It’s not always easy for my husband and me to save money.
However, over the past nine months, we’ve managed to save over $20,000 by saving 50 percent of our income coming in.
Learning how to live on half your income requires a lot of willpower, but it’s not impossible. In fact, using these stories below, you can learn how to save half of your own income with these important strategies.
4 ways to live on half your income
1. Be realistic with what you can do
First off, it’s important to consider if it’s possible to live off half your salary. For some, this means just minor changes like eating out less, prioritizing savings, or grocery shopping elsewhere.
For Amelia Grant, a 27-year old graphic designer from Chicago, saving 50 percent of her income meant going for much more drastic lifestyle changes.
“When I looked at my monthly budget I realized that I wasn’t actually blowing a ton of my salary on ‘extra categories,’” Grant recalls. “The only thing I think I was spending too much on was my two bedroom apartment.”
“So I moved into a studio and downsized everything,” says Grant. “I even sold my car so I wouldn’t have to pay car insurance or gas.”
Your motivation to live on half of your income can diminish if you’re not enjoying everything you’re used to. The key, Grant says, is to find balance.
“The first few months in the studio were hell on Earth,” says Grant. “I wanted to cry and go back to my old life.”
“But I ended up saving over 70 percent of my income for my retirement plan and to start a new consulting business in three years,” Grant explains. “But I could have just been as happy with saving 20 or 30 percent.”
2. Automate everything
Nicolas Peterson of Monterey, California was working odd, temp jobs while producing music on the side. However, he was able to pay off nearly $60,000 in debt by learning to reprogram his mind.
“Before I signed on to my new job, I used Mint to budget and set up payments for all my bills expenses, like my credit card and meal plans,” says Peterson. “Then, I calculated how much it was per month to max out my retirement plan.”
Instead of seeing his paychecks in full, he set up his paycheck to be distributed among three different accounts: checking, savings, and retirement.
“Whatever was leftover went into my savings,” Peterson explains. “I even automated that by scheduling the balance to go to my student loan lender at the end of the month.”
“If I knew I was saving half of my salary, I wouldn’t have been able to do it for over four years,” Peterson says.
Peterson’s strategy is an easy way to live on half your income without much initial stress.
But one of the biggest benefits he didn’t foresee was how his automated plan boosted his credit score. By making on-time payments each and every month on all his bills, he was able to buy a condo later on with a near perfect credit score.
3. Have a long-term and short-term plan
Living on half your salary shouldn’t be made without some extensive pre-planning.
Like Peterson and Grant, my husband and I used monthly budget software to see where our spending could be cut.
This gave us a picture of what our spending would look like in the short-term. That way we could understand what “bare minimum,” or the lowest amount of money we could have on hand, really was.
While it’s tempting live on that bare minimum, it wouldn’t be feasible in the long-term. As we all know, accidents happen, cars break down, hospital visits come up. While it may not happen today, emergencies can happen at any point when we are least expecting it.
Living on half your income must also come with a serious discussion around emergency savings. Especially if your ultimate goal is to place 50 percent of your income towards paying down debt. Or, boosting a savings account you won’t be able to easily access.
The amount of your emergency savings is up to you. We use the amount of money we would need to cover our health insurance’s out-of-pocket expense requirement ($5,000 per family) as our starting mark. Others suggest three to nine months of your current salary in case of a layoff.
4. Learn more about your money
Kelly-Ann Reynolds and her husband graduated college just a year ago when they decided to live off half of their income on their family farm.
Learning how to live on half their income meant cutting out cable, eating out only once a month, and doing the repairs for their home themselves.
However, their biggest saver came from boosting their own curiosity about money.
“I started reading all of these blogs and websites about personal finance, and it got me curious,” Reynolds says.
“My husband had a hospital bill of over $10,000, but I learned that I could actually negotiate that,” explains Reynolds. “We saved for two months and then offered the hospital a payoff of $8,000 in cash if they would take away the other $2,000.”
Incredibly, this strategy worked. “I wouldn’t have known I could do that if I didn’t start getting really invested in learning about where our money was going,” Reynolds explains.
She and her husband also doubled their savings by reducing their student loan bill through an income-based repayment plan. Their monthly bill went from around $600 to $75.
It’s possible to save half of your income
It may seem extreme to live off half your salary, let alone save half of it.
But with advanced planning, substantial emergency savings, and a drive to continue using your money to your advantage, you can make this lifestyle work for you. And, learn how to live on half your income to achieve your financial goals.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|