If you’re looking to save more, early retirees and financially independent individuals say the goal isn’t to skimp on every little pleasure. The key is to be more intentional about where your money goes and make sure more of it stays with you.
Business Insider collected the top savings tips from people who have achieved financial independence, retired early, or made big progress toward their big money goals.
Not every strategy is realistic for every household, but the common thread is to make savings intentional rather than accidental.
Know your numbers and avoid lifestyle mistakes
Whatever your goal, keeping more of your income starts with knowing your numbers: what you earn, what you spend, and what you actually save. It’s difficult to improve your savings rate if you don’t know how much money is coming out of your account each month.
A good place to start is by checking credit-card statements and tracking where your dollars are going. First, make sure you’re spending less than you earn. Then, calculate your savings rate. Which categories cost more than you expected? Where can you appropriately cut back?
And if you start earning more, don’t automatically start spending more.
For New York City couple Alex Nathanson and Josette Chang, Avoid lifestyle deficiencies was central to reaching financial independence. They decided not to upgrade to a larger apartment, even though they were able to do so.
“Moving up will just be like riding a pleasure treadmill,” Nathanson said. “Now you’ve got a bigger place, and after a few years you’ll want a bigger place again. We deliberately decided to get off that treadmill.”
Treat your savings as profit
Steve Antonioni, who has Save the “war chest” to finance mini-retirementRecommends thinking about your personal finances like a business.
“I think it’s very important to have the right attitude towards saving,” he said. He adds, “Even the word ‘savings’ messes you up right from the start.”
People use different terms to describe corporate finance and personal finance. Businesses have “revenue” and “profit”, while individuals have “income” and “savings”. Antonioni finds it helpful to make a direct comparison between the two.
“A business is trying to make a profit, right? It’s exactly the same thing for you – your savings are your profit,” he said. “You want to run your life in such a way that you’re making a profit, because that profit is yours. That goes straight to you.”
One way to increase your personal “profit” is to make saving automatic before you have a chance to spend the money. This could mean setting up recurring transfers to a savings or brokerage account, increasing retirement contributions after a raise, or separating spending money from long-term savings.
Try “No Spend Month”
michela allocca, who Quit my corporate job to create personal-finance content Full-time, prefers to set “limits” on spending rather than strict rules.
Sometimes, those boundaries are about behavior rather than categories. For example, she avoids making purchases on her phone and doesn’t keep her credit card near her computer.
“This creates friction in the purchasing process,” she said. If she really wants something, she’ll have to get up, retrieve her card, and make a more deliberate decision.
Another strategy she uses is a “no spending month”, in which she sets clear criteria for what she has and is not allowed to spend on. For example, during a no-spending month, she decided not to buy clothes or beauty products.
“But I’m going out to dinner once a week and spending money on my hobbies,” she said. The idea is that setting guidelines for a certain period of time can make spending limits more manageable.
slash the big 3
To substantially increase your savings rate, take a close look at three major expenses: housing, transportation, and food. often called “big three“These categories are typically among the largest expenses faced by most families.
“If you learn how to get a handle on those big expenses, it’ll save a lot of money so you don’t have to stress about the little things,” said Josh Lupo, who retired with his wife, Ali, at age 30.
The couple used a strategy called “house hacking” to offset their housing costs. Other ways to reduce the big three include car sharing or using public transportation, cooking meals at home, and living with roommates.
Focus on earning more
Cutting expenses can help widen the gap between what you earn and what you spend, but especially in a high-cost environment, increasing income can be another important lever.
Reflecting on the money moves he made in his 20s that helped him achieve millionaire status in his 30s, Alloka said the increase in his income was a major factor. After all, there’s a limit to how much you can deduct, while earning more can expand what’s possible.
“I’ve been able to achieve these big numbers because I’ve increased my income outside of my corporate job,” she said. “It’s not the sexiest thing — not everyone wants to take on extra work or start a business — but it’s a great reason.”
Still, earning more is helpful only if you avoid increasing your lifestyle at the same pace.
“No matter how much you increase your income, you have to avoid lifestyle degradation,” Alloka said. “Otherwise, you won’t really be able to progress.”