What to do When You Hit the Upper Limit of Your Savings Rate


Recently I was scrolling through Twitter and noticed the following tweet from Ty at Get Rich Quickish:


This tweet got the wheels turning in my head. What should people do once they reach the upper limit of their savings rate and essentially have their personal finances on autopilot?

A Moment of Awakening

Odds are, when you discovered the concept of financial independence, you had a moment of “awakening”.

Holy shit, my spending habits are preventing me from saving any money and killing my chances at achieving financial freedom.

So you rushed to find a cheaper phone plan, downsize your home, cook more meals at home, reduce your transportation costs, cut your cable, and a whole slew of things to cut the fat out of your expenses.

But at some point all the fat is gone. All that’s left is the necessary. You have minimized your housing, transportation, food, and living expenses to the point where you have achieved maximum frugality without depriving yourself and your family.

You have reached the upper limit of your savings rate. Once you reach this point, your time to financial independence (or whatever your financial goal is) simply becomes a waiting game. Or does it?

Three Options

Once you hit the upper limit of your savings rate, I see three options you can take:

1. Accept the Waiting Game

This is the most obvious choice. Simply be patient, maintain your savings rate, and wait for financial freedom to roll around. 

This option is most reasonable for people who are fairly close to their financial freedom date. If you only have 1-2 years until you achieve F.I., earning more or spending less will have very little effect. You might be able to reduce your mandatory working life by a couple months, but rarely more.

This option is less appealing for people who have more like 7 – 12 years until F.I. For some people, the thought of working another decade at a dead-end job they can’t stand just to achieve F.I. sounds like a nightmare. For those people, this option doesn’t make much sense.

2. Earn More

This option is also obvious. If you have cut all the fat out of your expenses, the only way to reach F.I. faster is by increasing your income. There’s a few ways you can do so:

  • Start your own side business. Personally I tutor students in statistics and it’s a great way to earn some extra money. What skills do you possess? Do you have any niche knowledge of photography, sewing, making jewelry, tutoring, social media marketing, foreign languages, etc? You might be surprised to find that people are willing to pay you for your knowledge and skills.
  • Pick up a part-time job. For a while during my first corporate job I was a tutor at a math learning center on the weekends. Every Saturday morning I would tutor students and earn an extra $60 per week. Just because you have a traditional 9-5 job through the week doesn’t mean you can’t work a weekend job.
  • Job-hop to earn a higher salary. Depending on your family situation, this option might make sense. I personally changed jobs over the summer and increased my salary from $52k to $80k

3. Only Pursue Partial F.I.

This option is so overlooked and underrated in my opinion. You don’t have to be financially independent to have an amazing life. 

If you have maximized your savings rate and you find that you’re still 15 years away from F.I., this option could be screaming your name. What if you only work another 3-5 years and reach a financial launching point where you can quit your job and pursue work you enjoy, even if it pays less?

Keep in mind, the whole point of personal finance is to maximize happiness. It’s not about never working again. Doing the right type of work can actually be deeply satisfying and fulfilling. In fact, mixing passive income and active income can potentially be the best way to maximize happiness. 

If you’re distraught about how many years you have left until financial independence, this option might make the most sense. If your F.I. number is $1 million, consider the possibility of only saving $100k – $200k and simply working part-time to cover your expenses. Achieving partial F.I. takes drastically less time than full F.I.

There’s No “Right” Answer

There’s no universal “right” answer to this dilemma. It all depends on your unique family situation, your age, and your interests.

If you enjoy your day job and you’re content with how long you have until financial independence, just chill out and enjoy the ride.

If you just can’t stand the thought of working for 8 more years or however long, then consider options 2 and 3. To achieve complete F.I. faster, you’ll need to increase your income.  

Are you someone who likes working? Do you dream of owning your own business and working for yourself? Consider option 3. Save up enough money to reach a financial launching point where you have the ability to quit your day job and pursue work you love. 

I’d love to hear your thoughts on this issue. Which option is best for you? Is there another possible option I haven’t considered here?

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12 Replies to “What to do When You Hit the Upper Limit of Your Savings Rate”

  1. Nice post Zach! I like this list. Id add one more bullet here – #4: Double Check that fat you cut. A while ago I read a post on Reddit (FI) about a guy who reached his maximum savings rate and then went with option #1 here. The trouble was (and this is a real danger to FIers) he cut too much. So he and his GF never had any fun and just sat around imagining how great life would be one day.

    Well one day she left him, and then he was alone and miserable posting on Reddit about his misery. Lesson learned, double check that fat you just cut. It could be that adding a bit of spending is just what motivates you to keep going.

    1. I absolutely agree. It’s definitely possible to cut too many expenses and live in a way that’s just depriving yourself. The whole point of saving money and being frugal is to live a BETTER life, not to be miserable just to save money. That’s a great thought to keep in mind.

  2. Hey Zach – it’s brings me more satisfaction that it should to know that my tweet your wheels turning. I hope one day my Qdoba > Chipotle message will also resonate 😉

    Option 1 isn’t all that terrible when you think about it, but I’m not interested it (at all). 2 is where I’m at and 3, part time FI, has always been a possibility that I’m very open to.

    Great post, as always!

    1. You have a tough uphill battle in convincing me that Qdoba could ever be better…

      And Option 1 does make sense for some people, probably for the ones who are already fairly close to FI. But Option 3 is something I think people are too quick to overlook and it’s worth exploring.

      Anyway, thanks for the idea for this post, Ty! #ChipotleForever

  3. I am very strongly considering option 3 at this point. Interestingly, I think the biggest hurdle is just the inertia of sticking with my high paying job and staying in option 1. However, if something happens to my job or I end up moving, option 3 will suddenly become much more likely. For me, I feel like there’s a lot of messaging in the FI community and the general culture to follow option 2, but I find myself very resistant to the loss of free time and potential loss of quality of life that would be necessary. Maybe that’s just an incorrect perception on my part, but options 1 and 3 seem a lot better from a “net happiness” perspective.

    1. Each option has it’s perks and drawbacks. Like you said, sometimes it makes the most sense to stick with option 1 and just keep earning that high-income for a while.

      I view option 2 as the most reasonable for young people with no family who can spend a ton of free time grinding at different odd jobs and side-hustles.

      And I think option 3 requires a little more planning but it can be the secret to living a good life as soon as possible, rather than sticking with a work situation you might hate.

      I’m with you though, options 1 and 3 (for most people) are likely to lead to the most happiness.

  4. I’m on the opposite end of the spectrum, but still find the theme to this post very beneficial. I’m currently paying down ALL my debt. I’ve trimmed all the fat (spending), picked up a side hustle and just currently doing the waiting game. I should be debt free by December 2018, maybe a month or two sooner depending on what new income I can bring in between now and then.

    The beauty of my “awakening” is that once I’m debt free I’ll be able to maximize my savings automatically because I’ve become accustomed to living this lifestyle. The thought of that type of savings accumulation is a huge motivation for me to keep going. That and your blog. Thanks!

    1. Thanks for the kind words, John!

      There is a huge benefit to getting accustomed, as you say, to a frugal lifestyle. The natural side effect is a high savings rate, which will help you reach your financial goals as fast as possible. Best of luck on your debt repayment journey 🙂

  5. Most of the time I enjoy working. I enjoy getting up and ready and serving a purpose. I enjoy the thought of doing something that I studied for in college. Part of me is nervous about reaching FI because I’m not sure what I would want to do with SO MUCH time on my hands 🙂

    1. That’s awesome that you’re in a position where you enjoy your work, not many people can say the same! Hopefully once you achieve F.I. you’ll be able to do some work that you also enjoy and work as much or as little as you like at that point 🙂

  6. I’ve been thinking about this a lot lately because yep, there’s only so much further I can frugalize my life as it is! I’ve recently switched to option #2 with a weekend job, and am definitely keeping in mind that I might need to make some big career moves to do more than grow my income by a few hundred here or there.

    I like the idea of #3 but it’s a bit scary to me, given that I’m an over-preparer and trying to change the scarcity mindset I’ve had for a few years. But I’m open to the possibility!

    1. Option #3 definitely requires a bit more risk, since you would have to find a way to earn some extra money if your passive income doesn’t cover all your expenses. That being said, one possibility is continuing your frugal ways and using option #2 for a while until you have enough to be comfortable with pursuing #3. No matter what you choose, it’s good to realize there’s more than one path to using finances to maximize happiness 🙂

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