Why I Save So Much

I save and invest a lot. I track my spending and investing and have a goal of investing (between retirement accounts, health savings accounts, and taxable accounts) more each month than I spend. I have successfully hit this goal every month for the last three and a half years.

I recognize that this is unusual.

I have spent a good deal of time preparing taxes for folks in a pretty well-off area, and I am aware that most people don’t save like this. It is especially unusual for young people.

Young Adults and Money

Most young people are not putting much time or thought into preparing for retirement. We’re at (or near) the bottom of career ladders and will likely make more money in future years than we do now. We’re buying furniture and cars and houses for the first time. We’re going out with our friends. We’re going on vacations. We’re buying coffees and drinks for networking.

We have a lot that we need to spend on, so we plan to worry about saving later.

And I get that. There’s nothing inherently wrong with taking that approach. Most of my friends (of those that I have talked money) are saving very little and I hold no judgment towards them.

So why have I chosen a different direction?

A few reasons, actually. Today I want to talk about buying options through financial independence. In future articles we will delve into the value of capital and labor, the future of automation, and the idea of “sacrificing” present life standards to hit those savings and investment numbers.

Financial Independence

Financial independence is the point at which you have enough money invested that you don’t need to work for money. I was introduced to the concept a few years ago when I stumbled upon Mr. Money Mustache and read his story of retiring at age 30.

Mr. Money Mustache saved about 2/3 of his take home pay and retired in 10 years. He explained the shockingly simple math that made it possible. He explained how the recommended 20% savings rate is great if you plan on working a 37-year career, but ramping up that savings rate could drastically shorten the number of years that you needed to work.

While I originally saw this and was intrigued by the idea of sprinting to the finish line of retirement, my viewpoint has changed a bit. I am still aiming for the same general target, but my framing has changed.

Now, I am buying options.

Buying Options

The more money I have saved, and the less I spend, the more options I have regarding how to spend my time in the future.

Let me unpack that a bit.

If I have no savings and spend everything that I make, then I can only take jobs at or above my current salary. I also need to line up a new job before leaving an old one so I don’t miss any paychecks.

76% of Americans live paycheck to paycheck and are in this situation. If you are spending every dime that comes in, this has implications on both spending and earning.

First, unexpected expenses become catastrophic. If you are spending everything that you make, then you have no room for error. There is no extra money to cover emergencies.

Second, you cannot decrease your earnings. You cannot take a lower paying job. You cannot leave your job. You have to pray that you don’t lose your job. When living paycheck to paycheck you require each and every paycheck to make ends meet.

Hitting my full financial independence number would be at the other end of the spectrum. This would mean that I have enough money invested that I do not need any paycheck and I can choose to use my time however I would like.

If I want to quit my job and write a novel, then I can do that without worrying about whether it will make money. If I want to spend my time volunteering or protesting or hiking or watching Netflix, I can do that. If I want to keep working at my job, then that is perfectly fine, too.

There is a lot of space in between these two extremes.

Between the Extremes

With regards to options, the space the extremes looks like a sliding scale. The further away from paycheck to paycheck you get the more options you have, even before you hit full financial independence.

You could take lower paying, but more interesting and meaningful jobs. You could take a year or two off before going back to work. You could quit your current job before starting the hunt for your next.

You could switch to lower paying remote work to have more geographic flexibility. You could switch to freelance work to have more control over your time.

Or, again, you could continue to work your current job for as long as you enjoy it.

I want to buy myself those options.

I enjoy my work. I like my coworkers and supervisors. I don’t plan on quitting right now. But coworkers move on. Supervisors change. Personal priorities and interests change. The future is unpredictable.

I’m not planning on quitting, but I want to have that option in the future, just in case.

What about you? Are there options you would like to buy? Are you working towards financial independence? Do you have other reasons for saving at whatever rate you do?

35 thoughts on “Why I Save So Much”

    1. I’ve always been a hope for the best but plan for the worst person. There are too many things outside of our control to assume that everything will always go smoothly.

      Thanks for the comment, Emily!
      Matt recently posted…Death and HappinessMy Profile

  1. Matt, just like you, I would like to buy options. When it’s 80 degrees and sunny out, I want to have the option to go to the park with my family. I would like to choose to do that and receive less pay, or work at another time to make up the income. But I could choose. Having to work someone else’s schedule for ~240 days out of the year is not my idea of fun. (Especially when most of the time people do this to just spend it on the craziest stuff!)
    The Tepid Tamale recently posted…Maybe all is not lost!My Profile

    1. This is true. It’s never easy or enjoyable to be reliant on someone else’s whims and timelines for your livelihood. And anything that allows us more time with our families is a win in my book.

      Thanks for stopping by!
      Matt recently posted…Death and HappinessMy Profile

  2. We also stumbled onto FIRE thanks to Mr. Money Mustache. And we were also part of the 76% of a Americans who live paycheck to paycheck. The last straw for us was when we realized we had zero money left over at the end of the month for ANY savings–and that meant we couldn’t buy a house. I’m so glad we made the changes that we did, and I wouldn’t go back to my old ways for anything. 🙂
    Mrs. Picky Pincher recently posted…What A Frugal Weekend! June 18My Profile

    1. I got lucky in that I discovered MMM while working on a low-paying fellowship. I was still in the “cheap college student” phase and was able to be cautious of lifestyle creep when I finally got a solid salary.

      Thanks for the comment!
      Matt recently posted…Death and HappinessMy Profile

  3. Such an important POV here. Not everyone can retire at 40. But that is not the end of the story. Being able to have a more fulfilling career and getting paid less for it is a totally reasonable goal that could probably change millions of lives.

    1. It seems like a lot of people dismiss financial independence out of hand because they like their job and don’t want to retire early. It always felt like there was more to it than that and that people were missing the big picture.

      Thanks for stopping by, Linda!
      Matt recently posted…Death and HappinessMy Profile

  4. I discovered Mr. Mr. Money Mustache’s blog recently and thought it was fascinating!

    You made a great point about how being frugal and financially independent can give us more options in the future. We’re forgoing the not so important options now (i.e. buying fancy cars, brand name clothes, expensive vacations) so that we can have the freedom to quit our job and pursue our passion in the future or just live like no one else like Dave Ramsey always says. 😉

    1. Indeed. I have written about some disagreements I have with Dave Ramsey before, but I have always appreciated his idea of living like no one else now so that you can live like no one else later. Combining that idea with MMM, you can see how quickly you can free yourself from work with just a few changes in lifestyle.

      Thanks for the comment!
      Matt recently posted…Death and HappinessMy Profile

  5. This is huge – “Personal priorities and interests change. The future is unpredictable.” For me, these are such compelling reasons to prepare one’s self financially and buy as many options as possible. Nice post, Matt!

  6. “Buying options” is a perfect way of putting it! Mr. Adventure Rich and I try to frame our FIRE goals that way… we don’t hate our jobs (we like them!), we like where we live and don’t have an itch to travel the world, but we do want options. We want the option to take the lower paying job like you mention or the option to pursue a passion as a business or a part-time job. I’m glad you are doing the same!

    Even though we are still “early on”, our saving has already given us the opportunity to take options when presented (like our cross-country move, new job and house last year!). That move would not have been possible without buying the options in advance!

    1. That’s great! Glad to hear that it is already working out for you. People tend to focus on the finish line of Financial Independence, but the benefits can come much sooner!

      Thanks for the comment!
      Matt recently posted…Death and HappinessMy Profile

  7. Great thoughts Matt – I love your mindset with regards to this and feel we are similar in our outlook on work.

    I’m looking to set up a few income streams (and have 2 already) that are not necessarily time intensive. Once these are set up, then I can have the flexibility to do what I want with my time, be it a 9 to 5, take a year off, etc.

    Thanks for sharing Matt, have a good one
    Erik @ The Mastermind Within recently posted…Unapplied Knowledge is No Knowledge at AllMy Profile

    1. That’s great, Erik! Extra income streams can definitely relieve some stress from the 9-5. I have a few options that I can ramp up if needed (or wanted) to fill in for lost 9-5 income, but nothing that is all that passive at this point. It would definitely be something beneficial to add to the toolbox.

      Thanks for stopping by!
      Matt recently posted…Death and HappinessMy Profile

  8. Yes to buying options! 🙂 After we paid off our student and auto loans and built up our savings a bit, the fear and stress we used to have about job loss virtually disappeared. It’s amazing to have the peace of mind that we would be just fine, at least for a few months, without a job. Taking it a step further, we could also accept lower pay, or even both work part-time, if we wanted – so many options!
    Amanda @ centsiblyrich recently posted…Tiller: Why it’s the best spend tracking tool for meMy Profile

    1. Even if you don’t intend to exercise the options, it helps to have them. The job loss fear is a great example of that. When you have no choice but to stay in your current job you have no real choice but to stress about keeping your current job.

      Thanks, Amanda!
      Matt recently posted…Death and HappinessMy Profile

  9. YES YES YES!!! Love this post. My wife and I save so much so that it will provide us options and opportunities in the future. That means if I want to take a lower paying job that I am more passionate about in the future that I can. Or if we want to move somewhere that provides the lifestyle that we’re looking for that we have that flexibility. Knowing that I can do something vs. feeling stuck b/c of a lack of savings is an incredible feeling and definitely a mental game changer for me.
    Mustard Seed Money recently posted…The Benefits of the SP500My Profile

  10. I was reading part 3 of this series first and when you said you wrote about “buying options” in part 1, I was like “stock options??” Haha. Anyways, yes I see my savings rate as buying options and in pursuing FI, I hope to have the option to not work for money. Now more than when I was younger do I feel the need for more time and flexibility. I have 2 little kids. But by the time I reach FI, that will have changed. Nevertheless, having options is always a good thing.

    1. Thanks, Andrew. I have the same thought. I do not have kids yet, but one of my hopes in saving as much as I can now is that I can take my foot of the pedal when kids are in the picture and be able to spend as much time with them as possible.
      Matt recently posted…Death and HappinessMy Profile

  11. Great post. It sounds like you have a nice jump on doing what needs to be done to reach financial independence. I too started early on this journey. I have zero regrets. The freedom is priceless.

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