This report was originally published Sept. 15, 2016.
If you’re committed to saving money, you could try an extreme strategy: choosing to live on half your income. While saving half your salary requires a lot of willpower, it’s not impossible. If you can swing it, you could make rapid progress toward your savings goals.
4 ways to live on half your income
There may be many, many ways to slash your spending in half, but here are four things to do that could be worth looking into:
First off, it’s important to consider if it’s possible to live on half your income. 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% 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 said. “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,” she said. “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 said, is to find balance.
“The first few months in the studio were hell on Earth,” Grant said. “I wanted to cry and go back to my old life.”
“But I ended up saving over 70% of my income for my retirement plan and to start a new consulting business in three years,” Grant said. “But I could have just been as happy with saving 20% or 30%.”
Nicolas Peterson of Monterey, Calif., was working odd, temporary 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,” Peterson said. “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 left over went into my savings,” Peterson said. “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 said.
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.
Living on half your salary shouldn’t be made without some extensive pre-planning. One resource that can help is a budgeting app.
Budgeting software will give you a picture of what your spending needs to look like in the short-term to live on half your income. It will help you understand what the “bare minimum,” or the lowest amount of money you must have on hand, really is.
But while it may be tempting to live on that bare minimum, it wouldn’t be feasible in the long-term. As you know, accidents happen, cars break down, and 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% of your income toward 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. For instance, you could start by saving the amount you would need to cover your health insurance’s out-of-pocket expense requirement. Or you could strive to save the equivalent of three to nine months of your current salary in case of a layoff.
Kelly-Ann Reynolds and her husband graduated college just a year before deciding 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 said.
“My husband had a hospital bill of over $10,000, but I learned that I could actually negotiate that,” Reynolds said. “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 said.
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.
Rebecca Safier contributed to this report.
Interested in refinancing student loans?Here are the top 9 lenders of 2022!
|Lender||Variable APR||Eligible Degrees|
|2.49% – 11.72%1||Undergrad & Graduate|
|2.50% – 6.30%2||Undergrad & Graduate|
|4.13% – 7.39%3||Undergrad & Graduate|
|2.49% – 7.99%4||Undergrad & Graduate|
|2.49% – 7.99%5||Undergrad & Graduate|
|3.24% – 8.24%6||Undergrad & Graduate|
|2.48% – 7.98%||Undergrad |
|1.74% – 7.99%7||Undergrad & Graduate|
|3.69% – 9.92%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 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 6, 2022.
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 $9 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 April 29, 2021. Information and rates are subject to change without notice.
3 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.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 09/09/2022 student loan refinancing rates range from 4.13% APR – 7.39% Variable APR with AutoPay and 2.99% APR – 9.93% Fixed APR with AutoPay.
4 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
You can choose between fixed and variable rates. Fixed interest rates are 3.99% – 8.74% APR (3.74% – 8.49% APR with Auto Pay discount). Starting variable interest rates are 2.74% APR to 8.24% APR (2.49% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.
5 Important Disclosures for Navient.
6 Important Disclosures for SoFi.
Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 3.24% APR to 8.24% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
7 Important Disclosures for Purefy.
Purefy Student Loan Refinancing Rate and Terms Disclosure: Annual Percentage Rates (APR) ranges and examples are based on information provided to Purefy by lenders participating in Purefy’s rate comparison platform. For student loan refinancing, the participating lenders offer fixed rates ranging from 2.73% – 7.99% APR, and variable rates ranging from 1.74% – 7.99% APR. The maximum variable rate is 25.00%. Your interest rate will be based on the lender’s requirements. In most cases, lenders determine the interest rates based on your credit score, degree type and other credit and financial criteria. Only borrowers with excellent credit and meeting other lender criteria will qualify for the lowest rate available. Rates and terms are subject to change at any time without notice. Terms and conditions apply.
8 Important Disclosures for Citizens.
Education Refinance Loan Rate Disclosure: Variable interest rates range from 3.69%-9.92% (3.69%-9.92% APR). Fixed interest rates range from 4.49%-10.11% (4.49%-10.11% APR).
Undergraduate Rate Disclosure: Variable interest rates range from 6.39%- 9.60% (6.39% – 9.60% APR). Fixed interest rates range from 6.58% – 9.79% (6.58% – 9.79% APR).
Graduate Rate Disclosure: Variable interest rates range from 3.69% – 9.16% (3.69% – 9.16% APR). Fixed interest rates range from 4.49% – 9.35% (4.49% – 9.35% APR).
Education Refinance Loan for Parents Rate Disclosure: Variable interest rates range from 3.69%- 9.09% (3.69%- 9.09% APR). Fixed interest rates range from 4.49% – 9.28% (4.49% – 9.28% APR).
Medical Residency Refinance Loan Rate Disclosure: Variable interest rates range from 3.69% – 9.16% (3.69% – 9.16% APR). Fixed interest rates range from 4.49% – 9.35% (4.49% – 9.35% APR).