How to save large amounts of $$$

[cnicolef08]

I'm a new poster here so please be patient with me. I've recently become slightly obsessed with reading through old posts and I've noticed a LOT of people mentioning the amount of money they have saved for a house purchase, cars, etc. How in the world were some of you able to save that much money? Especially being only a few years out of school? The older crowd I can understand but I've seen people who are maybe 3-4 years out with 100k+ saved? I don't even want to mention my piddly savings amount. I do contribute to my 403b but right now only 6% to get the match from my job. I recently opened a high yield savings account with Synchrony at 0.95%. What else can I or should I be doing? Also, I think you should know that I am in the process of moving back home with my parents to pay off my loans more quickly. With my current plan, I should be able to pay off ~160k in 3-4 years. I'm pretty much throwing my entire monthly income at my loans (only bills are a cell phone and credit card with ~$900 balance).

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[confettiflyer]

Basically make a realistic budget and stick to it. That's the tough part, sometimes the first inclination when you see money direct deposited into your account is to spend it.

That's the first thing you should avoid - only have enough net deposited into your account to cover your expenses + a small margin of error. The rest should be automatically sent to your preferred savings accounts (403b max at $17,500, Roth IRA, emergency savings account, etc...)

That's pretty much the secret, you can't make money that isn't there appear spontaneously, contrary to what some stock market gamblers may say on here. The most effective thing you can do is ratchet down your expenses (looks like you're doing that). Make sure your retirement accounts are tuned up to maximum/aggressive allocations, and make sure you have goals for saving that you are reevaluating every few months (like, $10k in your emergency savings account, once you achieve this goal, redirect the money you were putting in there to another purposed account for house down payment, for example.

Once you set things into motion, just sit back and stick to the plan. Also, pick up some basic personal finance books (Suze Orman...ugh, I hate her sometimes, but for newbies I recommend her stuff as basic reading), subscribe to Money Magazine to start, and try to read into Bogleheads.org but don't worry if it doesn't make sense.

 

[Corytrade]

Do you have a car payment, cable bill, internet bill? Those all add up. Ditch cable if you can. (Or if your parents are paying these then don't worry about it) I would not worry about the savings account until you have the student debt paid off. Basically have a few thousand in there for an emergency, but that is it. Make an excel budget sheet and track every penny you spend, it will show you where you can trim the fat.

Someone once said, "if you're in debt, the only time you should step inside a restaurant, is if you are going in to work there."

 

[BMBiology]

There is really no secret:

(1) Pay off your student loan as soon as you can. You said you owe 160 k? If the interest rate is 6.8%, that is 160 k x 0.068 = almost 11 k in interest for the first year!

(2) Cut cost. I hate to say it but living with your parents is a good start. Not only would you save money but it would also free up some of your time. You can use it to work OT, pick up a shift at another hospital or even start a business

(3) Take advantage of retirment fund like 403 k, 401 k especially when there is company matches

(4) Spend your money wisely. Do you really need cable? Eat out every weekend? Take 2 or 3 vacations a year?

Often I would see my friends "reward" themselves for working so hard and for all the stress they are going through. But by spending more and more money, they don't have a choice but to continue working which causes more stress and therefore, they need to continue to "reward" themselves.

I was careful with my money. I didnt want to pay more student loan interest than I have to. I paid all of it off in 3 years. Honestly, it wasn't hard at all and it was probably the best financial decision I have made so far.

 

[Momus]

The biggest obstacle to your success is starring at you from your own mirror - Bernstein.

1. Be frugal. By that, I mean live like you are broke. More broke than your technicians if possible. Think as if your money is your life energy. You are trading your time for money. Your time is your life. Don't waste that life/money unnecessarily. Know your want vs. need. If you don't need it or use it more than 10 times, don't buy it. Never pay retail. Ever. Always be on the hunt for discount.
   • Expenses will kill you without you ever realizing where all your money goes. My expenses is about 1k/mo, that's how I am able to amass money. Most importantly, the fixed expenses, utility bill (electric, water, phone, cable, internet, satellite radio), gym membership, coffee money, gas money, lunch money, rent/mortgage payment, installment loans, insurance (car, house, life), food. If you cut this down to 1/2, you are golden. (For example: I have the cheapest phone/plan in my store for example~. My cell phone bill is $25/mo Virgin Mobile grandfathered plan. No TV cable). I never have a budget tracking penny here and there. Seriously, budgeting sucks. As long as you know your overall expenses are low, you will save a lot of money every month.
2. Remove your emotion. Automate everything. Auto pay your credit card, direct deposit to 401k, investment, and 6 months expenses saved up minimum. Max out retirement accounts. The rest of your money goes your loans.
3. Pick up extra shifts, part time job, moon light, 2 jobs.
4. Don't date/marry a spender/spendthrift/shopaholic.

 

[WVUPharm2007]

Everyone should be doing all of these:

Invest to the full match of 401k of your employer at the very least.

Buy all you groceries at Aldi. I can't recommend that place enough. I can feed myself for like $50/month there if I really wanted to.

Drive a modest car. Buy it 2-3 years old and drive it until it dies. Repeat. This will save tens of thousands, easily. (I am going to break this rule when the Tesla 3 comes out, but if I keep it until it dies or even just the 8 year warranty period, the gas savings will quickly be well in my favor.)

Use Hotwire/Priceline or AirBnB for all travel accommodations.

Get a 1.5% or 2% cash back credit card. Use it to buy everything. Pay it off weekly (monthly is good enough, but I do it weekly to make sure I don't forget)

 

[Momus]

Drive a modest car. Buy it 2-3 years old and drive it until it dies. Repeat. This will save tens of thousands, easily. (I am going to break this rule when the Tesla 3 comes out, but if I keep it until it dies or even just the 8 year warranty period, the gas savings will quickly be well in my favor.)

Get a 1.5% or 2% cash back credit card. Use it to buy everything. Pay it off weekly (monthly is good enough, but I do it weekly to make sure I don't forget)

There is a calculator somewhere and lots of article that say converting to an electric or hybrid car might not be the best idea. It takes like 8-10 years just to break even on that first purchase even with the gas saving. Doesn't happen with all the scenario tho.

Automate your credit card payments. I have been doing that for 6 years. Withdrawal from checking/saving account on the due date every month. Use mint.com to check all accounts.

 

[WVUPharm2007]

Automate your credit card payments.

I do as a backup. I still pay it off weekly.

 

[cnicolef08]

Thanks so much guys..... I guess I can say I'm on the right track. I'm going to stick with my 6% contributions for now, just until this burden of student loans is off my back. Then I'll start to gradually increase my contributions until I reach the max. I have an 8 year old Honda civic and I plan on riding it until the wheels fall off, which I pray will be after the loans are gone. If not, maybe moms will let me borrow her car to commute to work. Since I'm moving back, I will now have about a 45 mile drive to work so those 90+ miles a day add up quickly on a car that's already at 173k miles. Oh and to answer the question about my other expenses, the parents are being super supportive so I don't have to pay for anything as far as household bills or utilities. So my only expenses are my cell phone (~$90/month) and a $900 credit card balance. And I know $90 isn't cheap for a cell phone but it's almost impossible to get a cheaper plan around here. I live in the country and virgin mobile doesn't work here. My only options are vzw and AT&T. T-mobile doesn't work here either. Page plus is a cheaper option so I'll look into it. It runs off of vzw towers

 

[confettiflyer]

. I'm going to stick with my 6% contributions for now, just until this burden of student loans is off my back. Then I'll start to gradually increase my contributions until I reach the max.

Is there any way you can bump this up to achieve the maximum $17,500/yr?

If not right away, make sure you set up automatic escalation (like +2-3% a year) to coincide with any raises or cost of living adjustments.

I have an 8 year old Honda civic and I plan on riding it until the wheels fall off, which I pray will be after the loans are gone.

Oh that thing will last, just don't skimp on maintenance, which should be cheap anyway.

and a $900 credit card balance.

Oh man, pay that off with your next paycheck! But stick all your expenses on it and pay it off every month. If you don't have one, consider a rewards card with cash back (see other thread).

And I know $90 isn't cheap for a cell phone but it's almost impossible to get a cheaper plan around here.

Fair enough, can you family-plan it with your parents? Definitely look at the prepaid plans that use vzw towers, but test it out first.

 

[cnicolef08]

These responses are out of order but you're smart... You can follow me.

1) Yeah I probably will just pay off that credit card and be done with it.

2) Also, I contribute 6% now but I have it set up to increase 2% yearly. Once I'm done with the loans though, I'll likely just go ahead and push it on up to the max and just leave it there.

3) And unfortunately, I'm already on a family plan with my folks. We all have iPhones so we pay for the plan and then for 6g/month of data. I've tried going down on the gigs but if any of us happens to be stuck somewhere with no wifi and it eats up our data, we can easily burn up a gig or 2 in a day if we aren't careful. Just this month I had to stay overnight with a friend who didn't have wifi and just in browsing the net and checking emails, I used up quite a bit of data in a few hours. We actually went over our data this month

4) I worked at Sears auto center in undergrad so I know the value of good car maintainence. That's one thing I make sure to always do. I had a 95 Saturn sl and I Loved that car and it ran like a champ. An old washed up champ but a champ nonetheless. Had it not been for the fact that I was in an accident and my car was totaled I'm sure if still have it!

Is there any way you can bump this up to achieve the maximum $17,500/yr?

If not right away, make sure you set up automatic escalation (like +2-3% a year) to coincide with any raises or cost of living adjustments.



Oh that thing will last, just don't skimp on maintenance, which should be cheap anyway.





Oh man, pay that off with your next paycheck! But stick all your expenses on it and pay it off every month. If you don't have one, consider a rewards card with cash back (see other thread).



Fair enough, can you family-plan it with your parents? Definitely look at the prepaid plans that use vzw towers, but test it out first.

 

[B Wong]

Remember everyone's situation is different. I see guys post gloating about their "200k in the market now and am buying my house at 28" and then realize that I would be there too if I had parents that paid for a good portion of my schooling, didn't have to help pay for the bills at home while attending school, and started my life with a clean slate financially. I've followed the same basic outlines provided here and am proud to say I have 60k in loans remaining, and am determined to get rid of them by 30 (two more years from now). All this while driving/maintaining a 1990 Nissan, taking a vacation overseas once a year, and planning a wedding.

 

[trailerpark]

But what if your employer doesn't match 401k till you been there 1 year? Then skip it?

 

[cnicolef08]

My job does this weird match thing.... I've been here for 2 years now so I guess I'm at the 30% mark. It only works out if you contribute 6% so anything less than that is pointless.

Yrs of service // match formula
< 2 yrs // 25% of the first 6% of your salary deferral contribution
2 yrs // 30% of the first 6% of your salary deferral contribution
3 yrs // 35% of the first 6% of your salary deferral contribution
4yrs // 40% of the first 6% of your salary deferral contribution
5 yrs // 45% of the first 6% of your salary deferral contribution
6+ yr // 50% of the first 6% of your salary deferral contribution

 

[Momus]

But what if your employer doesn't match 401k till you been there 1 year? Then skip it?

No, never. You are buying stocks at a discount because your money does not get taxed first. ~35% tax saving = more stocks to buy. Compound that 35% extra money in investment every year for 40 years = tons of money.

If you don't use your retirement contribution space, you lose it forever. You can't go back, ask for a discount/tax saving next year and contribute 17.5k. It's use it or lose it situation. Always max this out even if you have student loan.

 

[Momus]

My job does this weird match thing.... I've been here for 2 years now so I guess I'm at the 30% mark. It only works out if you contribute 6% so anything less than that is pointless.

Yrs of service // match formula
< 2 yrs // 25% of the first 6% of your salary deferral contribution
2 yrs // 30% of the first 6% of your salary deferral contribution
3 yrs // 35% of the first 6% of your salary deferral contribution
4yrs // 40% of the first 6% of your salary deferral contribution
5 yrs // 45% of the first 6% of your salary deferral contribution
6+ yr // 50% of the first 6% of your salary deferral contribution

It works even if you contribute 1%... The first line: tells you that you are getting 25% match on your first 2 years. Say you put in $1 you get 25 cents free money (match) up to 6% of your salary. So, if you make 100k, the max they will match, 6% of 100k = $6000 contribution to 401k X 25% = $1500 free money. Put in 6000 + company will give you $1500 extra from year 0-2. I think this is a sh1tty plan but free money nonetheless.

A lot of plan will match up to 5% salary / 50-100% match after 1 year. 100k salary, put in $5000 5% salary, gets $5000 free money 100% match.

 

[cnicolef08]

Gotcha. Guess I was interpreting it as they would match a percentage of your 6% contribution, not that they would match anything up to 6%.

 

[Ackj]

Always max this out even if you have student loan.

If you're not getting employer match, it's not quite so clear cut. The math is a little bit complicated because you're comparing pre-tax investment vs post-tax loan payments, and guaranteed % interest on loans vs. variable returns on the investment. There are a few calculators out there, but they mostly refer to investing vs. paying down a mortgage. Have to tweak the assumptions a little bit.

http://www.globalrph.com/prepay.htm

The results for me say it's better to prepay if I pick investment returns of 7%, but better to invest if I can get 8%. Its only a difference of a few hundred $, but who is to say that the returns will be 7%? Difference becomes a few thousand if returns are only 3-4%. Over the long run I'm sure that I'll see that 7-8%, but I'm not confident that will be during the next 6 years.

 

[BMBiology]

Always max this out even if you have student loan.

Whether you should or should not max out your 401 k when you have student loans is debatable. By paying off your student loans, you are guaranteed to get a return rate of 6.8% (or whatever your interest rate is). The rate of return from the stock market is about 7-8% annually based on historical data.

Remember when you cash out your 401 k, you would need to pay income tax but you are taxed at the bottom tax bracket first then it goes up. You would need to pay income tax on your social security as well. So lets say you get 3.5 k from social security and 4 k from your 401 k every month. That is 7.5 k per month or 90 k a year in income that you need to pay taxes on.

My rule is to contribute to your 401 k to whatever your company matches and put the rest of your money in your student loans. It is hard to beat 6.8% rate of return.

 

[BMBiology]

Remember everyone's situation is different. I see guys post gloating about their "200k in the market now and am buying my house at 28"

This is very true. If your parents paid your tuition and put 20% down payment on your house, you have 20 years head start. That's just life.

 

[Jibby321]

But what if your employer doesn't match 401k till you been there 1 year? Then skip it?

With WM you have to wait a year. But you can start contributing to the stock purchase plan and they match a certain percent of stocks too. Sign up ASAP. I started back in 2011 and shares were like between 45-50 and now they are at 75ish. Hoping they split soon? Not quite sure how that works though.

 

[MatCauthon]

One very important thing! Try to refinance your student loans with DRB. I just took my 6.8% interest loan to 3.5% (fixed) for 5 years. This will save me a lot of money. With all my student loans now at 3.5%, I have bigger fish to fry. Also, try to get a 2nd job. I try to pick up 3 extra shifts a month, plus I try to do at least 2-3 hours of OT a week. It all adds up big time.

 

[All4MyDaughter]

One very important thing! Try to refinance your student loans with DRB. I just took my 6.8% interest loan to 3.5% (fixed) for 5 years. This will save me a lot of money. With all my student loans now at 3.5%, I have bigger fish to fry. Also, try to get a 2nd job. I try to pick up 3 extra shifts a month, plus I try to do at least 2-3 hours of OT a week. It all adds up big time.

I'd like to hear more about the refi.

 

[cnicolef08]

http://www.drbank.com/student_loan_information.html

I just looked at the site.... I'm intrigued

 

[genesis09]

First, don't use a savings account. I grew out of a savings account many years ago. You should use a money market account. Normally the interest is better, but you can only write checks > $250, and so I have a checking account to keep cash and do direct deposit.

Secondly, this is important when building up your cash amount; don't over invest in retirement. You will have short/medium term financial needs which you cannot use any retirement monies for without penalty. I didn't even think much about stocks until I had at least $100k cash. Compared to some of the other people here, I come from a more conservative investment perspective. I have always been taught to be a little cash heavy. Of the money I have invested in mutual funds, most of it is in index funds. I don't care to beat the market, I just want to stay with it.

Also, avoid loaded funds because they will charge you money to invest in it beforehand. If you invest enough money with some of the brokerages, ie Fidelity or Vanguard, you can receive benefits at certain levels of investment.

 

[trailerpark]

More refi info please.

 

[WVUPharm2007]

Got like 4 boxes of cereal, 2 loaves of bread, 2 giant packs of water, a bunch of frozen chicken breasts, they had filet mignon on special, got a bunch of snacks, some hot dogs, a few frozen pizzas, some beef jerky, they had a bunch of weird frozen Asian meals I picked up. And other stuff, I won't list it all. Point is...food for 2 for a week.

$52.

Aldi, son. Eff your favorite grocer.

 

[BenJammin]

Dollar Shave Club. Why spend $40 a month on razors when you can get the same amount at a lower price?

 

[mustang sally]

We were having a spirited debate at work the other day about which is cheaper, Walmart or Aldi. Apparently some people here feel Walmart is cheaper for some items.

 

[rxwaiting]

Got like 4 boxes of cereal, 2 loaves of bread, 2 giant packs of water, a bunch of frozen chicken breasts, they had filet mignon on special, got a bunch of snacks, some hot dogs, a few frozen pizzas, some beef jerky, they had a bunch of weird frozen Asian meals I picked up. And other stuff, I won't list it all. Point is...food for 2 for a week.

$52.

Aldi, son. Eff your favorite grocer.

Do they have pharmacy?

 

[WVUPharm2007]

We were having a spirited debate at work the other day about which is cheaper, Walmart or Aldi. Apparently some people here feel Walmart is cheaper for some items.

Coca-Cola is cheaper. Its one of the handful of name brand stuff Aldi carries. Other than that...I don't agree. Aldi is the effing king. The Emperor.

 

[WVUPharm2007]

Do they have pharmacy?

No. They sell like ibuprofen, acetaminophen, and other similar minor ailment remedies. I'd totally work there if they had a pharmacy.

 

[WVUPharm2007]

I had this jawn for lunch.

Marked down to $3.49 on sale. It was seriously delicious. Unfortunately, it was one of their weekly special buys, so I'll never see it again. The place is like the ghetto Trader Joe's. They have an entire aisle where they get in seemingly arbitrary, delicious stuff...but its always limited. Its weird.

 

[297point1]

Dollar Shave Club. Why spend $40 a month on razors when you can get the same amount at a lower price?

Who the devil spends $40/month on razors?

 

[297point1]

Got like 4 boxes of cereal, 2 loaves of bread, 2 giant packs of water, a bunch of frozen chicken breasts, they had filet mignon on special, got a bunch of snacks, some hot dogs, a few frozen pizzas, some beef jerky, they had a bunch of weird frozen Asian meals I picked up. And other stuff, I won't list it all. Point is...food for 2 for a week.

Does Aldi sell produce?

 

[WVUPharm2007]

Does Aldi sell produce?

Yes. Its decent. I got me some bananas.

If you plan on hopping at Aldi's some time, read up on it. There is a process. Its very different. It's run like a German grocery store, not an American grocery store.

 

[Momus]

Who the devil spends $40/month on razors?

I spent 0 on razor... Airline disposable razor for years, got some disposable from bodybuilding.com also.

 

[confettiflyer]

Dollar Shave Club. Why spend $40 a month on razors when you can get the same amount at a lower price?

I use disposable razors and use a strip of old denim to make them last. $2 razor lasts me 2-3 weeks, I can go longer if I tried harder with alcohol/oil.

 

[MatCauthon]

More refi info please.

PM me and I will give you all the info you need.

DRB had the best rate for me. I looked into a couple other companies but their rates were higher. These companies are only doing refinancing for high-income professionals such as doctors, lawyers, pharmacists, etc. The rate I got was actually 3.75%, but you get a 0.25% reduction if you use auto-payment through a DRB bank account. I'm still debating if I will do that. The refinance process isn't terribly difficult, but they do require some paperwork, credit, and identity verifications.

They also have variable rate loans that are lower. I talked to a dentist who got a 2.8% rate. Personally, I would much rather have a fixed 3.5% loan than a variable 2.8% loan.

I have another loan from pre-2006 that is 3%. I have that set for 25 years of payments. I honestly don't think I am in any rush to pay it off early.

If you guys get your loans refinanced below 4%, it may be wise to consider not investing so much of your capitol into student loans. There are a lot of other investments out there that can easily beat 3-4%. I am investigating lots of other business, real estate, and stock market ideas. I don't want to be cash poor when the right opportunity presents itself.

 

[cnicolef08]

Thanks for the info MatCauthon! If I did decide to go this route, I may definitely slow down and take my time paying these loans back because of the interest rate. Right now, I'm at 7% though so I'm just ready to get from under the hold of "the man" lol! I'm holding out for a little while though because I may (fingers crossed) be considered for a position at the VA so I would qualify for the PSLF program. Either way, it seems to be a great program with good interest rates.

 

[Sparda29]

I use one of these:

http://www.royalshave.com/p/401-015-00/merkur_safetyrazor_classic_33c.html

Merkur Safety Razor, best $40 ever.

And I use these razor blades.
http://www.amazon.com/gp/product/B0..._m=ATVPDKIKX0DER&pf_rd_r=0Y893G3DQ3EVKFQD9SK3

 

[Rockinacoustic]

Beard + $20 norelco trimmer > Baby face

 

[confettiflyer]

I think this thread just brought together all my favorite parts of SDN. Investing and one-upping each other on how to be dirt cheap.

 

[lsexie]

who knows a cheap internet only plan, lower then 60 box a month

 

[MatCauthon]

who knows a cheap internet only plan, lower then 60 box a month

I had comcast for the past 4 years, usually for $50/month or less. Currently, I am paying $70/month but I get basic TV with it.

 

[trailerpark]

Aldi was actually my secret gem, but now I live 124 miles from the nearest one, ugh. I would always get all my produce there. Blocked cheese too and salsa, crackers, salmon in those little upright bags, etc...

The only thing I don't like about Aldi was the crazy abundance of frozen processed junk food. Their meat is to be avoided too, especially the hamburger. I don't drink soda, but Walmart has cheaper soda for sure.

 

[trailerpark]

You should go to cablemover.com to find out which companies are in your area and then compare.

 

[Pharmpills]

I think cable/satellite tv is a great thing and if you can get it for under $60 which I have for the past 10 years then it shouldn't be cut out. One of the biggest chunk of our paychecks go to student loans and mortgage. If you can learn to control these two then you are on top of your game. Having no mortgage and just student loans is not a good thing either because it shows you haven't invested and by the time you are ready the prices of houses will probably be much higher (although that's the case now in many areas). I've seen pharmacist buy 500-300k houses which I don't think is necessary unless you have been working for many years because that can put a drain on your pay check as well as buying that 50k luxury car.

 

[Silent Cool]

But what if your employer doesn't match 401k till you been there 1 year? Then skip it?

Still put in as much as you can.

Also: I personally am a huge fan of the backdoor roth IRA. If you invest your money aggressively, then paying taxes now will offer you huge advantages later.

 

[Silent Cool]

I use disposable razors and use a strip of old denim to make them last. $2 razor lasts me 2-3 weeks, I can go longer if I tried harder with alcohol/oil.

Or check out Harry's:

https://www.harrys.com/