Spring cleaning (expense hunting)!

About twenty years ago, when I had just started working, I was able to save about 30% of my salary. However, it was quite miserable, the kind that makes unions jump about the working poor. With such a ratio, I had the capacity to invest, even with relatively few means. I also imagined myself after a few years, proud of a few promotions and salary increases, with a significant "self-financing" force. I also remember discussions with a manager colleague, twenty years older than me, who told me that even if we earned more, we didn't put more aside at the end of the month. I always refused to believe him, telling myself that it was just a question of discipline.

Now that I am the same age as him at the time, what is the reality? I must admit that my colleague was not entirely wrong. What I had underestimated is that life means that when you get older, you are partly forced to increase your spending, particularly (and perhaps only) from the moment you get into a relationship and start a family. Although you may receive family allowances, they are very derisory compared to the additional expenses incurred, including insurance, medical expenses, rent, food, clothing, vacations and leisure activities. The carefree and luxurious life of a single person is a long way off!

Today, I have managed to increase my salary substantially, thanks to several changes of employer. This is also the only way I have found to increase my income from a lucrative activity, since bosses are very stingy with their own employees. However, despite this salary increase, my savings ratio has paradoxically only decreased over time. The first culprit, even before the family, is taxes and their progressive rate. From a certain level, we clearly feel the difference in terms of tax burden, to the point of even wondering if it is worth getting a raise or working more. This is also what motivated me to reduce my working hours (in addition to the increase in quality of life of course). By working less, I have certainly also started to eat into my savings capacity, but not as much as one might think. 20% less activity rate, if we remove tax and social charges, as well as professional expenses, ultimately only represents 10% to 15% less net salary.

In short, from this point of view my colleague was right, we do not a priori put more money aside at the end of the month because we have more salary. That being said, if we can explain this phenomenon in part by the increase in tax, social and family charges, we must also put it down to our own behavior. This is also an obvious fact that we see quite often in society. I know high-earners who, for example, take out leases because they do not have the equity to buy a car. I also know a former boss of an IT startup who lived like a king on scandalous income for more than a decade and who is struggling today to make ends meet, having put absolutely nothing aside during his golden years.

Even if we ignore these perhaps extreme cases, over time, as our standard of living increases, we become less careful, lazier and less disciplined. When you earn a small salary, every franc counts. As soon as you become more financially comfortable, you tend to turn a blind eye to small expenses, or even to some larger, occasional ones. If today I am no longer able to save as much as I did 20 years ago, it is because my mandatory charges have increased, but also because I no longer have the same rage as I did back then.

Following these various reflections, I decided to embark on a major spring cleaning. I exported the list of expenses for an entire year made on my checking account, my credit card and my PayPal account. Already, just seeing the total of all the money outgoings is scary, and so it's a good way to (re)motivate yourself. Then I grouped the expenses into different categories (taxes, insurance, mortgage debt, food, clothing, travel, leisure, transport, etc.) and I paid them monthly. From there, we can see which are the most important items and what they represent concretely on the same time scale. There are big bills that hurt once a year, but ultimately they can represent much less in total than other regular expenses of less importance. Then, for each of these items, I set myself a goal of possible savings. You shouldn't be afraid to question everything. The goal is not to live like a hermit, but rather to ask yourself what expenses really enhance our quality of life, and what not.

In doing this work, there are several possible approaches that can be taken. Either we cut back and tackle the big expense items. Often (but not always) this involves major changes in our way of life. Examples include cars, housing and even taxes. We can also tackle the smallest expenses. Taken in isolation, this doesn't seem to make sense, but if we add them up, they can add up to some pretty significant amounts. I chose to mix approaches, some big expenses and some small ones, prioritizing what had the least impact on my quality of life. In the end, I managed to find a fairly large amount of expenses that I was no longer really aware of and that I could cut or reduce with little or no consequences. Better still: by limiting some of them, you can even improve your quality of life! This is typically the case for certain goods and services linked to our Western lifestyle that is not very respectful of our health and our planet (junk food, industrial, toxic or even addictive products, cars, etc.). Over many years, we tend to develop bad habits and we no longer even realize it because they are part of our way of functioning. We are witnessing a similar phenomenon to those who store piles of things in their cupboards or cellars that they no longer need. In short, we clutter our lives with futile things.

In short, in the end, thanks to the various positions identified, I managed to free up almost immediately 10% of additional savings, without forcing myself too much. I am still planning on 5% more in the relatively short term. This should bring me back not too far behind what I was able to save at the time. Expenses are therefore not inevitable. Not all of them are avoidable, but by taking a step back and putting a little effort into it, it is possible to free yourself from several of them, despite the increase in expenses that come with age. My colleague was therefore partly wrong, and I am very happy about it, not because I was right, but because it allows me to move ever closer to financial independence.