As I mentioned a few days ago I’ve accepted a new job where I’ll be taking a pay cut of approximately $10,000 a year when compared to my current salary. If you read that post then you would understand why I felt this would be a good idea, but suffice it to say that I’m lucky enough (thank you wifey!) to be in a position where the pay cut won’t be devastating to our budget and savings plan. Here’s the kicker: I’ve evaluated the budget and decided to make a few changes and further streamline my automatic savings plan. Said changes will allow me to almost double the amount of cash that I’m putting away into savings every month.
How did I do it?
They say it takes money to make money. For my situation I’d like to reword this phrase ever so slightly to “it takes money to save money.” My wife and I have been rigorously paying off our remaining debt over the past several years and we decided that it would be best to accelerate our payoff by several months in order to free up more available cash every month. So we took some money we had in our savings and used it to pay off a student loan and a revolving credit line that we took out a few years back. The savings from paying off these loans is almost enough to completely evaporate the income loss I’m taking with this new job.
I said I’d be saving more, not just breaking even…
I’ve known for a while now that our spending habits were getting a little out of hand. My wife and I both work, have no children and go out with friends several times a week. We’re classic DINK’s. So we’re using this pay decrease as an excuse to cancel a few of the frivolous monthly charges we’ve taken on over the years and make a slight modification to our lifestyle. A few tweaks here and there, a revamp of our automatic savings plan and, tada, we can live on her paycheck alone. As for mine? It will be going straight to a few IRAs, our savings account and an investment account. The amount that I will have going into our savings account soon will almost double the amount we’ve been contributing over the past few years.
Not bad for a pay cut eh?