Tuesday, December 23, 2008

how did I save so much money?

I received an email from a reader recently in response to the post directly below this one, where I described that in 2008 we saved an average of $1,395 per month for our non-registered portfolio while my wife was on maternity leave. The gist of the reader's question was:

How on earth are you able to save so much money?

Well, simply put this blog's advertising revenue is approximately $1,395 per month.... :)

I wish the above were true. In reality my wife and I both pull in modest salaries. The best answer to how we are able to save so much money each month is a detailed description of several of our characteristics and habits which I feel allow us to do so. A simpler, more refined answer is we know how to get rich. It is really as simple as that. Read my "how to get rich, explained" post and that is basically the reason why we are able to save a significant portion of our income. Specifically:
  • The conventional wisdom says that your mortgage and property tax should account for no more than 28% of your gross income. Ours accounts for 14%.
  • The conventional wisdom says that as we age and earn more money we should buy larger houses and new cars. We don't subscribe to these theories whatsoever.
  • The conventional wisdom and human nature tells us to spend money on what we need and what we want before considering what is left as savings. We turn this idea around and make saving the first action.
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1 comment:

Bean said...

MG,

That's a great savings rate that is made even more fantastic that it was done while your wife was on mat leave.

My wife just went on mat leave with our first and we are hoping to keep up our high savings rate too. So far we're on track!

I also like looking at how much our mortgage gets paid down as an additional form of savings but of the non-cash form.