Frugal lifestyle reward: Young couple saves $175,000

Bryan and Katie Phelps

For Bryan and Katie Phelps, saving has become an addiction that has netted their young family a $175,000 nest egg.

Although Bryan has worked since high school, he says he wasn’t a saver until after he and his wife, Katie, 28, married — and "real life" started. An interest in finance developed along with their plans for the future.

"As I paid more attention to personal finance, it became much easier to save, and I genuinely started to enjoy it," says Phelps, 28, an Internet marketing consultant who operates his own agency, Big Leap Web, in Saratoga Springs, Utah.

The couple wed at age 21, when Katie was a senior in college and Bryan was taking night classes and working full time. They began making smart money decisions, like saving and establishing a budget, right off the bat.

When Katie got her first job, as a graphic designer for a software company making $35,000 a year, she immediately maxed out her contribution to her 401(k) plan.

Meanwhile, Brian was making $25,000 a year at a data-entry position. Since his company didn’t offer a retirement account, he opened a Roth IRA and contributed the full amount.

Plus, "we put about 25% of our paychecks into a money market account as an emergency fund," Bryan says.

All of this was possible because they tried to live off just one of their salaries, since they planned on Katie staying at home once they started a family.

"We kind of decided on what our lifestyle was going to be back then," he says.

Chart showing combined 2012 contributions of people with both a 401(k) and an IRA.When Bryan wanted to change careers, he stopped taking classes and accepted a part-time position at night with an agency to gain experience in online marketing.

The job also netted him an additional $12 an hour. He was eventually able to switch to the field full time and quickly advanced to management positions.

His salary grew to $85,000 a year plus small bonuses.

Bryan listened to podcasts during his daily commute and read finance books in his spare time. The more he learned, the more he enjoyed watching their savings grow.

"It made me question every small purchase, even a drink or candy bar," he says. "I probably drove my wife a little bit nuts."

Not that Katie isn’t on board with their frugal lifestyle. Bryan says the fact that they both are aware of their budget has helped them save.

They track their spending on the personal finance website and categorize expenses daily to see how they add up over time.

"We feel it’s important that both of us are aware and knowledgeable about our finances," he says. "Our marriage is a partnership."

When the couple welcomed the first of their two sons, Katie quit her job, as planned. Bryan took on consulting work at night.

"Having extra income from side projects that we didn't depend on for our living expenses made it easy to really pad our savings account," he says.

Plus, those contacts helped when Bryan started his own company, which increased his salary again, along with his flexibility.

"We have increased spending, but not at the same rate as our income," he says.

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Bryan admits to having one weakness: cars. He loves them.

Many financial experts advise against buying new cars, since they are depreciating assets. But Bryan has a 2012 Audi A6, and his wife drives a 2011 Ford Explorer.

"That’s the place where we splurged a bit," he says, noting they saved up and paid cash for both vehicles.

Saving for automobiles, so they don’t have car payments, is part of their ongoing plan to achieve financial security. Subaccounts set up in their online savings account allow them to regularly direct funds toward future cars as well as for Christmas presents and his wife’s hobbies of crafting and home décor.

Bryan says the first $100,000 was the hardest to save. The couple actively saved for five years to reach that milestone.

"It feels like that first $100,000 is cash out of your pocket," he explains. "After that range, you see more significant returns from interest and dividends."

Today, the couple has about $127,000 in retirement accounts and another $50,000 in liquid savings.

They add about $2,600 to that pot each month with a short-term goal of building their dream house — with cash — and a long-term goal of living comfortably in retirement.

Bryan and Katie Phelps’ tips for saving more than $100,000:

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