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Creating Freedom Through Financial Independence


Podcast: The #1 Factor for Financial Independence – Your Savings Rate

June 16, 2020

In this episode…

We take a deep dive into why your savings rate is more important than any other factor when it comes to becoming financially independent.

If there’s one thing to focus on, this is it!


Listen to the show…

(if you prefer, download the mp3 file here)


Discussion points…

  • How spending less affects your FIRE number (2:45)
  • Emergency funds, and why Pat doesn’t have one (4:30)
  • Why saving is the most controllable factor in our finances (9:40)
  • Specific examples of why saving might account for 70% of your FIRE progress (13:13)
  • The psychological benefits of saving (17:01)
  • Earning more income to boost your savings rate (18:32)
  • Our thoughts on side hustles and extra work (23:21)
  • Lifestyle inflation and spending desires (29:38)
  • Number of years to retirement based on your savings rate percentage (35:18)
  • Is FIRE possible for low income earners? (45:26)
  • Listener question (55:30)


Resources and stuff mentioned:

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Do you have something to add to this discussion?  Share your thoughts in the comments below…


15 Replies to “Podcast: The #1 Factor for Financial Independence – Your Savings Rate”

  1. Hi Guys,
    Enjoyed your latest podcast.
    What methods do you use to budget/track expenses?
    I have been trying to both set a budget then track expenses against that budget,
    Have downloaded the money smart budget excel sheet which was helpful but now want to track expenses against that budget I could create an excel or a Google sheet and i also downloaded an app excel and budget tracker which is pretty good just wanted to know how you guys tracked your budget v expenses?

    1. Hey AP. Not sure about Pat, but I don’t follow a budget. To track expenses, I simply have a spreadsheet with a list of categories and once per week I log onto online banking and add the cost to whatever category it fits in. Extremely simple but I find it effective. A fellow blogger has created a spreadsheet you might like – see this post.

      Spending tends to not get out of hand after developing the habit of optimising each category and questioning most purchases as they come up. Probably the most powerful ‘budgeting’ habit there is 🙂 Hope that helps.

    2. Hey AP,

      I tried a few different apps and have settled on one called Monefy – super simple, can export to Excel, has different ways of displaying your income/expenses depending on what you prefer etc. Might be worth a try!


  2. Hi Dave, thanks for another great podcast. One question I still had about savings rates is what do i actually include in that number? Is there a set standard of what to include when calculating your savings rate cause I’m confused – Eg. Are Mortgage payments on PPOR usually included? Standard Super contribution (just the mandatory amount and no extra)? Emergency fund contributions which may either end up as savings or being spent if there is an emergency?

    1. Ah yes we didn’t cover that. Ppl seem to do it differently depending on their own approach and is where it gets tricky…

      If super is part of their plans then that can make sense, but at the same time there’s no point putting all saving into super because no matter how high your savings rate is, it won’t help you retire early if you have very little money outside super. But if you plan to live off your personal portfolio and sell it off steadily until you reach super access age, then including super contributions might make sense.

      Emergency funds don’t count, they are a one-off lump which sits there if needed and don’t contribute to your FI time-frame.

      With mortgage repayments, the principal portion is included for some people, but I would only include it if the house was going to be paid off by the time you retire. Otherwise the money is sitting there in your house, but your mortgage repayments are still the same, so ongoing cashflow is not improved for FI.

      We just counted net savings which are being invested personally, as that’s the simplest option since we weren’t paying off a house or using super. But counting those other things might make sense depending on your situation. Hope that helps, and sorry we didn’t cover it in the show.

  3. Another great podcast guys! I thought Pat’s explanation of why he doesn’t have much of an emergency fund was important as his situation is probably different to most other people’s.

    I’m with Pat on the side hustle issue as well. As much as it would be nice to have some extra income, it would come at the cost of more time away from family or doing stuff that I actually want to do.

    1. Cheers mate 🙂

      Yeah it’s a good point to remember on side hustles. The idea has become popular, but it generally means giving up some freedom today which is certainly less than ideal for those with a family. A hobby or a field of genuine interest might be okay for singles to spend some spare time on, but it would be a tricky balancing act.

  4. Hi Dave and Pat. I wish to thank you for your blogs and podcasts ,It is just the thing to bring me back to earth ,I first heard of FIRE and your blogs from reading Scott Pape and Peter Thornhill..
    Just wish I had an income something like Dave while working. I retired on 8/7/ 2001 When our income from dividends fist become greater than my working income which for the year ending30/6/2001 was $28,000 only got over $30,000 twice in my working life. My wife only worked part time in years the Girls were at uni.As the girls did not get austudy because our assets were too high,my income not high enough to keep them at uni and still continue with our investment plans. It is now 19 years since I gave up work.The plan was to rent out the house and travel around australia for 2 and a half years We got home 5 and half years later since then we manage to stay home for about 100 days a year the rest of the travelling with the caravan until 2019 when wifes health issues has kept us at home as we always had to be within 30 minutes of a hospital all things are now sorted so from now on we will be away more often. FIRE sure can be acchived on an minature income .I have been receiving a small part pension for the last 3 years It has been the hardest retirement years because of lifestyle kreep
    I will not state our exact net worth orther than say we are on the same page as Pat plus a $500,000 house a caravan and boats kayaks .Wishing you both every success Reguards Chester

    1. Thanks for sharing your story Chester 🙂
      Fantastic to hear you making your financial independence plans work on a low income and that you’ve been enjoying the retired life for almost 20 years now, including travelling round Oz – awesome stuff! Love hearing stories like this. Keep living the good life my friend…

  5. Hi Guys,
    Another great podcast. I’m really enjoying the content so far. I just wondered if you have plans to cover off on families who are working toward FI? I fall into this category as we have three teen girls!! And obviously our expenditure is going to be greater because of that. Side note stop paying out on 4wd drivers it’s a lifestyle we can’t help it 🙂 we purpose bought the 4wd as we offroad as an alternative to family holidays. But on a serious note I would love to hear from someone on the pod that has life experience with juggling saving and still providing for a family.
    Looking Forward to the next episode

    1. Hey Belinda, thanks for listening!

      We prob won’t be diving into different household situations because there are so many possible situations people have that we’d then need to cater for. It’s easier just to give the broad numbers, ideas and strategies and let everyone adapt it to their own situation. Also helps to avoid giving advice where we don’t have experience (large families, v low income, etc). Hope that makes sense!

      p.s. I like your comment on 4wds… is it a lifestyle, or an addiction/sickness? Haha nah, on a more serious note, it’s totally reasonable if ppl are genuinely using those vehicles for holiday purposes on a regular basis and therefore maybe even saving money because of less/no international holidays. But when it’s for driving to work/shops or carrying a small child around, a giant expensive vehicle makes zero sense and is really a glorified status symbol. Sounds like your in the first camp which gets a pass 😉

  6. Great podcast guys!
    Just a question about your income while you were still working – are you talking about your net pay?

    1. Thanks Ryan. Nah I’m referring to gross income before tax. As a couple we averaged $75k each ($150k total) before tax. After tax that becomes about $115k.

  7. Hi Boys ,
    Loving this awesome Aussie content !!
    There are so, so , so many variables when it comes to focussing on savings !! … Peter Thornhills famous quote ;

    Two savers (if you have a partner ) …Nirvana , Two spenders ….so,so , One Spender , one Saver ….DISASTER!!!! ….says it all !!!

    I’m on a low income , have always been as it’s giving me the flexibility in my life . My spending ratio has always been around 60 % . The usual saving more than spending mantra and living a happy and frugal existence has definitely benefited me . So , Absolutely YES you can achieve your financial goals on a low income ( on a single income )!!

    I also live in a shared accommodation in a affluent area in Sydney .

    Before , Covid 19 I was working fulltime however the plan is to reduce my working days to 3 days a week and use my high savings rate , plus the tax system ( the government is proposing that the 19 % tax rate will be increased to $45 000 ), leaving me this extra money to even further boost my savings rate ) and reinvest in my LIC further !!

    Finally boys , would like to add that if there is no marriage between having a focussed mindset and having the values ( living a healthy, mind , body and soul ) together with the savings law of principle ( saving is king ) …you can forget about having a free and fulfilling life on your terms!!! …ain’t going to happen !!

    You boys , Matt from Aussie Firebug , Peter Thornhill, have all provided great Aussie wisdom , content and mentorship in achieving the ultimate goal ….cash flow and freedom on ones own terms!!! ….thankyou ???????? cheers ????

    1. Thanks for sharing your experience Jimmy, and thanks for you support! Excellent to hear you’re thriving on a lower income and saving well 🙂

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