6 Steps my Partner and I Took to Save Half of Our Income Living in Los Angeles
I originally wrote this article about two years ago for a publishing company and it's odd to go back and read it now. One thing I've learned over the years is that personal finance is personal. Not just between yourself and others- but even between yourself today and yourself 2 years ago. When I wrote this article, saving and investing was of the utmost importance to me. I poured every extra dollar that I could into a Roth IRA and consequently felt jittery at every date night we managed to finagle and every family get together that involved even the smallest ticket to entertainment.
Nowadays, I have a completely different job and lifestyle. Of the six steps outlined below, I would say that I've kept half of them. The time just isn't right for the other half, and other measures and priorities have taken their place. Yet, I'm still VERY glad that I took these steps at the time, when I needed to. Because luckily I had the self-awareness to know that I really did need to.
All of that is to say that if you read this and think, "I could never do that," that's okay! These are just pointers for what worked for us at the time. My hope in sharing it isn't to say, "Look, we did everything right! Ha!" By that logic, I would be doing half of things wrong now, anyway! I only share this now to show how saving half of our entry-level income was possible in a big city at this phase in our life. If we'd had kids, the story would be different. If we were paying off debt, the story would be different. Why? Because our priorities would have changed. Anything is possible if it's your #1 priority.
With that being said, here goes nothing!
My boyfriend, Beny, and I moved to Long Beach in the Spring of 2018. For those who aren't familiar, Long Beach is a city of half a million people 20 miles south of the city of Los Angeles. It's at the southernmost edge of LA County, and thereby enjoys both the beachfront atmosphere of Orange County as well as the busy industrialization of Los Angeles County.
I had recently graduated with a Bachelor’s degree and landed my first entry-level job as a personal banker, and Beny was working part time as a teller as he finished up his Bachelor’s at Cal State University Long Beach. Combined, we made less than $50,000 a year (a high for us!)... but we were panicking about our finances.
We knew that to survive in L.A., we would need to implement big change- and fast. Gone were the days of skipping a morning latte and patting ourselves on the back for our frugality!
Because our income seemed set for the time being, our first action item was to focus on cutting down our expenses as much as possible. We found that there are countless blogs out there that will go on and on about the merits of coupon-clipping, turning down the thermostat by 2 degrees, and driving across town to get the best deal on gas. You know the ones:
"Save THOUSANDS of dollars a month by cutting out these THREE weird things!"
And the weird things were things like AC, lattes, and movie tickets.
First of all, we didn't have AC to waste. We already weren't buying lattes. If you can really cut thousands of dollars a month by cutting out lattes then I just don't know what to say!
Second of all, we quickly realized that these were high-effort, low-payoff money moves. Would skipping the movies went to roughly every three months save us money? Sure. About $24 dollars. We knew that to survive in L.A., we would need to implement big change- and fast. There was no longer any such things as skipping a latte and patting ourselves on the back for our frugality!
So here are the 6 biggest decisions we made that would ultimately enable us to save half of our income while living in Long Beach.
1. We automated our savings.
This was the number one way that we saved our money. It forced us to save a large amount by getting us out of the payday cycle. Instead of seeing our direct deposits hit on Friday and thinking of all the ways we could spend it, we conditioned ourselves to expect a much smaller amount. After a while, the smaller amount became our new normal, as our savings were literally “out of sight, out of mind.”
Setting up automatic savings was extremely simple. First, we both established 401k and Roth 401k plans with our retirement providers and contributed at least 10% of our respective paychecks to a combination of the two. Next, we coordinated with our HR departments to split the remainder of our paychecks into two different accounts. After retirement plan contributions, 60% of my paycheck went to the checking account I use day-to-day, and the other 40% went straight to an online, high-yield savings account.
10%+ was doable for us, but the magic is in the automation, not necessarily the percentage. The way I see it is this: if you can spend even 5% of your income every month without knowing where it's going, then you can save 5% of your income every month for the same reason.
2. We lived with roommates
Maybe this should be number 1, because it hands-down has saved us the most money over the years. If we hadn’t made this one lifestyle choice, then it would have been impossible for us to automate so much of our savings.
Many people hear the word “roommate” and think of a dingy college dorm with empty 711 cups littering the floor. There are more than enough horror stories out there for anyone to swear off roommates for life! But the truth is, finding a good roommate at the beginning of your career might be one of the best investments you can make. My boyfriend and I paid a combined $850 per month to live in an average part of town with two roommates. If we had lived by ourselves, we would have paid at least $1400 per month to live in the same area. That’s an incredible savings of $550 per month!
If we hadn’t made this one lifestyle choice, then it would have been impossible for us to automate so much of our savings.
It might have been hard to live with roommates, but it would have been harder for us to save $550 in other areas of our lives, so the payoff was worth it.
3. We bought our cars outright. (Okay, almost outright).
To outsiders it’s obvious that Beny and I are not keeping up with the Jones’ at all. We both drive cheap, used cars. But we’ve found that it’s a very small price to pay for the freedom of being debt-free.
My car is the most expensive purchase I’ve made in my life so far. It is, statistically, the second-most expensive purchase that most Americans will ever make. To be honest, mine wasn’t the best deal ever. I could have gone much cheaper and bought something off of Craigslist and perhaps had a mechanic friend do an inspection for me. That’s what Beny did, and his car has been reliable for years now. I wound up buying the cheapest car on the lot at a used car dealership, and I loved it. I was able to mitigate the costs by paying it off within one year, just before we moved to L.A.
4. We limited our eating-out.
Our policy is that we only eat out when we really, really want to. I know you’ve heard it all before, but I’m just going to reiterate why you probably shouldn’t eat out very often if you’re trying to save money, especially if you're going for bigger money goals than you ever have before!
When you go out to eat, you’re paying for service, not for food. Take it from someone who's worked in the food industry. Eating out is so expensive because the overhead costs are rolled into the price of the food. You’re not just paying for a sushi roll, you’re paying for the rent on the building, the electricity bill, the wages of the cooks and cleaners, the ambiance, etc. And to top it all off, you pay an extra 10%-20% as a tip to the staff when you’re done.
This might all seem like common sense, but when you haven't prepared your food and don't really have a plan for it, then your brain seems to go into starvation mode. We justify eating out all the time by saying, "Well, I HAVE to eat, don't I? If I don't eat out I'll sTaRvE!"
Not true. Most people are probably fine if they wait to get home (or to a grocery store) to eat. But it's not in our nature to put it off. My favorite Instagram account for meal prepping and making affordable food is WorkweekLunch, check them out!
5. We shut down our propensity for random spending.
Clothes, video games, subscriptions, and any other unnecessary knick-knacks. It helps to be a minimalist here. I naturally want to throw things out. And living in a 13 square foot room made me really want to throw things out. When a new pair of shoes takes up a tenth of your closet, how could you not??
Beny is not quite the same (in other words... he's normal!), but what helped him cut down on random spending was more of a mindset shift. We asked ourselves the following questions to put things in perspective:
"Do I want this THE MOST, or do I just want it RIGHT NOW?"
- This is the easiest one to help rule things out. Turns out, 75% of random spending is on things that we only want right now.
"Will this still be a welcome addition to our home a month from now, or will we want to throw it out by then?"
- I will say that this question became difficult to answer around the holidays! But it helped curb a lot in random home decor and clothing.
"Does this reaffirm the values I'm trying to live by?"
- I've found that this question helps me a lot when it comes to buying food and clothes, because I personally don't like to feel wasteful. I might be able to afford to buy a to-go latte every day, but I feel like I'm leaving a plastic trail of cups on top of a landfill somewhere. Same with clothes. Do I really need a new blouse or can I just repurpose an old one to look similar? Most of the time, I know the answer before I even have to ask the question.
6. We practiced the Anti-Budget.
Beny and I hate crunching numbers and counting pennies. It works for some people, but for me the whole point of saving money is that I don’t have to think and worry about money so much.
Instead of a budget, I practice the Anti-Budget. The Anti-Budget starts with how much you want to save, rather than how much you think you have to spend. Let’s say you want to save 20% of your income. With a traditional budget, you would allocate your spending in line items to make up the other 80% of spending. 30% to rent, 5% to utilities, 20% to food, etc. Finally, at the end you would write “20%’ to savings- and cross your fingers.
With the Anti-Budget, you automate the percentage of income that you want to save first. And then you can do whatever you want with the rest of your money. I love this strategy because it puts the focus on my goals (saving) rather than arbitrary guidelines that might help me get there (but probably won’t).
For me, the whole point of saving money is that I don’t have to think and worry about money so much.
When all was said and done, Beny and I found that we didn’t feel deprived at all. To the contrary, by cutting out all of the unnecessary things in our lives, we felt that we were able to appreciate the important things more. That year, we accomplished our big goals. We had no debt hanging over our heads and built a substantial emergency fund. And while we were on that road, we also accomplished many little goals that we didn’t even know we had. We learned how to cook, how to care for our cars, and we walked outside to explore our new community. Frankly, it was fun! And the investment we made in ourselves to figure things out from the get-go will pay dividends for years to come.
These six steps were so vital to our success our first year living in Long Beach. But if they were so great, then what changed, and why?
First, Beny and I no longer live with roommates. We discovered that Long Beach has a surplus of studio apartments due to the conversion of old hotels into more functional, modern living spaces. So we bit the bullet and ultimately moved into a place for just the two of us. Although it cost more money, by that point we were at a place in our lives and careers where we felt more comfortable with our priorities shifting, and valued the privacy and ease of access of a studio to the money we would have saved with roommates.
Second, I'm not currently automating my savings. Since I wrote this post, I switched from a stable 9-5 job with a steady paycheck to part-time and freelance work. When I was working at a 9-5, it made sense to try to forget when payday was and how much would be going into savings. But working as sporadically as I do now, I need to be much more careful with every dollar. I need for each paycheck to be at the forefront of whatever I'm doing in order to stay on top of it all. Once again, it all comes down to what I currently value and prioritize.
Finally, I wouldn't say that we follow the Anti-Budget right now- for the same reason that we're not automating our paychecks. There are times in life for everything and right now isn't one where we're prioritizing saving above all else.
What does this mean for you?
I hope that something here resonated with you! We were extremely fortunate to be able to save an incredible HALF of our income while living in LA County, but it came with its fair share of sacrifice in other areas of our lives. Even though we've drifted away from these 6 steps though, many of the concepts have stayed the same. Chances are, you'd see a significant increase in your savings rate even if you tried ONE of these steps. Just like us, you don't have to do it forever. Try whichever ones stand out to you for a few weeks (or months) at a time and see for yourself how things change in your life! Then- adjust accordingly.