Savings as a substitute for raises

[rob in cal]

I wonder if anyone else has my mindset on this topic. Basically year to year, my hourly income as a delivery driver stays about the same, maybe going up a little with inflation, but no increase due to seniority like many people get. For that reason, I view the one to two thousand dollars a month that I'm able save as a back door raise, as it gradually is building up my passive, unearned income year after year.
I think some people would get discouraged with no real income growth per hour over the years, but due to savings I've piled up enough capital that it has become my raises in essence.

[disneysteve]

I'm actually in a pretty similar situation though I can't say I've ever thought of it in those terms. Although I am a professional with a 6-figure income, thanks to the disaster that is the American medical system, I haven't had a raise for years. Despite that, I've gradually bumped up our savings rate from 15 to 18 to 20 to now 23% of my gross income. And in reality, the total saved usually is even higher but that's the "mandatory" saving that I do from my income. Add in what we save from my wife's income (50% goes to her 401k) and we're doing just fine despite our incomes being flat for years.

Essentially, cutting spending is just as good as getting a pay raise. Reduce expenses by $1,000/year and that's as good as earning an extra $1,300 or so when you factor in taxes. Frugality pays.

[JustBill]

Well you're certainly right about only so much being in your control with regard to wages. One of the enjoyable saving/investing landmark events is eventually(hopefully) when your savings earn more than you contribute in a period, such as a year. But even better than that is when your savings out-earn your annual wages. Truly a "V8" moment where you begin to realize retirement may not be just a dream.

[~bs]

I wonder if anyone else has my mindset on this topic. Basically year to year, my hourly income as a delivery driver stays about the same, maybe going up a little with inflation, but no increase due to seniority like many people get. For that reason, I view the one to two thousand dollars a month that I'm able save as a back door raise, as it gradually is building up my passive, unearned income year after year.
I think some people would get discouraged with no real income growth per hour over the years, but due to savings I've piled up enough capital that it has become my raises in essence.

That's just a different way of thinking about the same concept. But you'll get there faster if you work a second job for a while or if you postpone retirement among other things. After a certain point, it becomes easier to increase income than it is to cut back on expenses. "squeezing blood out of a turnip"

[disneysteve]

After a certain point, it becomes easier to increase income than it is to cut back on expenses. "squeezing blood out of a turnip"

That's true, particularly for lower income individuals. For many people, though, they don't have an income problem, they have a spending problem. There are plenty of people out there earning as much as 100K and even more who can't make ends meet. That isn't about insufficient income.

[breathemusic]

call me pessimistic, but I feel like thinking about the increases in the amount of money that you save out of the same paycheck doesn't seem like a raise at all, and more just a way to try and feel better about not actually getting a real raise.

Lots of people don't get regular raises, so it's not necessaily anything to be ashamed of (though at least a cost of living increase should be expected and reasonable). I just think that the value of saving a higher % of the same pay is in knowing that you're either managing your money better, or something has changed such that your mandatory living expenses have gone down. That itself is a rewarding feeling... but I wouldn't consider it a raise.

[disneysteve]

One situation where I definitely felt like I had gotten a raise even though I hadn't was each time I paid off a debt and no longer had that payment to make every month. When I paid off a student loan, paid off our home equity loan, paid off my daughter's braces, etc., it was always nice to see the bump in available cash flow (which I usually directed to added savings).

[grumpter]

I would love to be able to save $18,000 per year after taxes even if I made $100k per year.

[swapnil]

I have an income of Rs. 8050(Gross) from the job and after cutting down all the taxes like PT, then ESI and PF it comes to Rs. 6954 out of which I take out Rs. 3000 for expenses at home and about Rs. 1500 for personal expenses in a month but I am still finding it difficult to save up the rest for the future can anybody advice me as to shat should be done to save a good amount from Income or where should I Invest money to get good returns I am definitely looking forward to have some good investment and think about retirement, future (after marriage) and other emergency fund too. please suggest me some way.