investing growth rewards

How I Managed to Save 90% of My Paycheck

Most people save less than 10%. Here is how to save 90%.

investing growth rewards
The more you save, the greater the rewards. (Photo: nattanan23 on Pixabay)

In my introductory post, I mentioned that over the course of my financial journey, I saved up to 90% of my paycheck. Understandably, I got some questions about that. No, I didn’t live under the bridge, or in my parents’ basement, and I didn’t subsist entirely on lentils – though I do love me some lentils. (Shout-out to Jacob from the Early Retirement Extreme blog for turning that into a meme.) I did, in fact, manage to save 90% of what I made, but that was only for certain months, and with a great deal of preparation. Here is how…

When I finally got my full-time Amazon employee status – that coveted blue badge – in May 2010, I was overjoyed. I’d still pack the same old boxes, but with a slightly hourly wage, much better job security, and a lot more corporate benefits I’d never had before. (After six months as a temp, that was my first real Fortune-500 job after graduating college smack in the middle of the housing bubble. Talk about bad timing!) One of those perks was the 401k match.

The match itself was low to the point of absurdity: if you contributed 4% of your paycheck, the company would match half of it a few years down the road. If you contributed more than 4% – good for you, but you’d only get that first 2% matched. That was a pretty laughable deal, but hey – free money is free money. I signed up.

At the time, I was driving a beat-up lemon car that I’d bought for $800. (It eventually ended up on fire on a mountain highway.) I was paying off my student loans and had some mighty broke and unreliable roommates. (I lost more money with them than I’d ever saved.) Even so, some part of me wanted to start saving, to have something – even if it was as ridiculous as $80 a month – growing and compounding, now and for decades later.

I often wonder what would’ve happened if I hadn’t signed up for that 401k… That gradual and compounding increase in my retirement account was insignificant on the grand scale, but it introduced me to the concept of stashing my cash, and made the whole concept seem less ridiculous than it had been before. (We’ve all heard the naysayers that make fun of compounding interest and low savings: “wow, you’ll turn that $100 into $105, great job!” Ignore the haters: you’ll prosper while they wail.)

A couple of cities, years, and promotions later, I became a bit more serious about my investing, and I changed my paycheck’s 401k allocation to 10%, in addition to contributing the annual maximum to my Roth IRA. (At the time, the limit was $5,500.) Personally, I view Roth IRA as a better deal: in theory, and given a lot of luck, you can grow that post-tax money to billions of dollars, the way Peter Thiel did, without paying any taxes on those gains ever again. 401k has higher contribution limits, though: in 2021, it’s $19,500 vs $6,000 for Roth IRA. And so, whenever I maxed out my Roth for the year, I’d start thinking what I could do with my 401k…

As I wrote earlier, I never made $100K USD in total compensation: there was one year when I managed to make $95K, but that was due to the incredibly fortuitous combination of three-year-old stock grants and Amazon’s stock price. For a lot of high earners, putting 15-20% of their income into their 401k is fairly easy, but this ain’t that kind of story. My personal savings rate would typically range between 40%-60% of my take-home pay. That was primarily because I kept my housing expenses low (ironically, it was cheaper to buy a cheap 750-sq-ft condo in the suburbs than it was to rent a single room in Seattle), avoided lifestyle inflation, and generally remained an introverted workaholic with occasional “treat yourself” expenses.

My personal savings rate was significantly higher than that of a typical American. The data from shows that the average pre-pandemic savings rate in the US hovered around 7%. It spiked twice during the pandemic: it reached 33.8% in April 2020 and 26.6% in March 2021. I’m fairly certain that was due to lockdowns and stimulus checks – you can save a lot more when there’s nowhere to go and when you get a little monetary boost. More recently, the savings rate has returned to its baseline 7%. If you save more than that, you’re already a financial badass.

Personal saving rate in the United States from June 2015 to June 2021
Personal saving rate in the United States from June 2015 to June 2021 (Chart from

When it comes to maxing out your retirement accounts, there are two basic strategies: you can either contribute and save the same amount every month, or you can save up and go all in for a few months in a row. The former is more stable and ensures you get the same amount of spending money each month. The latter is more chaotic, a bit more dangerous, a lot more fun, and makes for more entertaining stories and far more hilarious $200 paychecks. You can probably guess which one I picked, eh?

Before you set your 401k contribution to 90%, there are several things you should take care of. First and foremost, make sure you have an emergency fund, and that it’s easy to access. (I used to think mine was easily accessible, but when my Vegas roommate got thrown in jail the night before Thanksgiving and all the banks were closed, I ended up paying a lot of money for a special casino withdrawal to get enough cash for his bail. That really changed my worldview.) If you get some unpredictable expense while your paychecks are only a funny fraction of what they used to be, you’ll want to be able to cover it without resorting to credit cards.

Secondly, calculate (or at least guesstimate) your baseline monthly expense rate. For example, mine is $1,200, though I keep trying to bring it lower to a more impressive $1,000. In other words, how much money do you realistically go through every month? If you cut down on certain optional expenses without becoming a complete monk (which no one can keep up very long), how much money will you need?

Thirdly, save up your cash stash. Take the money that you would’ve invested at the end of each month, and just keep it all in a plain old savings account. That’s the money you’ll live off for the next few months: once it starts to run out, it’s time to flip your 401k allocation from 90% back to 10%. (Why 90% and not 100%? Because that’s as high as it went in the system, and Social Security and the insurance plan still needed to take some of the money from each paycheck.)

And so, using my own situation as an example: at the height of my career, my salary was a whopping $57K (plus the Amazon shares that would vest twice a year), which amounted to almost $5K a month pre-tax, or almost $4K a month after taxes and my usual 10% 401k contribution. My emergency fund was $3K in cold hard cash. (If your emergency requires more than $3K, well, you’re already in serious trouble, friend.) My combined monthly expenses ranged between $2-2.5K, which was quite low for Seattle. Each month, I’d be able to squirrel away between $1.5-2K.

If I saved my money for four months, I could squirrel away about $7K. I didn’t always keep that in my savings account, but would let it ride in the stock market, and then withdraw it after making a small gain: it’s important to have your cash stash safe and, well, in cash once you start the 90% maneuver. You don’t want to have to sell stocks at a loss if the market has a bad year. That $7K was enough money to sustain me for four months, assuming baseline spending behaviour. (Fortunately, I didn’t experience any emergencies during my 90% months.) Keep in mind that I’d be saving my cash stash while also contributing 10% per month to my 401k.

If I did nothing at all, 10% of my annual salary (or $5.7K) would go to my 401k. With this approach, I contributed 10% for nine months (or $4,275) and flipped the contribution percentage to 90% for three months. Of the $14,250 of my salary earnings, $12,825 would end up in my retirement account. Overall, that would be $4,275 + $12,825 = $17,100 per year, just below the then-$19K annual limit. My annual 401k contribution amounted to 30% of my total salary. (I never sold my vested Amazon stocks, except the time I needed a down payment for my condo; the only other time was in May 2020, when I set up my own investment portfolio.) All of that would be in addition to the annual $5,500 Roth IRA contribution.

I kept up that 90% maneuver for three years, between 2017-19, and that made a ton of difference for my retirement savings. Granted, a lot of that was due to the fact that I lived through the biggest bull market in history, but even so – in the long run, the stock market rewards patience. (Or, as the self-proclaimed apes on r/wallstreetbets say, “stonks go from bottom left to top right.” Heh.) Aside from those untouchable Amazon stock grants, my salary never exceeded $57K per year, and yet I ended up with a 401k account that’s currently in low six figures and will grow a lot bigger and stronger over the next 24 years.

I’m not as arrogant as to say “if I could do it, anyone could do it!” but I hope my example proves that there are some creative and unusual (yet legal!) options for everyone. I firmly believe that anyone’s financial situation can be improved, if only just a little – and I hope this post will make a difference in your own finances.

What about you? What interesting and/or bizarre financial maneuvers have you engaged in to boost your savings? I’d love to hear your story – share it in the comments!

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