Increase Your Savings By Identifying Specific Reasons To Save

save money for freedom. Jamaica panorama
Save money so you can live a free life! Jamaican sunset

I was invited to join the TaxACT How I Save blog tour which shares ways to increase your savings. Last year, TaxACT saved America over $240 million on tax preparation. 

The personal savings rate in the US could be better. And it is my hope in spreading knowledge on personal finance topics that more Americans will take better care of their finances. I certainly hope I can help inspire you to increase your savings and achieve financial independence sooner rather than later.

Increasing your savings and regularly investing are so important to growing wealth. For those who are hesitant to invest because of volatility, know that investing during uncertain times makes you a better investor.

One of my main goals for 2015 is to save $100,000 in new liquid cash after spending too much money on remodeling in 2014. I got down to around $25,000 in liquid savings towards the end of the year and it just didn't feel enough for me. Each person's desire for liquidity is different given our living expenses and risk tolerance levels are all different.

Set Goals To Increase Your Savings

The reasons why I want to have roughly $100,000 liquid at all times is as follows:

1) Minimum private equity investments generally are around $50,000, at least all the ones that have been presented to me. The last thing I want to do is only have $25,000 and not be able to invest in the next Uber.

2) It's always good to have cash on hand when the stock market throws up. The general long-term trend is up and to the right. I want to implement my own advice on how to better dollar cost average with $5,000 – $10,000 investment increments at a time.

3) I have a goal to pay down my first rental property mortgage within 12 months. There is roughly $85,000 left in principal from this 11.5 year old mortgage (started at $464,000), which is starting to annoy me. I will be averaging roughly $7,000 a month towards paying down extra principal along with my usual monthly mortgage payment that pays down $1,100 in principal in order to achieve my pay down goal. Having $100,000 allows me the flexibility to pay it all off in one go, or give me the confidence to keep on my $7,000 a month plan.

Save Money With A Purpose

If you're saving money just for money's sake, then eventually you will hit a wall and ask yourself, “What's the point of working so hard and saving so much?” I hit that wall at 25, after only 2.5 years of killing myself at work. I received a financial windfall after one lucky stock pick, and saved 100% of my annual bonus plus another 30%-50% of my base salary.

I was so burnt out that I was *THIS CLOSE* to short-circuiting my career by moving back home to Hawaii to plant mangoes for a living. The 5:30am work start and 9pm departures were really beginning to warp my mind. I was even considering working at a Merrill Lynch brokerage branch in Honolulu for $40,000 a year, rather than keep my six figure job, just so I could see more sunshine (it was dark when I got to work, and dark when I left work for the majority of months).

Luckily, I escaped Manhattan and found a new job in the same industry in San Francisco that lasted for 11 more years. Living in San Francisco was like getting a massage by the most attractive woman on Earth. Manhattan was like getting my eyes gouged out by Golem with bad breath.

Increase Your Savings With Specific Targets

With renewed vigor, I set some new money saving goals while living in San Francisco as a 20-something year old:

* To save enough money to never have to return to Manhattan for work.

* To save enough money to not have to work in finance after age 35 (~11 years after coming out to SF).

* To save enough money to take care of my parents for the rest of their lives if needed.

* To save enough money so that I could afford $200,000 in ridiculous private school tuition for two kids if they aren't smart enough to get into a world class public institution for 1/3rd the price.

* To save enough money to afford taking on a lower paying job that is more interesting.

* To save enough money to travel abroad comfortably for 10 weeks a year for two.

* To save enough money in order to minimize fighting about not having enough money.

* To save enough money to buy a variety of assets that will generate enough passive income to live a comfortable life.

Savings Equals Security And Freedom

Saving money is delayed gratification. But is that really so bad when you're working hard, learning a lot of great new things on the job, and testing out your passion project on the side? When we're young, we don't need much money to be happy. Life is simpler and we're still in the incubation stage.

But eventually all of us will want to be free to do our own thing. It doesn't matter how awesome your job is now, sooner or later you'll get bored. The last thing you want to do is feel stuck doing something for money because you don't have the savings to allow you to be free.

The secret to freedom is to come to grips early on that all things fade over time. I've spoken to many people in their 50s, 60s, and 70s about their perspectives on personal finances. The consistent theme that comes up is wishing they got their act together earlier on.

Personal finance starts with savings. Minimizing one's tax liability is one of the biggest steps towards increasing savings. TaxACT has been kind enough to provide a software giveaway for those who are interested.


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44 thoughts on “Increase Your Savings By Identifying Specific Reasons To Save”

  1. I largely save out of habit and also not having that much I’d want to spend buying month to month. I make sure to cover all my expenses each month, and plan for any large upcoming expenses, and the rest generally goes straight into my savings. Although I’m making a better effort lately to put my extra cash into investments instead of just stock piling cash.

  2. 401k from former employer….I have a 401k from a former employer and I was considering moving it to an IRA (eTrade) so that I can have better investment options and a bit more control. The former employer is Merrill and I feel like the investment options totally stink! Is the move to IRA worth the extra tax burden I will be hit with? Curious to know your thoughts.

  3. Hey Sam-

    I am young in my career and want to keep saving so I can build up my passive income stream. Having 100k in the market only gets you 2-10k of income depending on your investments. To have significant passive income, you need some significant wealth. I want to eventually replace my salary with passive income – so I will just keep on saving.

    I had a heated discussion with a manager at my company last night about savings. He is in his early 30’s and basically told me he has no savings but isn’t worried at all because “he has the next 35 years to save”. He said he wants to “smooth out consumption” over time and not deprive himself while he is young to save a few bucks. I countered with compound interest and how I would much rather invest 100k and have it grow to 1mm one day than spend it on something that provides no financial return.

    The lesson here: don’t debate colleagues about their spending habits :-)

  4. I think one of the most important reasons to save is psychological. It sends a signal to your brain that you have “enough”. Saving is strength.

    I do remember the first thing my wife and I saved for together, our first house. When we met we only had about 1k saved between us. We both started saving a whopping combined $140. a month ($35. each paycheck)! 3 yrs later, we had about 5k saved, enough for a 3%-down FHA loan on a 125k house! That was over 20 yrs ago. We are in the same house, renovated, and debt free.

  5. The Alchemist

    If only just saving were enough! I’m rapidly coming to the realization that aggressive saving alone, even when the savings are well invested, is just not enough. You have to be able to generate a substantial income that increases over time.

    I’ve done a fantastic job of saving/investing for years. I easily have enough cash for a house down payment. The problem is that houses cost so stupidly much here in the most expensive place on the planet that my mortgage would still be ginormous and the taxes staggering. You have to have a hefty monthly income to deal with that.

    Apologies for tossing a glum note in here! The talk about wondering what you’re saving for just kind of struck me at a weird oblique angle; it’s sort of depressing to have been an aggressive saver for eons and still feel as though your goals aren’t realistically attainable. Which also puts you in the position of asking, “What are you saving for?”

    1. As an aggressive saver for eons, did you have specific things you were saving for though? It sounds like you’ve really wanted to buy a house for several years, but was it always the case?

      I’d look at places in Eugene, Oregon and Washington if I were you. Lots of GREAT houses for $500,000!

  6. Thank you for another great and insightful article.

    What is your advice on having exposure/opportunity to the private equity investments? Thanks!

    1. Private equity is currently a very exciting asset class now due to the amount of liquidity flowing in and the crazy valuations eg Uber, Airbnb, Whatsapp. It feels like a bubble, and there have been down rounds like Box going public at a 30% lower IPO price than last round, although the stock could PPP.

      Private equity is part of my alternatives portfolio that has they most upside and the most downside (-100%). I like allocating 5-10% of all investments in PE. Invest what you can afford to lose or not get back for 10 years!

  7. James@StartingNegative

    I also wish I had gotten my act together sooner. Better late than never.

    Currently, I save for risk reduction purposes, job loss and potential medical emergencies being ones that come to mind.

    Ultimately, I’d want enough passive income to not have to work. I’m pretty sure the stress is starting to get to me.

  8. My main reasons for saving:
    1. To obtain assets that generating enough passive income so I can gain my freedom from corporate slavery :)
    2. To take care of my family
    3. One day, I can go to third world country and do something meaningful for others

    By the way, I am divided between paying extra for mortgage (rental, not primary residence) with little price appreciation in 2015 or investing in the stock market/mutual fund. What would you suggest?

  9. Hey,

    Long time reader i’ve just never commented on any of the posts. Love the blog, as i’m sure you here countless of times. I’m currently in college so i’m taking stock of your advice to I get to the point where i can actively practice them. Kinda curious when you mentioned private equity investments, are these opportunities that arise due to the acquaintances you’ve made in your professional career or are you actively searching for these investments and if so can you advise how you hear about them?

    I appreciate your help, and hope your website continues to do well in the future.

    1. Howdy Izzy,

      Various investment opportunities either come up through my network of friends and acquaintances. You can also look online at places like

      The thing is, the law says you must be an acreditted investor to be able to invest in such deals. But, there’s plenty of public equity opportunity as well.

  10. green_knight008

    My main reasons:

    1. Freedom from wage slavery.
    2. Set a good example for my son and family.
    3. Provide security for my immediate family.
    4. Retire on a warm water beachfront.

  11. I completely agree that having the right motivation is very important for meeting financial (or other) goals. For my New Year’s resolution I decided to “resolve my reasons” for saving by reading and blogging about finances more this year.

    1. The accountability factor of blogging is huge. I like your website name. Like a Stealth Wealth derivative!

      Because I wrote an article that I would slay my rental mortgage debt this year, I have been FULL ON in paying the sucker down… $20,000 in the first 14 days.

  12. Other than the first of your 8 reasons, I have almost exactly the same reasons. Even the ridiculous private school tuition. The clock is ticking on that now with a 2 1/2 year old and another baby on the way…

    And I’ll most likely be working in finance a few years beyond 35, unless I find something more interesting to do in the next year or so that doesn’t involve a pay-cut.

    I’d also add ‘To save enough money to live in a comfortable family home in a nice neighbourhood’ – which we will be doing in around 10 days time. Technically, this will be ‘to save enough money to pay off that massive mortgage on our comfortable family home in a nice neighbourhood….’, which is probably a little more motivating anyway!

    1. Will be cool to see a $500,000 tab for 4 years of private school tuition in 16 years Jason! Well, that’s in America at least. Only the super rich will ever be able to afford that type of money, and then the wealth gap grows.

  13. It’s also important to prioritize those savings goals. I have about a million of them, but there are some that are more important and urgent than others. Usually the less-urgent and important ones are more fun :(

  14. I firmly believe in what you are saying here Sam. Saving for saving’s sake is pointless, pretty much like any other practice we might set for ourselves that has no end-goal behind it. When we save we actually designate names for what the money is going towards. That way it doesn’t “accidentally” get spent on something else. Right now we have several savings goals, the biggest of which is to purchase a new vehicle.

  15. I just wish that someone had told me to “pay myself first” and bank 10% from my first pay cheque onwards. They should drum that into kids from the first day at school. I live in the UK and we are heading for a pensions meltdown in this country – a TV programme the other night revealed that the average pension pot in the UK is $50,000. (That is in total, not what it will pay out every year!) It’s frightening. At my work, people are now automatically enrolled in the work pension scheme when they join. They have to request NOT to be a member. The rule is that if they contribute 6% then the company matches it. Over 70% of new starters request that they opt out of the scheme. Insanity.

    1. I agree. Why we don’t pound that message into kids’ heads, I donno.

      But pension, WOW! Only like 10% of Americans have pensions, or something like that. Getting a pension is like winning the lottery!

  16. I am splitting a fraction of my savings to fund a business I have been tinkering with for sometime. I figured if I invest about $250 a month on it, it will avoid me taking a loan, pay interest and also keep my savings intact. This fraction acts as a bank that lends myself money at a 2% interest rate. Kinda quirky but it works for me!

  17. We save for retirement. Liquid cash is nice and we certainly have our emergency cushion and our future-investment savings, but in a single earning family of 3 free cash is the biggest challenge.

    We just keep setting goals, paying ourselves first, and knocking them down one by one. Next is the college tuition account, just need to decide if it’s 529, or something else…

  18. Hi Sam,

    Wow – you must have hated Manhattan!

    If you’re saving money just for money’s sake, then eventually you will hit a wall and ask yourself, “What’s the point of working so hard and saving so much?” – I think this is very true for nearly everyone, I have set NW and savings % goals that I can track throughout the year, so the goal isn’t too far into the future.

    Once this grows more and more, then I will look at income, as this is easier to relate to than a chunk of assets for most of us.

    It’s still relatively new to me and I am still enjoying learning new things, but like anything, this initial period will start to cool off and you need to keep the motivation going once this happens!

    Mr Z

    1. Hahaha, yes, I HATED walking to work in freezing whether during the winter, when the skies were always grey. I never saw blue.. which is depressing man. It really was being the grunt at work that bummed me out. Manhattan is pretty awesome if you got $250K a year to spend and ball out.

  19. My girlfriend and I have a joint savings account for our future wedding. I’ve also made it a habit to open accounts for a lot of things, some of which may or may not be a known expense (e.g. auto insurance and Christmas gifts vs. emergency and opportunity).

    It’s a collection of of short and long term buckets. All leftover money goes into the freedom bucket that’ll continue to grow and buy more of my time back. Right now, it’s the runway for my entrepreneurial dreams.

  20. I’m just starting out in my career (about to hit the two year mark!) but I have always been an aggressive saver… My only problem was I would pick something I wanted to buy with my savings. This worked great in college- finally bought the *used* car I had dreamed about for 3 years, but then I was stuck with no savings and no new goal.

    Starting up work I matched my employer 401(k) contribution, but didn’t have any reason to save more (although I did start looking at shiny new cars.) Then I found that one article that struck a cord – The Average Net Worth For The Above Average Person, which gave me my current goal. Not falling behind the above average.

    Some day I will start worrying about that liquid asset #, heck maybe that will be 2016’s goal!
    Thanks for the good article-

    1. Hi CRP, I’m pumped to help you shoot for some financial goals with that post! I’ve found a lot of folks don’t know what to shoot for, and end up spending their money on stupid stuff and then look back and regret the money they spent.

      Stay away from shiny new cars!

  21. Gen Y Finance Guy

    Personally, I don’t personally like to see my liquid savings (checking/savings/less than 1 year CD’s) dip below $40,000. That just seems to be a good number for my brain.

    My wife and I typically set specific saving goals in the form of total liquid balances. For example, we wanted to pay off her car which was our last piece of consumer debt outside of our mortgage. Because we both feel way more comfortable with a $40,000 cushion in the bank. We set a goal to pay off the car once we had $50,000 in the bank. The car is now paid off :)

    The 2015 milestone is to build our liquid savings up to around $85,000. Once we hit this milestone we want to look at adding a 2nd rental property to our assets. We will be looking for something in the $200-$300K range. We have some friends that want go in on a property together. So with about 20% down, that will be about $20K to $30K for our piece of the down payment. And if this doesn’t work out we have a few back up plans as to how to put the money to work.

    1. Sounds like a plan mate. Per your other comment, you are welcome to share a guest post. Just shoot me an e-mail with some ideas you have in mind that haven’t been addressed here before. I’m always interested in reading new perspectives.

  22. We’re all about saving for retirement, our children’s college educations, and travel. Oh, and I really wish my husband would quit his stupid job! I am hoping to get enough money and income built up that he sees it is no longer necessary and could do something at home with me instead.

  23. Good article. I often have this problematic mindset. I’m comfortable. I have little motivation, for saving like I used to because I’ve more or less met my goal, but one can never have too much money!

  24. I recall when saving for my first house deposit just how much drive and energy it gave me in knowing that I was saving up to a specific amount for a specific purpose. I achieved a savings rate I’ve yet to reach since. The problem now with saving towards ‘early retirement’ is that there is no specific set amount or physcial end goal. I’m hoping instead to focus on the goal of ‘paying off the mortgage’ first as I do agree that having a specific goal makes increasing the savings rate much easier.

    1. It’s interesting you brought up paying off your mortgage as I’ve recently had this discussion with my wife. We are both late 20’s and bought our first home a little over a year ago.

      Some of our friends are same age but have had their homes a little bit longer. They are paying more towards their mortgages, but I don’t think that is necessarily the right thing to do in our (and their) situation.

      I can understand paying down the principle on a home you think you will retire in, but at our age, it seems like we are throwing money away, if we know we don’t plan to stay in the house long enough.

      That was somewhat of a tangent, but I guess it still is relevant to this topic as far as liquid assets go.

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