Saving Half of My Income – Can It Be Done?

Ever since I started this website I’ve published a monthly update tracking all my retirement and investment accounts. The purpose was that putting it out there in the public view would force me to really stick to a savings plan and maximize the potential of my investments. I don’t know what you all think of the updates, but every time I write one I have one thought – “Damn, I need to save more money!”

That’s why I’m setting the following goal for myself starting in the new year:

Save 50% of my gross income. 

It’s an admittedly lofty goal for myself. I went through my budgeting history before sitting down to write this post and right now it looks like I spend about 70% of my gross income. So I need to cut back about 20% to meet my goal! I paid off my car loan earlier this year which will help out a lot. And once I switch over to a non-contract smartphone plan I’ll cut even more spending out over the next year. What I need to cut back on after that will take a more detailed analysis of my budget this past year, which I plan to do over the next few weeks.

Sam, over at Financial Samurai, mentions quite often how in order to retire early he regularly saved 50-70% of his after tax income. While I have no illusions of being able to retire by the time I’m 40. I do think that adopting a more aggressive savings philosophy will offer me the following benefits:

  • Making up for lost time – I will readily admit that I squandered the majority of my early – mid 20’s financially. I’m lucky I never got myself into too much debt, but after graduating college I spent two years doing just about nothing before finally putting my degree to use and landing a job at a “too big to fail” bank about 6 months before the financial industry went over the brink. Needless to say it’s been a rocky career path ever since. By saving aggressively now, I can close the gap on some of those missed years and take advantage of the power of compounding while I’m still pretty young.
  • Force Prioritization –  While I do a good job of sticking to my current budget, there is still a lot of wasteful spending that I could cut back on (advance apologies to anyone who owns Chipotle stock!). Setting a goal of living off of half of my income will force me to really prioritize my discretionary spending and cut out the things I can really do without.
  • More Investment Opportunities –  It’s only natural that if I’m saving a lot more money, I’ll have more money to invest! And that brings a much bigger smile to my face than all those burritos! Contributing more to my 401(k), Roth IRA and savings account will naturally be part of the plan. In addition I’d like to start to focus on building some investments in non-retirement accounts. Such as finding a rental property, investing in a regular brokerage account, building a CD ladder, and adding to my P2P lending portfolio.
  • Less Stress –  More money saved means more of a safety net against the unexpected. Home & car repairs, medical bills and even a stint of unemployment will be less daunting and cause less stress because I’ll be more prepared to handle them (provided they don’t happen in the too near future!)

So, will I be able to meet the goal of saving 50% of my gross income? Honestly, I don’t know. It is a pretty big goal and it’s going to take a lot of work to achieve, but what good are goals if they don’t give you something to strive for?  Even if I fall short of 50%, as long as I improve upon my current savings rate I’ll consider it a win.

Do you think you could live off 50% of your income? Want to take the challenge with me? Try Personal Capital to manage your spending, budget and investments all in one place. 

Are you already living off of half your income? Share your secrets! I may need the motivation when this gets really tough!


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55 Responses to Saving Half of My Income – Can It Be Done?

  1. Michelle says:

    We are currently living on less than half of our combined incomes. It’s definitely a task, but well worth it.

  2. Good goal mate!

    And nice job surviving at a too big to fail back until today! That’s no easy task in this environment!

  3. Charles says:

    We’re living on less than 50% of take home pay, here’s some tips:

    – increase income, we’ve gone from $36k to $120k in 5 years through job changes and side consulting work.
    – moved in with in-laws to help each other financially.
    – make side income unreachable by having it go into a s-corp
    – keep living like we still only make $36k

    Wife stays home and takes care of our kids and cooking so we don’t have to go out to eat.

    • Going from $36K to $120K is huge!

      I’m sure many people will wonder how it can be done in 5 years. It’ll help folks from reducing their complaining about income!

    • I think living like you did when you made less money and avoiding “lifestyle inflation” as they call it, is huge.

      $36k-$120k in 5 years is very impressive indeed! What field do you work in if you don’t mind me asking?

      • Charles says:

        I’m a web programmer. It took changing 2 employers as wells as I’m still working 10-20/hrs week for my previous employer at $65/hr.

        What I did to get here is looked at the job postings of the $100k+ job postings to see what kinds of things I should focus on studying and projects to work on. It started actually 6 years ago when our electricity was cut off and I was working at Taco Bell to bring in enough money to turn them back on, but that’s for another day.

  4. K.K. @ Living Debt Free Rocks! says:

    We are living on less than 50% of our combined incomes and saving the rest and it requires a conscious effort to keep it up but it’s worth it for us. It was the reason I can celebrate my debt freedom in just a few days as opposed to over 1 1/2 years from now and I wanted really badly to be debt free. I believe you can do it, if that’s what you really want. Good luck to you!

    • Wow, awesome job getting rid of your debt like that. What did you find was the hardest part of saving 50% of your incomes?

      • K.K. @ Living Debt Free Rocks! says:

        I would say not buying all your wants at once even though financially you technically could. So it’s now about planning when to buy the wants while striving to have more put away for the not too distant future…a balancing act for sure.

  5. I think living off of 50% of your income is a tremendous goal and based off of your current track record you should be able to come close. Cutting 20% will be a challenge but I’m sure you could at least do 10% without trying too hard.

    For other people out there, it simply comes down to how much they make. It’d be nearly impossible for somebody that nets $2000/month to live off 50% of their income. However, somebody that nets $6k or 7k/month would have a lot easier time.

    • I’m pretty confident I can find another 20% to cut out. It may be hard to KEEP it cut out, but thats the challenge I guess :)

      Income for sure plays a part, but somebody netting 6-7k/ month is probably also accustomed to a “higher” standard of living. So its not necissarily any easier for them to cut back to 50%.

    • kmadsen says:

      I live off $1150. I’m 100% confident that if I cut out the expensive dates, buying art supplies, a video game prescription, etc etc we could cut it down to $950. However I don’t want to live like that and I know my husband doesn’t either. If we rented out the 2nd bedroom and moved all our work stuff into our room with us and our 18 month old daughter we could lower it to $650. But that would also not be preferred as we like/need our space.

      • kmadsen says:

        Btw if we did for some reason go saving/cheap crazy and lived off $650 a month we’d be putting $2850 a month away as savings. That’s living off around 20% of our income. We live off around 30% right now and it’s the difference between comfortable living and ghetto style.

  6. Marven says:

    I admittedly don’t do a very good job at all of keeping track of my expenses. But depending on how one views debt repayment, I also manage to live on far less than 50% of my income. This is largely due to still living at home with my parents. But after squandering years worth of income, I intend to save up enough to be able to maintain a frugal and efficient lifestyle once I do finally leave.

  7. Depends on the income. My guesss would be that we certainly could do this once the dreaded loan is paid off (in about two months time). However, I have always been ‘increase your clothe’ kind of girl so my focus in on increasing income not only decreasing out-goings. And not simply saving – the beauty and opportunities come when you invest it rather than save it.

  8. We live on less than half of our income, and the rest is all going towards paying off investment real estate or other investments.

    We still live like college students in many ways – we have upgraded our lifestyle very slowly, which helps keep spending down quite a bit even though our incomes have increased quite a bit over the past couple of years.

  9. It depends on the income, of course! We live off of about 60% of our income. Aside from my debt obligations, we live almost entirely off of my wife’s income and the remainder of my income is saved. It’s handy since I don’t actually have a job for part of the year.

  10. Pauline says:

    I lived off half of my income when I was working corporate, then was even down to 25% or something. I started getting rent money and other investments’ dividends on top, but I lived off 25% of my salary, or 15% of total income. Everything was calculated in terms of “how long will I have to stand this crappy job”. So if a new gadget was worth one day of work, I probably didn’t buy it.

  11. It’s such a good goal! I came close this year, if you count paying down liabilities “saving” which I do. :)

  12. Oh yay, what a fabulous goal. I’m here to cheer you on! I’m also a compulsive saver so squirreling away 50% or more of income seems pretty standard to this gal. 😉

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  15. That is a great move. I wish I could do that now, but can’t. If I could, I would absolutely save that percentage. Saving as much as possible when younger, and investing that amount, will allow compounding to do its magic. The more the better!

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  17. Jon @ MoneySmartGuides says:

    This is a great goal! I’ve decided in the new year to make saving my #1 priority. I plan to max out my Roth as well as save 10% in a taxable account. This is in addition to what I save in my 401k. I doubt I can get to 50% in 2013 but I’m on my way getting there.

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  19. Savings 50% of your income really depends on your income level. Obviously your expenses plays a big part but in order for me to save 50% of my income I would need to have an after-tax income around $36k for this year. Luckily my income is well over that so everything else goes straight to savings, mainly investments.

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  22. el0j says:

    I’m currently able to save 50% of my income. I realize I’m privilaged to be able to do so. I’ve been saving/investing since late 2007. Like you I got a pretty late start, but being able to save 40%+ even for these few years I’ve long since surpassed the average man in savings.

    I should cross my first large mile stone around the end of 2013, which I’m looking forward to. Not $1M but…

    My goal’s been to be able to buy a nice central apartment in the capital. We’re in a housing bubble though, which makes it very hard for me to “step-in”. Bubbles are the worst, you can KNOW about it, yet chosing to not participate means you’re making less money than a cluesless fool that’s “in it”. sigh.

    Good luck on your quest.

    • Congrats on being able to save so much for the last 4+ years.

      Where do you live that a real estate bubble is still inflating? It’s got to be tough knowing one is happening, but like you said you’re almost helpless against it. You could rent and hold off on buying, but no one knows when or IF a bubble will burst. Good luck, I hope your decision works out for the best.

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  24. We are currently living off 50% of our income. It’s not super easy. There are things we wish we could do, but don’t because we will go over our budget. I think the best way to save 50% is to earn high income.

  25. Josh B says:

    I’m currently living off about 50% of my gross income. I could probably get that down to 50% of my net if I really tried, but I don’t feel the need to cut *that* deep into my lifestyle.

    A few things that helped: moving to Japan forced me to re-evaluate all the clutter I had built up since living in LA for 7 years. I sold what I didn’t need, boxed the ‘save, non-essentials’ and stored them at my parents. Then I packed two suitcases and 1 backpack and headed out. I now live in a 18m^2 apartment and only buy what I actually use everyday; nothing more. I have no cellphone contract (pay-as-you-go only), no TV, and no car (using Japanese trains really helps).

    Lastly, I spend my time going on hikes, taking pictures, drawing, reading at the library, or other such ‘low cost’ hobbies. It also helps that I only eat out maybe once or twice a month and rarely drink alcohol.

    Once you’ve got a lifestyle built around saving, it becomes second nature to just always have money in the bank.

    Good luck on your goals. BTW, I don’t think you need a high income to save 50%. It helps, sure, but I’ve lived off $12k a year in LA before (painful, but possible) and saved quite a bit of money before I got a higher-paying job (and was able to breath a little). Happy saving. ^_^

    • Jim Mason says:

      I am 65 and I retired at 60. My wife is still working. We have two adult children. I recently put together a spreadsheet on our lifetime earnings and savings. It turns out we have saved 43 percent of our gross earnings. After paying taxes and social security deductions, we have lived on much less than half of our gross earnings. Adding investment growth to our savings, we are in a very comfortable position for our retirement.

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  27. inci says:

    I think this and more can be done. I am 25 years old and just graduated grad school. My living expenses ( housing, food, transportation, entertainment) make up to 7 percent of my income, I send nearly 88 percent to my family and remaining 5 percent goes to student loan which is $600 a month. Saving 50 percent is a very realistic goal in my situation, considering I can very well save that 88 percent I send out.

    • SMatt says:

      5% of 12000 makes 600 a month. A lot of people dont make 144k after tax income right after graduation. What line of work are you in?

  28. Susan says:

    I also save 50% of my after tax salary.
    It was tough at first because I used to spend freely on eating out, shopping and traveling. But after reading finance blogs I thought I should start being smart with my money.
    How did I save 50%? I always draw the amount that I allow myself to spend for that month and keep it in my wallet. And I’ll make sure I’ll spend everything in that budget that I made for myself. Spending is tight, but you’ll soon realise it’s enough and learn how to cut back of unnecessary items.
    You can do it! It has became a way of life for me

  29. wijjika says:

    Hi all

    I wanted to share my experiece,I am new to this journey at 31 have never saved a penny! I wanted to say how inspirational this blog is and hope that at 31 i’m not too late.

    I am a contractor and have the luxury of earning £1925 a week and would love to start cutting back my lifestyle to live on half.

    What do you more experienced people suggest is a great way to start saving? into a regular savings account or do you pay down debts first?

    As for debts, i’ve got no credit card debt, an overdraft of 1250 which i am not using, £5500 of low interest personal loan and a £20,000 car which the lease is finished in 12months time.

    Even with my debt is it better to save half now, or pay down stuff first?

    Any help or tips to get going would be massively helpful

    • Josh says:

      You will always pay more interest than you earn. This is how banks make money. Pay the debt down first and then save.

      To take that a step further, if you have more than one debt, find the one with the highest interest rate and pay that one off first, then the next highest and so on until they’re gone.

      You can then start saving and, when you have a cash backup, invest :-)

      • Ryan Conrad says:

        Studies show tackling the smallest debt first based on amount is better than paying attention to the largest interest rate. If you have debt, I’d recommend watching and reading all that Dave Ramsey has to say on money. He got me out of debt and now savings tons of money. :) But….I like that you have a plan. Just trying to help. It’s all about seeing quick gains. When you knock out a quick small credit card, you feel the win and you keep going on to tackle the bigger ones. Called the debt snowball.

  30. Gary Haman says:

    I will be out of debt in 7 months. This year I paid off my Credit card, land loan, pickup truck, and RV house trailer. Next is my car. I have built my savings nest egg to equal more than one year’s retirement pay. I live on 40% of my after tax income, save 50 %and spend 10% on vacations.

    I discovered the “snowball” method of loan payoff on my own. I invented my own “deprivational” way of living after my divorce and have paid off 97% of over $250,000 of debts over 17 years. It can be done! good luck!

  31. Michelle says:

    I would love to be at this point. I don’t see it happening for a while. But it is a goal to work towards.

  32. Josh says:

    I currently live on 20% of my take-home income.

    Admittedly, my rent is only $100 a week and I live in NZ, but even when I was living in Sydney, I still lived on less than 50%

    Two pieces of advice I can offer are:

    “What can be measured can be managed”

    If you want to manage your finances, you need to know where you’re at.
    Record everything, and I mean EVERYTHING! Income, expenses, assets (I mean income generating assets such as dividend-paying shares and cash. Your car is not an asset, it’s a hole in your pocket), liabilities (debt, rental contracts, phone contracts, mortgages etc), know your true net worth! You can then accurately say how much you spend and decide where to be more economical.

    This includes credit card and debit card transactions. (Identify the type in a column)

    You may not like this picture… But you will soon!

    Example: If I go out for lunch and buy subway for $10, I record it in my transaction listing against my food budget. (Column like card type but where you type “Food” or “Transport”) you then have a “cash flow statement” that picks up all transactions for the period between pay cycles (weekly, monthly), that is, income and expenses. You can then group them by type in your expense listing.

    You will then see where all your money goes and where to plug the leaks.

    “Sell your extraneous stuff!”

    I made just shy of 2k selling stuff before I moved back to NZ…. And here’s the thing… It feels so good!

    Look at that item and think “do I really need it?” If you come up with yes, then ask yourself “when did I last use it?” For me, if it’s not used inside 1 year ago, it’s sold!
    Less stuff = less stress = less (or no) contents insurance = savings
    The only insurances I have are life and TPD. I have enough savings to insure myself because I saved the insurance premiums into an account instead of paying the insurance companies. The funny thing is, when you have the backup in place, things tend to go right anyway :-)

    Stop trying to keep up with the Jonses people! Have the stones to say “I’m choosing to have less so I can enjoy more experiences in life with the people I love” rather than spending that money on insurance or up-keep of that boat or flash car

    When you’re aged and sitting in your rocking chair, are you going to remember that car? Or are you more likely to remember the sky diving, camping trip, or holiday with your loved ones?

    Have less items so you can spend more on experiences with loved ones…. Of course whilst saving a minimum of 50% of your take-home pay for retirement :-)

  33. doing itnow says:

    doing it now! in 30s and will retire after a year or two. high income and living meager is how we do it. saving is more exciting than spending for us. Hitting rock bottom gave us this out look.

  34. Alex says:

    Easily, We already do. When our children are in school, I will start work again and we will be able save 100% of what I make

  35. santanu says:

    I think this is quite possible for people who are disciplined in investment and can control their expenses. Most people spend like anything in week ends for their family for entertainment in shopping and other activities. Rather they could spend time by playing within family and also performing some interactive activity at home. This will save more money and also improve family bonding.

  36. Crystal says:

    I’m 21, just graduated undergrad and am working full-time. I’m living in the expensive Bay Area, yet still saving 65% of my after-tax income each month very comfortably! Saving early truly compounds – it gets a lot easier once it becomes a habit.

    I record EVERY payment I make – even if it’s $1.50 for some onions for a quick grocery store trip. I make a table on Google Docs, and record all my payments, the method of payment (credit card, cash, check, etc), the payment due date and the date I paid it. I also categorize my payments by type (i.e. groceries, rent, eating out, etc).

    If you make a spending plan and allocate certain fixed amounts, you can easily track your spending each month and then see if you remained on track. I highly recommend it to anyone of any age.

  37. Ryan Conrad says:

    We’re currently living off 44% of our income. I’m adding healthcare in a few months so I’ll be back up to 50% but it’s just important to first have no debt, then live in a very modest house/apartment, we chose a studio in Northern California. Then, we spend very little on weekly food and yet still have an $80 budget on weekend which still allows us to have fun. We currently live on $28,200 for two people.

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