I save like a G

I love today’s title because it holds double meaning. I originally meant I save like a G (as in Gangsta). If you didn’t know, I’m the ghettoest (is that a word?) personal finance blogger this side of the Mississippi Milky Way.  I love rapping, hip hop music, making beats, and learning about compound interest. If that’s not straight hood, I don’t know what is. Not only does “I save like a G” mean I’m a gangsta, but it also can be taken literally. I really do save about a G (as in a grand) each month. In fact, last month I had $1,800 in discretionary income.

Today’s blog post was inspired by a loyal reader who commented on yesterday’s post. MattyIce wrote…

What is your Percentage of Savings? Is it 15% and then that 15% is divided among your IRA, Savings, and Student Loan Payment?

Well MattyIce, here is my super-dee-duper-uber-complicated formula for my savings…

Basically what I’m trying to say is I have no savings plan. Here is how I actually decide what I do with all that discretionary income.

First, I take my baseline net income (I know each month the minimum amount of $$$ I will bring home is $2,700). Generally, I supplement that with a couple hundred dollars in side income. I also know that my expenses each month generally hover between $1,500 to $2,000 (depending on the month). Thus, I usually have about $1,000+ each month in “do whatever the heck I want” money.

Most people, pay themselves first. Meaning they treat their savings as an “expense.” Before they pay any bills, they throw X% of money in to their savings account. While I totally understand why people do it, I don’t really need to. I don’t have a problem saving. I’m frugal by nature, and frugality leaves me with discretionary income.

So what do I do with my discretionary income? It’s pretty simple, I take all of my left over moolah and throw it in my savings account. Sometimes, when I’m really feeling anti-debt, I’ll take a thousand dollars out of my savings and throw it towards my student loan. Other times, I pay minimum on the loans, and keep the discretionary income in my savings account.

As far as saving for retirement, I have 5% of my gross income thrown in to my 401K. I don’t actually use a dedicated savings account for Roth IRA purposes. Since I am able to hoard so much cash, I don’t have to set aside my retirement savings separate from my main account. Periodically throughout the year, I will make contributions to my Roth IRA, from my one savings account. There is no method to my madness, but it’s what works for me.

Essentially to answer your question MattyIce. I have ABSOLUTELY NO SAVINGS PLAN. Instead of subscribing to a super complicated method, or trying to manage 8 different dedicated savings account, I throw all of my discretionary income in one account and take from it when necessary (i.e pay down student loan, contribute to Roth IRA, buy an engagement ring).

Let’s look at a few past months to see what my savings rates were…

January 2010: 48% (of net income) saved

September 2009: 11%  saved.

July 2009: 53% saved

As you can see, my savings rate is all over the place. My “non-plan plan” is much different than a lot of methods, but it’s what works for me. How do you all decide what you are saving? Do you pay yourself first? Do you save an exact percentage? Or are you like me, and just throw all your leftovers in a savings account? Do you have multiple savings accounts for different things (i.e. new car account, retirement account, kids college, etc)?