Want to Become a ‘Super Saver?’ Consider Your Housing Costs

What’s the one thing that separates the “super savers” from those of us who are simply trying to save whatever we can?

According to a new study, it’s all about housing costs.

As MarketWatch reports:

New research from TD Ameritrade — which looks at people who save 20% or more of their incomes, called “super savers” — shows that they may be onto something: The single biggest difference between what super savers spent less on, as compared to the rest of us, was housing. Super savers spent just 14% of their incomes on housing, while regular folks dropped 23%.

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I recently made two big decisions designed in part to reduce the amount of money I was spending on housing:

  • I moved from Seattle to Cedar Rapids, Iowa, which cut my rent in half
  • I elected to rent a studio rather than a one-bedroom

The one-bedroom would have taken my monthly rent from $650 to $750; I decided that I’d rather save the extra $1,200 per year, not to mention the cost of furniture, art, etc. required to fill the additional space.

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Right now, my rent is 11 percent of my anticipated $70,000 gross freelance income (or 15 percent of my anticipated $50,000 adjusted gross income).

My savings rate, on the other hand—as defined by the amount of money I put into my retirement and personal investment accounts—is 30 percent of that $70K anticipated income, or $1,791.67 every month.

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There are a number of factors and privileges, many of which don’t apply to everybody, that go into my being able to relocate to a Midwestern city and live in a studio apartment. I am single, with no children. I’m a freelancer who can work from anywhere, and I was able to retain the clients, contacts, and income I had built up while living in Seattle. My parents live near Cedar Rapids, so my goals of “saving money” and “moving closer to family” were well-aligned.

There are also choices I’m not making—such as living with roommates or living further out of town—that might have been able to knock another $100 or so off my rent. In those cases, the tradeoffs weren’t worth the extra $1,200+ in savings per year.

I also know that not everybody can cut their housing costs down to just 14% of their income—many of us would love to live in homes that affordable, but they aren’t always available.

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Still, if you’re working on prioritizing savings right now, whether to pay down debt, achieve financial independence, or save up for a big life goal such as travel or a small business, it’s worth considering whether you can cut your housing expenses just a little.

Because the research suggests that you’ll save a lot more by doing that than you will by trying to cut expenses anywhere else.

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