How My Husband And I Made Saving A Habit

In the course of 12 years of marriage, my husband and I have taken out a $40,000 line of credit twice, and paid it off in less than two years.  We have purchased several new (to us) vehicles for cash.  We have purchased two properties, one of which is now rented.  We have – in addition to paying off our line of credit, buying properties, and cars – saved $40,000-$70,000 twice for major house projects.  And that is just short-term savings.  We also save 15-25% of our annual living costs toward long-term/retirement savings.

In short: we save a lot.

Some people have asked me how we save so much.  I think the better question is why we save so much.  I’ll answer both questions with one seemingly easy answer:  We make saving a habit, because we believe we are investors.  Over time, we built a habit of saving that has shaped our identity.  We have saved aggressively for enough years, that we now believe we are investors.  Now that we believe we are investors, our habits and how we manage money conform to that identity.

Habits Drive Identity and Identity Drives Habits

I find many people struggle to save, because they focus too much on the outcome, and not enough on building an identity.  Your habits and your identity go hand-in-hand.

Your habits drive your identity:

• You consistently show up late → You are someone who is late
• You call/text/send cards people on their birthday→ You care about people on their birthday

But this could go the other way, too.

Your identity drives your habits:

• You are someone who is late → You consistently show up late
• You care about people on their birthday →  You call/text/send cards people on their birthday

Your path in life is defined more by your identity and habits than it is by major events.  Our habits are clues to who we are.  They are the footprints in the sand that mark our choices, and reinforce what we believe about ourselves.  This, in turn, reinforces our habits.

How We Started Saving

When we got married, we paid for all our annual living expenses on my husband’s salary (mortgage, utilities, health care, food).  He made about $40,000/year in 2006, and I made about $30,000.  For the Washington, DC area, our combined income was below average, but our savings rate was above average.   For those who think that $70,000 is a lot of money, keep in mind that our 630 square foot condo cost $230,000 in 2005.  After taxes, retirement saving, and some charitable giving, we used my income to pay off a $40,000 line of credit my husband had opened up to purchase the condo (this was back in the days when banks were giving out mortgages with zero down!).  Generally, we were saving $25,000/year very comfortably, and we paid the line of credit off in less than two years.

Granted, we lived with no furniture, or furniture salvaged from the street.  We did not go on vacations.   We did not purchase new phones or electronics.  We did not have a nice car. We did not use air conditioning either in our condo or in our car.

No one thought of us as investors, and frankly, neither did we.  Everyone thought we did not have much money, because we did not buy much in the way of nice things.  This is where the secret to our identity as investors starts.  We were simply trying to pay off big items that would result in long-term value (e.g., equity in our condo), and generate cash-flow (e.g., paying cash for my graduate degree, which resulted in my income increasing by 50%).

We Were Committed to Earning

One of the largest reasons we were able to save, was because we were committed to earning money.  Our incomes continued to increase, but of course, so did our spending on big items: purchasing a new house, paying for my graduate degree, paying for childcare (we now have four children), and purchasing a truck and minivan.  In 2014, we drained our short-term savings account, paying $40,000 in major repairs to our house, while I was unemployed for several months (the only benefit to having to replace our heat pump, was we finally had air conditioning).

The reason we began rebuilding our savings so promptly after this setback was that saving was a habit.  We simply continued to do what we had always done – and, in fact, we saved even more aggressively for both retirement, and for the near-term.  Instead of living on one income, we lived below that one income.  In 2017, just 3 years later, we had saved $40,000 again.

There is a big reason that we were able to save: I kept working.  When I was laid off, I was pregnant with our third child.  I had originally planned to have three years between babies #2 and #3, and once I had baby #3, I would stop working.  My planned departure from the workforce was a big driver for our aggressive saving.  However, I ended up with just 17 months between babies #2 and #3, and we had drained our savings.

I could have stopped working.

Remember that we were already living and saving on my husband’s income.  However, we were committed to saving a certain amount of money, and full-time employment, even accounting for childcare costs, was the most efficient way for us to get to that goal.  I found a new job – a better job in many ways – and went back to work when baby #3 was six weeks old.  I was glad to be employed and saving money, but it was a difficult time for a few years.  This choice more than anything drove our habit of saving.  It solidified how we had lived for the previous eight years.

How We Became Investors

We did not become investors, because we came into money, or our portfolios took off.  We became investors, because our habit of saving money, and then putting that saved money into things with substantial value, created an identity of being investors.

When people ask me how we save money, I always have a ready response: Commit to earning a good income, and then live well-below that income.  Everyone knows that answer.

That is not what people are asking.  They are asking why we save.  That answer is also simple, but almost no one knows the answer.

We have developed the identity of investors, because we maintain the habit of saving.

• We save our money → We are investors
• We are investors → We save our money

Many people want the kinds of outcomes that we have, but they are not willing to adopt the same habits.  This is like saying you want to run fast, but you do not want to run routinely.  Even a child knows that is not possible.  Ask a child, “Who is a runner?” and the response is “Someone who runs.” If you want a particular financial outcome, consider adopting the habits of someone with the identity of an investor.  As you develop those habits, you will also develop an identity of someone who saves for long-term, high-yielding items.  Your goal is not to replicate someone else’s life, but to adopt the habits that will give you the identity of someone who has the kind of life and values you aspire to.

Photo by Ales Krivec on Unsplash