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This month I hit a huge milestone. I opened up my money tracking software Personal Capital, and after everything synced up– it spit out a number I sputtered over.
There have been a lot of changes in my life since I discovered the idea of financial independence three years ago. And no, in case you’re wondering, I didn’t receive an inheritance or win a lawsuit. In fact, on the outside my life looks pretty normal. For the most part.
I don’t always do things according to life’s script and so far that has worked out for me. After hitting this net worth milestone I thought I would reflect on some of the wackier ways I have saved money. Here are 5 crazy things I did to save like crazy in my twenties.
1. Sold My Car For More Than I Bought It For
Cars are a depreciating asset– we know that. If you take a new car and drive it off the lot, experts estimate that a new vehicle will lose 20% of its value in the first year, and 10% every year for the next 4 years after that. Today, buyers spend an average of $31,000 on a new car. Based on these depreciation rates, in 5 years it will be worth $16,272, or a loss of $14,728!
To avoid severe depreciation rates, I bought a used car. I wasn’t in a rush, so I did my research, cruised Craigslist, car enthusiast forums, and dealers in my area until I found a good deal. The MSRP for the car brand new in 2009 was $31,010. In late 2016, I found one listed for $12,000, a steal! I negotiated with the seller and brought the sticker price down to $10,700. With added costs of transporting the car, registering it, and flying out to inspect it, my total was $12,150.
|Registration, Title, License plates||$300|
Two years later, I listed and sold the car for $13,200.
I personally detailed the car, cleaned it, listed it, and held my own in negotiations. It might not be the largest profit, but with some diligent research, planning, and care, I made money even after driving the car around for two years.
2. Sleep In The Same Room As 15 Strangers While Traveling
Some might call it crazy– I call it cost-effective. Staying in hostels has saved me thousands of dollars over the years, and I have met some really cool people along the way.
Hostels often range in price from $12-$30 per night. I usually stay in a dorm room, sometimes sharing with as many as 15 people. When I spend most of the day exploring, all I need at night is a bed to sleep in. I don’t need anything fancy– room service, plush bedding, or other amenities would be superfluous. This way, I get to talk to other travelers, stay in the center of the city, and stash away the extra cash.
3. Applied for Jobs Without The “Right” Degree
“Wait, how did you become a software engineer if you didn’t study it in school?”
I get this question all the time, and the truth is that it took grit and a lot of gumption. I taught myself how to code on the job, applied for positions even if I didn’t meet 100% of the qualifications, and attended numerous networking events.
While many people were incredulous that I would even try to be a programmer without a CS degree, it seems that I am not alone in applying for jobs that don’t line up with my degree. In a survey from CareerBuilder, 32% of college grads said that they had never worked in a field related to their major (though to be fair, software engineering is at least tangentially related to my major of mechanical engineering).
Switching into software engineering was a huge boost to my salary, therefore boosting my savings rate. A high income undoubtedly is one of the biggest factors in being able to save so much money. While some called me crazy for attempting such a difficult field without much prior experience, the change of industries was critical to my income growth.
4. Job Hop Even When My Job Was Going Well
At my first job, I was promoted in my first six months in my role. I was getting raises without asking for them, and I was being sent abroad to do interesting work in other countries. Even so, after two years I started job hunting. Several of my coworkers stuck around because the job wasn’t that bad, and they would prefer to stick with the devil they knew rather than risk jumping into a worse situation.
However, I knew the market was hot for software developers, and in those two years I had gained valuable expertise in my field. Even with regular salary bumps, it would be impossible to catch up to the market rate.
It was time to hop.
In fact, employees that stick around with their company for longer than two years end up earning 50% less on average. True to this trend, when I changed jobs I doubled my salary and ended up with an exciting project and engaged mentors, making it an amazing move for my career.
5. Ignore Conventional Spending Advice
When I started ‘adulting’ for real, I wanted to find out how much was reasonable to spend on housing and buying a car. I did what most people do: I Googled it.
Rules of thumb, like the 50/30/20 guideline where 50% of your spending should go towards needs, 30% on wants, and 20% on savings, give a nice starting point for some. However, once you are living comfortably you don’t need to spend more. If you let your spending scale with increased income, you are leaving savings on the table.
I ignore all rules of thumb when it comes to spending advice. To save an amount like $300,000, I didn’t increase my spending as my income increased. I found a comfortable level of spending and banked all extra income, raises, and bonuses.
I budget a fixed amount for each spending category. Thus, the percentages I currently spend on each category decreases every pay raise.
If my salary goes up, those percentages should go down, because I will be spending the same fixed amount.
Here is a chart from Personal Capital of my monthly cashflow comparing my income and my expenses:
For many people, even high earners, the green and orange bars are the same height. Using conventional rules of thumb it is easy to figure out ways to spend more– whether on a larger house, a nicer car, or higher quality gear. However, in order to save more, it is better to keep your spending consistent and save anything extra.
Those are 5 crazy things I’ve done in order to save $300,000. For more context, I wrote more about the history and process of saving money in my post about saving $200,000 by age 25. While some may shake their heads, I like to think there is a method to my madness.
What do you think?
Is this totally crazy?
Would you or have you done these things?
What is the craziest thing you have done to save money?
Share in the comments below!