Allow me to set the stage: As of July of this year, we’d let our “rainy day” savings account deplete to less than $3,000, we weren’t refilling it, we were only saving about $500 per month for our “financial goals,” were each modestly contributing to our 401ks, and were spending every remaining dime on living in NYC.
While we were fast paying down our student loans and making our monthly credit card and car loan payments, we were not exactly the definition of fiscal responsibility. How does a couple like that amass enough money in 5 months to buy a car in cash, pay the downpayment on a (very) modest house, or — as we are — set off to travel the world?
Note: I’m not in the business of giving financial advice, and some of the decisions we made were, technically, really financially irresponsible. But this is the honest truth about what it took to save this kind of cash.
1. We defined our non-negotiables
Every household has some non-negotiable expenses. In our case, we were not about to stop paying our car payments. For a complex web of reasons, we were also not prepared to sell our car (we’ll publish another post on that). We also could not move out of the extremely expensive market of NYC due to my job, and it didn’t make sense to downsize our place, either, for reasons I’ll explain below.
All together, our total non-negotiable monthly expenses (rent, car payment, insurance, groceries, utilities) are about $3000 per month
2. We stopped paying down our student loans
While we couldn’t get out of our car loan, we were in a position to stop paying our student loans, as we were paid ahead by several years. Is this the financially responsible option? Maybe not. But based on our priorities and values, we’re okay with the small remaining balance accruing some interest so that we can take this trip.
Actual savings: $700 per month (this is what we had been paying monthly to get so far ahead on our loans; the required payment was less than $300).
3. We stopped saving toward retirement
Here’s the thing, we were saving just a couple hundred dollars per month each toward retirement, and our companies didn’t offer 401k matching. This trip is sort of like a quarter-life retirement anyway, right…? In all seriousness, I hope and expect that this trip will so drastically refocus our priorities that our spending habits will significantly change when we return — making it easier to save money for retirement when we get back (and live somewhere less expensive).
Actual savings: $400 per month
4. Switching our direct deposit settings
Probably the single most impactful change we made was switching up the direct deposit settings for our paychecks.
(A brief interjection on our household banking situation: We chose to have a single shared account for all of our household expenses in addition to two shared savings accounts. We each contributed to these in accordance with our salary. After contributing set amounts to those accounts, the remaining amount would go into our private, individual checking accounts, because to be honest, I don’t want to see every dime Alex spends. Every couple has their own way of mixing finances, but this is what’s been working for us since even before we were married.)
When we decided in July to buckle down on savings, we switched things up. Instead of contributing to savings and shared expenses first, then putting the rest into our “fun money” accounts, we put set amounts into our personal & shared checking accounts, then put all of the remaining money into our travel savings account.
Where we used to transfer $4,400/month into our shared expenses account, we ratcheted it down to just $3,000 for shared expenses. This is what we’d established as the bare minimum after carefully assessing our expenses and eliminating our student loan payments. We decided to be aggressive here with the knowledge that we could dip into our savings to pay the bills if absolutely necessary. And you know what? We never have.
Allow me to repeat that: By simply putting less money into our checking accounts, we spent less. How? What did we stop spending on? I have no idea. This was purely a mental change. There was nothing stopping us before from transferring tons of money from our checking accounts into savings at the end of every month … but we never did it. Having the money go straight into savings made it so much easier to spend less and save more. I can’t recommend this enough.
Actual savings: $700 per month (this is literally $700 of just miscellaneous cash that we’d been spending in addition to the $700 per month we saved by not paying our student loans).
5. Listing our place on AirBnB
Lots of people who are newer to AirBnB think of it only as a way to list a house that’s empty, but most hosts actually use it to list spare bedrooms (the name AirBnB actually refers to air mattresses). We started renting out our second bedroom in August and it’s been an overall positive experience. We hosted a total of 13 times in 5 months, for time periods ranging from one night to nine, and it’s been 100% worth it. Yes, sometimes it was annoying to have other people in our place, but it’s a ridiculously easy way to make money.
Actual savings: $3495 total
6. Making freelance income
I work as a freelance writer, and Alex owns and operates a marketing consulting company with a friend. While this income didn’t have an enormous impact on our total savings, we each took the profits into our individual checking accounts and transferred less of our salaries into our checking accounts. Not to mention, it’s super valuable groundwork for the freelance work we’d like to do while we travel.
Actual savings: $200 per month
7. We still spent money!
Most people doing this kind of aggressive savings will tell you that you have to scrimp and save money in millions of ways. Despite what others say, I’ve actually found that the biggest impact came from drastically reorganizing and reprioritizing our expenses, focusing on the major line items — not every single drink we had with friends. Simply having less money in our checking accounts made it so much easier to spend less, and it didn’t feel like I was really sacrificing.
Personally, I use my “fun money” account and my freelance income for things like meals out, hanging out with friends, and gifts. Even while we were saving for this trip, we took a 7-day road trip through the U.S., multiple day trips around NYC, and celebrated Christmas, including expensive meals, gifts, and entertainment. At the end of the day, tracking and limiting every cup of coffee, every after-work drink, and every trip to the movies would have made my last 6 months in NYC miserable. I stand by the decisions we made to eliminate major expenses rather than sweating the small stuff, and it led to us having over $20,000 in our checking account as of our departure date ($16k of which we saved in just 5 months).
Total Savings since July 2015:
- Savings from paychecks: $12,107.29
- AirBnB profits: $3,495.02
- Misc. income (bonuses, etc.): $758.00
- Interest: $46.81
- Total: $16,407.12