buy stock in a company, you own a piece of that business. If you own a share of Amazon, you are a part-owner of Amazon!

Publicly traded companies are companies that issue stock that can be purchased by individuals or organizations. The stock market is made up of all publicly traded companies.

A stock market or stock exchange is a place where people buy and sell stocks. There are several of these in the U.S., but the two best known are the New York Stock Exchange (NYSE) and the Nasdaq.

There are “indexes” that give you a feel of how the overall market is doing. These indexes are a basket of stocks that are averaged to indicate overall performance. The most popular indexes are the Dow Jones Industrial Average, The Nasdaq Composite, and the S&P 500. The Dow Jones tracks 30 large, significant U. S. stocks. The S&P 500 is a much broader base of 500 large companies. The Nasdaq is more oriented towards tech companies.

Why Invest In The Stock Market?

What we all hope to gain with our investing is more money over time. Since our investing plan should always be long-term, our money will be invested for decades.

Because of our long investing time horizon, we must consider inflation. Inflation is like a termite that eats away at your wealth. If you bought $100 worth of groceries 10 years ago (2011), they would cost you approximately $120-130 today. You can see that taking your hard-earned savings and putting it in the mattress is not a good plan! Also, the current (2021) interest rates on savings accounts or money market accounts will not keep up with inflation. So, savings accounts are not the place for money invested long term.

We need an investment that will do better with our dollars. The stock market is one of the best wealth-building tools we have available. But many new investors are afraid of the stock market. Is the stock market volatile? Yes. Is it still the best place to invest my money to grow my wealth? Again…Yes.

The stock market goes up and it goes down, but over time the market always goes up. There has been disaster after disaster that has caused the market to go down – sometimes significantly. But over time, the market always goes up. If you look back over its history, the market has averaged roughly between 8% and 10% per year. You can see this is significantly better than most other investing choices.

Let’s look at two examples of how your money can grow. The first chart shows three different investment amounts with no additional money added. We will use an average return of 8% per year for 30 years. Say, age 30 to age 60.

Amount InvestedMarket GainTotal
$ 10,000$ 99,357$ 109,357
$ 50,000$496,786$ 546,786
$100,000$993,573$1,093,573

The next chart shows a more real-life example. We will start with $0 and add money every month from savings. Again, the money is growing at 8%.

Amt Invested/mo.Time PeriodAmt InvestedTotal
$ 10030 years$ 36,000$ 150,030
$ 25030 years$ 90,000$ 375,074
$1,00030 years$360,000$1,500,295

These examples assume that any interest or dividends your stock receives is reinvested and not withdrawn. This shows how compounding works for you over time. You can see from these examples the stock market is a much better way to grow your money.

Can I Lose My Money?

Returns in the stock market are not guaranteed like the interest rate on a savings account. There is risk associated with investing. So the short answer to the question “Can you lose money?” is yes – over the short term.

Can you lose money if you leave it in for the long haul? Unlikely. Don’t forget, your stock market investments are long term. This is a marathon, not a sprint. This is not get rich quick. History has shown if you save, invest and leave it alone, you will build wealth.

What Are Stocks, Bonds, Mutual Funds And ETFs?

Stocks – As stated above, a stock is fractional ownership in a company. Money is made with stocks in two main ways. One, the price of a stock can go up as the company does well. You make money if you sell the stock for more than you paid for it. Second, the company may pay dividends. This is how the company shares profits with its stockholders. Dividends are typically paid once a quarter. The dividends can be left in the investment account to buy more shares.

Bonds – When you buy a stock, you are buying part ownership in a company. When you buy bonds, you are loaning money to a company or government agency. A bond could be thought of like an IOU. Bonds are used by companies, municipalities, states, and governments to finance projects and operations. A bond issuer promises to pay the bond or loan back in a specified time at a specified interest rate. An example would be bonds issued by your local school district for a new building.

Mutual Funds – A mutual fund is a basket of stocks. Mutual fund managers decide what and how many stocks to buy. These funds come in all flavors. It can be, for example, a basket of all large companies, small up-and-coming companies, or all healthcare sector companies. There are thousands of mutual funds to choose from. The major advantage of a mutual fund is diversification. You don’t have to decide which individual stocks to buy, you just pick the flavor you want. The disadvantage is they can have high fees attached to them. There is a person managing the buying, selling and decision making and they aren’t cheap. Their fees will eat away at your profits, but the diversification that mutual funds bring to the table is a good thing.

ETFs – an ETF or Exchange Traded Fund is very similar to a mutual fund. Their main difference is the way they are bought and sold during the hours the stock market is open.

How Can I Invest In The Stock Market?

Choose An Investment Firm

So you’re ready to invest some of your savings. Now what?

You will need to open a brokerage account. To trade on the stock market, you will need an account at a brokerage or investment firm. There are many brokerage firms out there, but the ones I would recommend are Vanguard, Fidelity, and Charles Schwab. I personally use Vanguard. You can open an account online in a matter of minutes.

When you first open your account, you will be asked how you will initially fund this account. You can send money from your bank, rollover money from an employer retirement account like a 401k or transfer money from another brokerage firm.

After setting up your account, you can tie your brokerage account to your checking or savings account. This allows you to move money back and forth online. One huge advantage of this connection is making your savings and investing automatic. You can decide how much money is going to investing each month and have it sent there automatically. Your emotions and temptation to spend it just got removed!

Choose The Type Of Account

You can set up different types of accounts. The main types of accounts are a taxable brokerage account, a retirement account such as a Traditional IRA or ROTH IRA, or a 529 Educational account. IRAs and 529s are tax-advantaged accounts. A taxable brokerage account is a plain investment account with no special tax treatment. Stephen and I have a joint taxable account and we each have Traditional and ROTH IRAs.

Choose The Type Of Investment

Here is the big question! And I really can’t tell you what to do – partly because I’m not licensed to do that nor am I an expert. But, I can tell you what I do.

I like to KEEP IT SIMPLE. As J. L. Collins says, “Simple is good. Simple is easier. Simple is more profitable.”

I invest in low-cost index funds and bond funds. Index funds track a particular index, like the S&P 500.  There are many advantages to index funds like high performance, low cost, and very low volatility. 

The index fund I use is a Vanguard Total Stock Market Index Fund or VTSAX. It tracks the entire stock market. This means I own a small piece of every publicly traded company in the stock market. This is where the majority of my investments are – 70% currently. Index funds have extremely low costs because they are not actively managed. They just track the market. They are high-performing because those active managers cannot consistently “beat the market.” And their fees eat away at your returns.

The bond fund I invest in is the Vanguard Total Bond Market Index Fund or VBTLX. Just like VTSAX, the Total Bond Fund is a broad base of bonds. This fund includes investment grade (top quality) bonds with widely differing maturity dates and a broad range of terms.

Why hold stocks and bonds? Stocks provide the best returns over time and serve as a protection against inflation (inflation hedge). Bonds provide some income and serve as a deflation hedge. Also, bonds are less volatile than stocks. They smooth out the wild highs and lows that can be seen in the stock market. You won’t make as much money from bonds as you do stocks, but they make the roller coaster a little easier to ride.

TIP: I like to keep things simple and I have only given you the very basics when it comes to investment info. I would HIGHLY recommend you read J. L. Collins book, The Simple Path to Wealth, Your Road Map to Financial Independence and a Rich, Free Life. It helped us when we didn’t know what we were doing or where to turn. Jim explains the stock market, how it works, how to use it to grow your money, and how to not be afraid of it. Buy the book, check it out from your library or you can check out his Stock Series on his blog jlcollinsnh.com. Do it! His book helped us more than any other one thing we have done for our finances, short of getting our mindset changed.

How Much Should I Invest?

In my article, How To Save Money, I talk about your short, medium, and long-term needs. Everything you are putting in long-term savings should go into investments. This is the money you will want working for you for decades.

If you are starting late as I did, you need to be saving aggressively and investing wisely. The number of years before retirement may be short, but even in retirement, you could have a 20 or 30-year investing horizon.

When Should I Invest?

Now! Don’t wait for the market to drop or wait until you understand every nuance about the stock market. Formulate your simple plan and get started.

If you have a company match with your 401k, BE SURE you are getting the match. That’s free money! Also, look at the investing options in your employer’s plan. Do they offer low-cost index funds? You might check into making a change.

TIP: Your taxable brokerage account, 401k, IRA, HSA or 529 plan are just buckets to hold your money. Just because you or your employer deposits money into those accounts does NOT mean it’s invested. It might just be sitting there in cash until you tell them how you want it invested. YOU have to make the choice of investments. Check every account you already own and make sure the money is invested.

What If The Market Goes Down Or Has A Crash?

Don’t panic! And don’t sell! The market will go down and it will come back up. The market is higher today (June 11, 2021) than it has ever been. This includes all those ugly events. The Wall Street Crash of 1929, Black Monday (1987), Dot.com bubble (2000), 911 (2001), Financial Crisis (2008), and the latest and shortest-lived crash of 2020 – thank you COVID! The market goes down and it always comes back up.

This chart shows the cumulative returns from the S&P 500 from 1960 to 2021. There are a few significant dips in the line, but the overall trend is up.

If you are in the wealth accumulation stage, these downturns are your friend. Stocks are on sale, and besides, you don’t need the money right now anyway.

Remember, we’re investing for the long haul. Most people treat a stock market downturn like going to your favorite store, everything is on sale, and the customers run out of the store screaming! Don’t panic. Be calm. And don’t pay attention to all the “noise” from the media.

Conclusion

If you want to grow your wealth for the future, the stock market is one of your better choices. Consider low-cost, broad-based index funds. If you choose the “Simple Path” to grow your money, you can almost put your investing on auto-pilot.

Key Takeaway -Learn how to start investing and growing your money. Investing in the stock market is easier than you think.

Assignment 1 – Read The Simple Path to Wealth

Assignment 2 – Check any existing investment accounts like 401ks, HSAs or IRAs and make sure the money is invested and not sitting in cash.

Assignment 3 – If you don’t already have one, open an account at an investment firm. Decide how much you can send to it automatically every month. Choose the funds you want to invest in and start buying shares.

Coming Soon – What is FI?

The Three Bucket Strategy

At A Glance – Planning your savings for short, medium and long-term goals helps you build stability for your financial future.

In my article, How To Save Money, I talk about saving for short, medium and long-term needs. This strategy for your savings goals helps you build stability in your financial plan for future needs. It gives you tools in your toolbelt to meet the ups and downs of life.

Here is an article written by a friend of mine, Randall Neighbour of Kingdom Wealth Management. He addresses this topic in his Three Bucket Strategy for savings.

The Three Bucket Strategy

The Three Bucket Strategy is a great tool for preparing for your future and thinking about money. It’s a common practice in the financial planning world because it has the potential to foster healthy investment attitudes.  

First Bucket – Operating & Emergency Fund


In this first bucket, you should keep enough cash for 3-6 months of living expenses. This money should not be invested but kept in a money market or a checking/savings account. While this bucket’s contents won’t earn much these days, if we experience inflation—and we will experience it sooner or later—then it should start earning more.

Tip: If you need to dip into this first bucket for a genuine emergency (a washing machine repair or an auto repair), imagine you’ve borrowed that money from a loan shark and he will break your kneecaps if you don’t pay it back as soon as possible. Cut back on eating out and expensive coffees or clothing or however you like to spend discretionary money and “top up” your first bucket as soon as possible. Draining it makes this strategy a worthless exercise.

Second Bucket – Near Term Spending Fund For The Next 2-9 Years


In this second bucket, you’ll want to invest money for upcoming needs such as a new roof or replacing a vehicle. Because the timeframe for the investment is relatively short, the money in this bucket should be invested conservatively.

Tip: Fixed instruments such as bonds and CDs could be considered for the second bucket. These investments probably won’t double your money in five years, but that’s OK. If you invest it conservatively, you won’t put yourself in an emotional quandary when a withdrawal is necessary. A conservative investment approach works here because the balance on the account is more predictable and the time horizon is not long enough to recover from a big drop in your investments.

Third Bucket – Long Term Savings For Retirement


In this last bucket, you want to invest for use in ten to thirty years. This is not money you touch unless you are forced to drain the first two buckets due to a financial catastrophe. Because of the duration of the investments in this bucket, you can afford to take more investment risk. After all, there’s time for it to recover if the investments drop in value for a season.

There are bull markets when most investments appreciate and bear markets when many depreciate. Historically, the bulls run longer than the bears and that’s what you’re hoping to achieve with long-term investing. The target use for this bucket’s contents is retirement withdrawals, healthcare costs, long-term care, charitable giving and inheritance.

Tip: Higher future tax rates are a big consideration. For this reason, using a Roth IRA may be an excellent choice for this bucket if you don’t make too much money to max out an annual contribution. However, if you only have Traditional IRA money or 401k money for this bucket today, that’s ok! It’s better to have a big third bucket of taxable money than no third bucket at all.

Which Bucket Should I Fill First?


You need an emergency fund. Build up a month’s worth of your expenses and fund the first bucket with it. If you have consumer debt, then attack your debt with every dollar you can find and get out of debt. When everything but your mortgage is paid off, go back to bucket one and finish filling it with your 3-6 months of living expenses.

Which Bucket Should I Fill Second?


The third bucket needs attention next, but you may not be able to completely fill it before you add to your second bucket. You just need to make sure that when you have to take withdrawals from the third bucket, you won’t run out of money. A good rule of thumb is to make sure you are contributing at least 15% of your take-home pay into your third bucket. If you haven’t been saving for retirement and you’re in your fifties, then you’ll need to save a higher percentage.

“Let’s Go Back To That Second Bucket. Now I Have Questions.”


Everyone has questions here. This second bucket is where you must first consider your NEEDS in the next three to five years and first save for those needs (new roof, replace a car) and then save for your WANTS on top of that amount (European Cruise, taking grandkids to Disney, update the kitchen). And always keep in mind that saving for things you WANT must never reduce the amount you should be putting in your third bucket. Remember this: I have never heard someone say, “I saved and invested too much money when I was in my 50s and 60s.”

“But What About My Mortgage?”


This is a tough question to answer and it’s different for everyone, but there’s a good rule of thumb to follow here: Pay off your mortgage and any other debt before you stop working. Millions of Americans are forced into retirement earlier than expected due to their health or the health of their spouse. For this reason, living lean in your 50s and 60s to pay off all debt is a wise long-term move even if you remain healthy and want to keep working.

In Summary…


I’ve been using the bucket approach with clients for a decade. This approach will help you mentally segment your savings and invest it appropriately.  It also helps put both spouses on the same page when it comes to money, spending, and investing.


Now get busy!


Sit down with a paper, pen and calculator. Or, bring up a spreadsheet on your computer. Total what you need in each bucket and why it belongs there. If you need help or have questions, visit with an advisor. Don’t let anything stop you from charting a financial course for your future.

Randall Neighbour is the founder of Kingdom Wealth Management in Houston, Texas. He holds the designations of Retirement Income Certified Professional® and Accredited Portfolio Management Advisor®. To read the original version of this article, follow this web link: https://kingdomwealthmgt.com/the-three-bucket-strategy

Key Takeaway – Planning your savings for short, medium and long-term goals helps you build stability for your financial future.

How To Save Money

At A Glance – Developing the habit of saving money is the key to your financial stability. It is your SuperPower. Even if you’re not a natural saver, it is a skill you can learn.

What Does It Mean To Save Money?

Saving money is living on less than you earn. It’s setting aside some money from every paycheck. It’s building an Emergency Fund. It is being intentional now to secure your future.

Why Do You Want to Save Money?

Saving Money Is The Most Important Step In Building Wealth

Let me say that again…It is THE MOST IMPORTANT step in building wealth. Your future financial stability and your retirement depend on it. Every dollar you save now could keep you from being the greeter at Walmart when you’re 75!

Becoming a saver will be the key to your financial stability and financial independence. Some of us are natural savers, and some are not. I am NOT a natural saver, but I have learned how to be a saver. It is like a muscle you need to work out. You keep exercising and over time, it gets easier

Save For Short, Medium And Long-Term Needs

The money you save can be earmarked for short-term, medium-term and long-term needs. Short-term would be any money you need in the next 1-3 years. This could be your Emergency Fund, money for next year’s property taxes/insurance or a vacation.

Medium-term savings is for 3-6 years. This could be saving to pay cash for your next car, the down payment for a house or the AC/Heater that will need to be replaced.

Long-Term savings, 6+ years, would be for things like your child’s college expenses, a new roof and retirement.

Having Money Saved Smooths Out Your Cash Outflow

Having money saved allows you to pay for large expenses without using credit. If you know you will need a replacement car in 5 years, you can create a sinking fund to pay for the car. Save 1/60th (5 years = 60 months) of the car’s expected price per month into your sinking fund. In 5 years you can purchase the car with cash and avoid all loan charges and interest.

Do the same with other large purchases like insurance, taxes or car repairs. If you save a little every month for those items, you can smooth out the cash outlay. That way you don’t have to come up with thousands of dollars all at once for a major purchase or repair.

I use this strategy to pay for our car and homeowners insurance. I save 1/12th of the insurance cost every month and then pay cash for the new policy. I don’t have to pay any extra fees for them to bill me monthly. It took a while to collect the money when I started using this method. At first, I paid that month’s bill and set aside a little extra. Over time I was able to collect enough to pay the entire policy at once.

How to Save Money?

Spend Less Than You Make!

It’s so easy to say and so hard to do sometimes! This is an area where I failed when things got bad for us. Sometimes we weren’t spending more than we made, but we were surely spending it ALL. You have to spend less than you make. The difference is ‘The Gap’. The bigger the gap, the more you can save.

Track Your Spending

Tracking your spending is one way to discover if you have any gap. If you track your spending, you can see where your money is going. Tracking helps you see where you might be overspending and where you can cut.

I recently read a story of a person who discovered they were overspending their income by $3,oo0 a month! You might be thinking, “How can that happen!” The answer is easier than you think. Remember my mantra…Pay Attention! This simply happens because we don’t pay attention.

Use A Budget

Using a budget puts guardrails on your spending. Once you get a picture of your spending by tracking it, you can create a plan for your money with a budget.

A budget helps you to grow the gap. Include your savings in the budget as a line item and then increase it every chance you get. Set a goal to save at least 15% of your income and increase it as you can.

Pay Off Your Debt

If you are carrying any debt other than mortgage debt, it needs to be eliminated. You cannot make headway with saving if you are weighed down with debt. You don’t have any control of your life when all your money is spoken for before you even earn it.

Check out my debt payoff article, How To Pay Off Credit Card Debt In 6 Steps.

Use Your Employers Free Money

One of the best ways to boost your savings rate is to use someone else’s money! If you have access to a retirement plan at work, such as a 401k, see if your employer matches. Most employers will match your contributions up to a certain amount. If you have a 401k with a match, be sure you contribute at least up to the match. That’s free money!

Tip: A lot of people think if they get the match, they have maxed out their 401k contribution. You can likely contribute far beyond the match. The max contribution to a 401k for 2021 is $19,500. If you are 50 years old or older, you can add a catch-up contribution of $6,500 for a total of $26,000. And these limits do not include the employer match. Check with your plan administrator and tax professional for details about your plan and your tax obligations.

Where To Put Your Saved Money?

Short-Term Savings and Emergency Fund

Any money you will need within the next 3 years is short-term savings. This includes your Emergency Fund. You do not want this money to be at risk. Therefore, a savings account or money market account is a good choice. These can be found at your local bank, an online bank or an investment firm such as Vanguard, Fidelity or Schwab.

Interest rates for savings accounts are next to nothing these days, but you don’t expect to earn a lot on short-term savings. You just want to make sure your money will be there when you need it.

Medium-Term Savings

Money needed in the 3 – 5 or 6 year time frame is medium-term savings. This money can stand a small amount of risk in order to realize some gains.

For this fund, we personally keep our money in a conservative bond fund. This fund does fluctuate up and down, but only in small amounts.

Long-Term Savings

Any money that is not needed for 6 or more years is long-term savings. This money can stand the most risk in order to enjoy the most gains. It can be invested in a variety of ways. A balanced fund, equities such as low-cost index funds or rental real estate are some of the choices for your long-term savings.

Tip: Look for a future post on investing. In the meantime, check out J. L Collin’s book, “The Simple Path to Wealth.” If you’re new to investing, this is a great place to start. It helped me understand the stock market, how it works and how to not be afraid of it.

When investing, remember that at any one time your investments might have gained or lost money, but over time, they usually gain. It’s time in the market that counts. I am retired and 65 years old, but I still have the possibility of a 30-year investment horizon.

The most important tactic for your long-term savings is this…DON’T TOUCH IT!

When To Save Money?

Early And Often

Save as much as you can as often as you can. Every dollar you can squeeze out of your budget will make your future more comfortable and less stressful. Especially if you are starting late like I did.

I’m not saying you need to live on beans and rice until you retire. Strike a balance between a life you enjoy now and a life that will be what you dream of in retirement. To read how one dollar today can turn into many in the future, check out my article on the power of compounding

Pay Yourself First

When I first started getting my finances in order I heard people say, ‘Pay yourself first.’ I didn’t even know what that meant.

Paying yourself first means to set aside your savings BEFORE you pay your bills. You are paying your future self.

If you were to look at my pre-retirement budget, the first line item was Tithing/Giving and the next was Savings. Pull out your savings first, then live on the rest. You Can Do It!

Automate Your Savings

Brad Barrett on the Choose FI podcast says to get your ‘Lizard Brain’ out of it. What does that mean? Automate everything you can. Especially your savings. That way you don’t have to think about it. You won’t forget to send your extra dollars to savings, and you won’t be tempted to spend it on that new couch.

You can do this by setting up an automatic transfer from your checking into the account where you keep your savings. This can be from checking to a savings account or checking to an investment firm like Vanguard.

If your paycheck is an auto-deposit, you may be able to set up an automatic transfer to savings from your paycheck.

So automate your savings already!

What Do Our Readers Say?

I asked my Started At 50 Facebook group to share their money-saving tips. Here are a few of their responses.

  • Always shop with a list – Ashley
  • Cut the cable – Jack
  • Use envelopes, track cash flow and net worth – Diana
  • Auto transfer savings to an account at a different bank so you don’t see it – Kristy

What Does The Bible Say

God calls us to be good stewards of everything we have. A steward is one who manages the property, finances or affairs of another. Everything we have comes from God, and He expects us to manage it well. Saving some of today’s earnings for the future is a way to manage well.

Precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it.

Proverbs 21:20

Go to the ant, O sluggard; consider her ways, and be wise. Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest.

Proverbs 6:6-8

Key Takeaway – Developing the habit of saving money is the key to your financial stability. It is your SuperPower. Even if you’re not a natural saver, it is a skill you can learn.

Assignment 1 – If you have non-mortgage debt, devise a plan now to pay it off.

Assignment 2 – Check with your employer for the matching rules on your 401k and get your match.

Assignment 3 – Make a list of the short, medium and long-term items you need to save for. Then look at your spending/budget and determine how much money you can send to savings.

Coming Soon – A primer to investing