My income is quite erratic. I get a fixed but low monthly salary and then a quarterly bonus based on performance; in my job I eat what I kill. Since discovering FIRE in early 2020 I’ve invested only a small amount each month. I then banked all of my bonuses. This felt sub-optimal I needed to do better. Over the last two months, I’ve slashed my spending and have identified five steps to increase your savings rate by 20%+ per month. Its been fun, I don’t feel I’ve missed out, and I’m loving the impact its having on my numbers.

A quick foreword….

Before jumping in, it’s important that you actually know what you are spending, your budget and track your net worth. You can then work out your savings rate and focus on increasing it!

If your savings rate is low, try increasing it by 1% every 30-days until it feels painful. Make sure you invest your new savings. Your money will quickly compound and then start working very hard for you!

Step 1: Stretch Goal – set a your savings rate goal

Based on your current spending levels you can work out your savings rate. Once you know what your current savings rate is, then you can set an ambitious goal to increase it. This is your stretch goal. It may take a few months of lifestyle adaptations to get there, but with perserverance and creative thinking you will be surprised what you can achieve.

I set my stretch goal to increase my monthly savings rate by 20%. In the first month I managed to hit this rate, in the second month I’m on track actually beat it! I’m very proud of this : )

Step 2: Track Spending – know where you are

Like most people on the path to FIRE, I use a rewards credit card for all my discretionary monthly spending. I have a great card that earns me Kris Flyer miles and I get loads of free flights (in non-COVID times). Using a credit card can make it a little harder to track your spending. Payment cycles are misaligned vs your salary, balances may still due from the last statement and charges are delayed in when they appear.

An easy way to track your spending

I decided to geek out a little and set up a simple spreadsheet which includes all of the following information:

• Spending Budget: this is the total budget for my discretionary spending which I can spend during the month;
• Credit Limit: this is the total credit available on the card;
• Balance Due: this is the amount left to pay on the card from the last statement – as a side note, obviously ALWAYS pay your balance in full); and
• Remaining Available Credit: credit limit minus the available available credit (minus the balance due from last month) is the amount which has already been spent during the month.

Using the information above, I calculated a running total of what I’ve spent in the current billing period. This then indicated how much I have left to spend based on the budget.

The daily budget amount

What has then worked incredibly well for me, is to breakdown the remaining budget into the remaining days in the billing period. This gives a daily budget which is easier to mentally remember each day (i.e. $50). When I am going about my day, its easy to then keep track in my head and ensure I don’t overspend. I update the spreadsheet numbers every other day or so to keep on track.

The daily budget amount has been incredibly important to me. For some reason, I get a kick out of beating my budget and coming in under each day. Doing this allows increased spending later in the month, or more to invest at the end of the month! A template spreadsheet based on the one I use is available here:

Step 3: Cut out Excesses – though don’t make yourself miserable!

You can increase your savings rate via three main routes:

1. Cut down on discretionary spending: this is usually where most people have flexibility in their budget, and is where I did. I was spending waaaaay too much on dates, drinking and socialising with friends. For example, by looking through my spending I realised I spent S$700 on dates in one month – to add salt to the wound, I didn’t take it further with any of the guys I’d met….
2. Cut down on fixed or recurring costs: another area to reduce excess is on your fixed costs. Accommodation costs, transport, memberships and subscriptions should all be reviewed. Do you really need Disney+ AND Netflix? Do you need Netflix at all? Could you get a better interest rate on your mortgage and reduce your payments? Could you move to a one-bed apartment and save 30% of your rent? Are you really using that expensive gym membership? Take a good look at everything on which you are spending. If it doesn’t offer good utility or value then cut it.
3. Boost your income: finally, you can increase your savings rate by boosting your income. Side hustles, promotions, bonuses etc. are all there for the taking. If you are able to cut your costs and increase your include, your savings rate will be rocket charged!

Step 4: Find Alternatives – working on your Achilles heel

Look at your usual spending habits and work out where most of your discretionary spending goes. As mentioned above, for me it was most definitely socialising. In Singapore, a cocktail can easily set you back S$25 and a meal in an upscale restaurant S$100 with a glass of wine or two.

I don’t want to cut out all socialising with friends (my Achilles heel) so instead I’ve been more active in suggesting budget friendly ideas. This has included bike rides with a cheap store bought beer at the beach, picnics where we all bring one dish and share, dinner parties on rotation and karaoke nights at home. These have all been really fun and I’ve not missed ‘going out’ as much as I thought I would.

Step 5: Building your Tribe – stay on track with people who care

A journey to FIRE can at times feel long and sometimes even lonely. If you are lucky enough to have a partner or spouse, it’s essential that your financial values are aligned. Its probably near impossible to reach FIRE if you and your partner are not.

Find a supportive friendship circle

It’s also very important to surround yourself with supportive friends who understand the FIRE journey (at least at a high level) and root for your success. When you are on the FIRE journey, you tend to get quite excited about it. I’ve shared the concepts widely within my friendship group and family and now there’s a good few of us following the same path. We are open about money, earnings, promotions and even share our net worth statements monthly. This is really invaluable.

Don’t let others derail your success

Those of your friends who get mad at you for not spending on lavish meals, nights out or holidays are probably not good friends. One of the dark sides of FIRE is that is can make people reflect on themselves and their own financial choices. When you hold up a ‘financial mirror’ to people, the reaction can sometimes be unexpected. Don’t let other people’s bad financial decisions force you into making choices which aren’t right for you. You shouldn’t lose a good friend because you didn’t go out to brunch last Saturday…!

So there are my five practical steps I used to increase my monthly savings rate by 20%. So far, for me, it’s working. By far the most useful thing I’m doing is tracking my credit card spending to keep on track.

Try following the steps and see how powerful they can be . Let me know how you get on in the comments below.