According to a recent survey done by SunTrust, a quarter of American households earning more than $100,000 a year are living paycheck-to-paycheck. Americans are struggling to save their money and income level can’t be the only thing to blame. We also need to take a closer look at our spending habits.
My husband and I got married right before we moved overseas to our first duty station. At our wedding, a friend told us a story of a service member he knew that was able to save enough money during his overseas assignment to buy a house with cash when he returned. We had a little bit of money saved at the time, but I figured it would be impossible to save that much! I do, however, love a good challenge.
We decided to save as much as we could while still taking advantage of the really cool place we were living in. After living overseas for nearly 4 years, we returned stateside last summer and I can proudly say that we did it!
Before you get too excited, let me explain. We don’t have enough cash to buy a house or even a condo in California, but we did save enough money to buy a modest 3-bedroom/2-bathroom home in small town USA.
It took a fair amount of planning and self-discipline, but this is how we did it:
1. We Lived BELOW our Means
People often say to live within your means, but has anyone ever told you to livebelow your means? I don’t mean that you should live like a college student and only eat ramen for dinner, but find a comfortable cost of living that is actually below what you can afford.
Let me give you a few examples.
- When we moved overseas, most of our friends found housing that cost exactly their OHA (Overseas Housing Allowance) or even a decent amount above. Many of them justified the payments they would be making out of pocket for the nice homes they would be living in. My husband and I instead found an apartment that was well below our OHA. Now before you start to think how awful this sounds, I will tell you that our sweet, little apartment was oceanfront with unbelievable views. It was just small and a little run down. While we were not able to keep the difference in OHA that we saved the government, it did set us up for successful, frugal living. Our utility bills were quite a bit less than our counterparts in the nice, large homes. Each month we were given a separate allowance for utilities and whatever we didn’t use was ours to keep. Just by using the air less, we were able to have an extra, steady income.
- Putt-Putt. This is the name that we gave my car overseas. We originally purchased it for $1000 on the Lemon Lot with the intention of selling it after we found a nicer car. It was small and beat up, but extremely reliable. After some time, we decided that we didn’t need anything fancier. It wasn’t the most beautiful, brag-worthy vehicle, but it did the job. We were known around town for driving the old beater while others drove BMWs. My car lasted wonderfully all 4 years of our assignment.
- For the first 10 months or so while I was looking for employment, we got used to living under one paycheck. When we finally had a second source of income, we redirected my paycheck to a separate bank account that we did not touch. Because we had grown accustomed to the single paycheck cost of living, we didn’t feel like we were sacrificing anything by saving all of my income. This also works well for promotions and military pay increases. If you are comfortable where you are, consider increasing your cost of living by only 10% with each pay increase and putting the rest into savings.
- One word: COLA. This stands for the Cost of Living Allowance that is given to service members stateside or overseas that live in an unusually expensive location. Where we were stationed, COLA was a substantial amount of money each month. While living under a budget, we were able to save the majority of our COLA. We still enjoyed the local community, went to festivals and ate the local cuisine, but we kept an eye on our spending and lived below our means. There are some expenses that are unavoidable that COLA does help offset, like road tax and specific city trash bags for example.
The biggest struggle that I have seen friends and clients deal with is getting too used to their way of life with the extra allowances and extra income. With all of this additional money that we were receiving overseas, many people still chose to live above their means. They returned to the States with a big financial slap to the face.