Money

28-year-old with $250,000 in savings: Budgeting is overrated—do this instead

One Minneapolis-based millennial, not pictured above, plans to retire comfortably in less than a decade 
One Minneapolis-based millennial, not pictured above, plans to retire comfortably in less than a decade 

The average American has $84,821 saved for retirement. One Minneapolis-based millennial, who goes by the pseudonym Sean, has managed to sock away three times that amount — $256,444 as of July 2018, he reports on his blog — though he's just 28 years old.

He didn't invest in bitcoin or inherit any money. He doesn't even earn six-figures.

What he does do is save and invest a considerable chunk of his $80,000 income: more than 60 percent. Achieving such a high savings rate didn't require following a strict budget. In fact, "I think budgeting is overrated," Sean tells CNBC Make It.

For starters, sitting down and making a budget can be "an extremely intimidating process if you're not used to it," he says. "It's easy to get bogged down with the mechanics of how to actually create one."

For those who do manage to draw up a budget, one of two things tends to happen, he says: "Either they get discouraged because they're not sticking to the budget, or they have a budget and they get to the end of the month and they say, 'Oh, I'm $500 under budget and therefore have a free pass to go blow $500 on something that I otherwise would not have bought.'"

If you want to up your savings rate, rather than budgeting, Sean recommends tracking your spending. It's the first step he took when he decided to fast-track his retirement and get serious about saving.

"You don't even have to say, 'I want to spend less on this,'" he tells CNBC Make It. "Just track your spending and find out where your money is going. Once you do that, you're going to spot areas — you're going to look back at your bills and say, 'Oh my gosh, I can't believe I spent $400 dining out last month.' When you look at your final compilation, it's going to stick out like a sore thumb."

Sean records his purchases with the iPhone's Numbers app, but you can also use apps like Mint, You Need a Budget or Personal Capital. Even writing down purchases in a notebook will work.

Over time, as he logged all of his expenses, his savings rate started to increase. When he first started tracking, he was saving about 35 percent of his earnings. But as he became more and more aware of exactly where his money was going, he became a more conscious and efficient spender. Soon enough, he was banking half of his income. Today, he sets aside more than 60 percent.

The 28-year-old, who says he's on track to retire by age 37, is far from the only super saver to track his spending. Other early retirees also started their journey to financial independence by analyzing their spending habits and figuring out where they could cut back in order to save more.

Don't miss: How this 28-year-old built up $250,000 in savings and plans to retire by 37

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