To those of us who live paycheck to paycheck, the idea of being able to save $150,000 dollars in just a few years, seems about as likely as finally getting that letter to Hogwarts we’ve all been waiting on since we were 12. Like you’d have to be a wizard to pull it off. However, when I talk to an actual wizard (though not the magical kind…unfortunately), I’m assured that it’s the kind of savings anyone can manage with a moderate salary, and some research/tips. Though if you’re able to master alchemy, it wouldn’t hurt.
Last week, I spoke to The Money Wizard, (a blogger who goes by the pseudonym, Sean) about how he saved over $150,000 by the age of 26. Mostly, I did this because when I think of even saving a couple of thousand dollars for a summer trip, I get depressed, and end up ordering take out (pro tip: take out is a real bank account drainer, but SO DELICIOUS).
“I’ve always been interested in money,” Sean tells me. “The joke is that when I was really little I talked to my mom about how I wanted to retire because I had this epiphany one day where I realized you pretty much work your entire life towards retirement.”
Even as a small child, Sean was disheartened by the rat race that would keep you working until your 60’s or 70’s. Sean wanted to be able to enjoy his retirement when he was still young, a goal that by elementary school he was obsessed with, and by early high school was already working towards.
“When I got my first job around age 15, I saved as much money of that as I could,” he says. “I opened my first savings account at 16, and then at 18, I made my first investments into the stock market.”
This ambition and drive to save carried into Sean’s first job out of college. He wasn’t making an exorbitant amount of money, about 50 grand a year, but he made the most out of this salary. By 25, the Minneapolis resident had already saved 100,000 dollars. And he insists this kind of saving is possible for anyone without sacrificing fun like travel and adventures.
“I travel a lot actually,” Sean says. “In 2016, I took 12 roundtrip plane flights. I went to Florida, Skiing in Utah and Lake Tahoe. I flew in to New Orleans for a couple of days. I did a weekend trip to Cape Cod. And I went on a summer national park road trip to Yellowstone, Grand Tetons, Glacier, and up into Canada a little bit.”
Along with trips to Denver, Seattle, and more than one jaunt to Texas to visit family, Sean finds that he’s able to get away quite a bit. While he’s committed to saving (he’s currently on track to retire comfortably by age 37), he finds you’re still able to splurge on fun by doing so affordably and making smarter choices thoughout the year.
While we talked, Sean shared some advice on how he enjoys his life while also saving like a boss. With his tips, you’ll be banking away your money and making the most of summer ’17.
1. Live your life like your most frugal grandparent.
Sean’s journey to financial success started with being 15 and learning shocking information about his grandfather.
“My grandpa was the cheapest guy I knew,” he says with a laugh. “He would look for a deal wherever he could. He worked a blue collar job, raised five kids, and grew up in that great depression generation where they’re extremely frugal. Then, when I was a teenager, I learned that he was actually a millionaire. He had $1.2 million invested into the stock market.”
It was a revelatory moment for the young teen to find out the most frugal person he knew might also be the most wealthy. He figured if his Grandpa could save up that kind of money, anyone could do it.
And while Sean isn’t saying that you should start hoarding the ketchup packets from McDonald’s or buy all your pants at the Dollar Store, we can learn a thing or two by watching frugal people. Being thrifty and not splurging on day to day items, can give us the financial freedom to make the big purchases that will actually mean something to us.
2. Lower your fixed expenses.
“If you can lower what your fixed obligations are as much as possible, then it frees you up so much more to do the fun things that you want to do,” Sean says.
This isn’t rocket science. Lower monthly expenses mean more money in the bank. Sean says it’s all about figuring out what your priorities are. If your priority is to have stainless steel appliances and granite counter tops or leather seating in your car, then you’re going to pay a few hundred dollars more in rent or a payment per month. But be aware that you’re sacrificing other things, like travel, in order to get that.
From Sean’s point of view, he’d always rather save that money for an extra round trip plane ticket per month than have a car or apartment with all the bells and whistles. But it’s all about looking at what you can’t live without and prioritizing your extra money there. For those of us who want to travel more, we should question whether we’re really spending wisely in our big, fixed expenses. While it is nice to have, maybe the brand new apartment with the in-unit laundry set up isn’t worth it if it means not being able to spend a week in Spain in August.
3. Don’t view your budget as an excuse to spend money.
This is a huge trap that many of us fall in. We feel good about making a budget, but then we actually end up using it as an excuse to spend more money than we normally would. Say you’ve budgeted $500 for eating out for the month. At the end of the month, you’re deciding between making something cheap at home or eating out- when you see that you still have $80 left in the budget. Great, you think. I can spend that $80 right now. Instead of making dinner at home (and keeping that $80 dollars in savings), you’ll try to max out the budget because you’ve given yourself permission to do so. That’s a mistake, Sean tells me. And we do it with travel too.
“I try to limit every expense the best that I can,” Sean says. “A lot of times with a budget, if you say, ‘I’m going to save $1,000 for a vacation, what happens is you end up spending exactly $1,000. Whereas, if you say I want to go on a reasonably priced vacation, then, you might, instead of spending $1,000, have the same experience and only spend 500.”
A budget should be an alert system for when you’re in danger of spending too much, but not an excuse to spend more than you might otherwise spend. Coming in under budget on your trip to Sydney for instance, should mean that you can use that extra money for the next trip. Rather than, say, deciding the extra budget money is a sign that you can spend the rest of it on a gold plated Koala fountain pen at the airport.
4. Always try to fly on slower travel days.
“Fridays and Sundays are the most expensive,” Sean says. “And then, Monday is right behind that.” Flying Tuesday-Thursday or Saturdays can often give you significantly cheaper flights for the exact same vacation. It might require a little extra planning, but shooting for off days can allow you to go on more vacations or splurge when you’re there. That makes the slight inconvenience worth it!
5. Travel during the off season
Not only is it way cheaper, but you’ll have less crowds and a more peaceful vacations. “I’m going to Alaska for a week,” Sean tells me. “And there’s a one week difference where if you go over Memorial Day, hotels are like half the cost than if you go the week after Memorial Day. Once that summer season really picks up, everything’s twice as expensive. Rental cars are twice as expensive, hotels cost almost twice as much. It’s incredible.”
So the lesson is, do your research about the place you’re going and watch for pricing trends before you pick your travel date. You’ll usually end up with a much better deal.
6. Spread your vacation time out
Unlike many bloggers, the Money Wizard still works a traditional job. So his vacation time is limited like the rest of us. Despite this restriction though, he’s still able to find creative ways to maximize his travel.
“What I usually try to do is leave on a Thursday instead of a Friday, and then, come back on a Tuesday instead of a Sunday,” Sean says. “That way you’re only taking a day on both sides, but, you’re not having pay the premium for traveling on the most frequent days.”
Plus, you’re able to take more trips while still getting paid by work.
It’s not too late to cut down your expenses, plan smartly, and get those amazing summer trips on the books! No magic required. Unless your dream trip is to Harry Potter World at Universal Studios in which case, we hope it involves at least a little magic.