Piggy bank

Saving is a pre-requisite to investing and wealth accumulation. The opportunity to save is present when income exceeds expenses. However, saving is often pitted in a tug of war with spending more whenever excess money is available – the impulse to spend vs. the discipline to save.

One of the ways that we viewed saving was to look at any excess income in a business context, e.g. retained earnings. Then, just like a business, we looked at how much of our retained earnings should be invested vs. how much we needed to spend on capital projects. For our purposes, we defined a capital expense as any unbudgeted expenditure over $100.

We didn’t set specific saving targets such as 5% per month. However, our unwritten goal was to save as much as we could. So in practice we established a very aggressive goal. It factored into spending decisions since our “bias” was towards saving.

We were fortunate to work for several companies that offered 401k matches, employee stock purchase plans and health care flexible savings accounts. Programs such as these offered us another way to grow our savings. Our philosophy was to always participate in these company programs to the fullest extent that we could. The company contributions really gave a boost to our savings!