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 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 5.64%1||Undergrad & Graduate|
|1.89% – 5.90%2||Undergrad & Graduate|
|2.25% – 6.09%3||Undergrad & Graduate|
|1.89% – 6.77%4||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 5.41%5||Undergrad & Graduate|
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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 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% 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 July 31, 2020, 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 7/31/2020. 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 [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 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
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of September 9, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.
5 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.