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Steps to Start Saving Half Your Income and Create Financial Security.

It is crazy to think how far we have come in just three years. Never did I think there would come a day that I would be planning to save nearly half our income each month. For so long I lived with a scarcity mindset. I thought only millionaires were able to live a financially secure lifestyle. Well, let me tell you, that’s is just not true. No matter what size your paychecks are, there are always things you can do to be smarter and save more. So let’s talk about what steps you can take to potentially start saving half your income and create financial security.

*This post contains affiliate links. Although I may make a commission, all recommendations are my own.

Why save half your income?

I’m not saying every single person should be saving half of their income. There isn’t a one size fits all cure to finances and that’s ok.

Personally, we are choosing to work toward saving half of our income because for so many years…we didn’t save anything.

I am 32 and my husband is 40 and with the exception of a 401K, we haven’t been able to keep a saving account if our lives depended on it. (Even the 401K was in jeopardy for a while.)

Our plan to save half our income is in order to help build up the savings we should have started years ago.

We want to make sure we are financially secure in case of emergency and hopefully, retire early and/or travel more.

Where should you save?

Emergency fund savings

We’ve personally decided to open a Savings Builder account through CIT Bank because it only requires $100 per month to gain an awesome interest rate of 2.45% — our current savings account offers .03%!

This is where we will first work to build up our 6 months of living expenses. Having an online savings account will be helpful to avoid the temptation of taking money out of savings unless it is actually an emergency.

How to Avoid Taking Money Out of Savings

Retirement savings

Another area that we are working on saving is in retirement savings.

Tips for maximizing 401K retirement savings:

  • Contribute what your employer matches (this is FREE money)
  • Contribute at least 10% of every pay check
  • See if your employer has a financial advisor who can work with you
  • Work with a financial advisor to make sure you are diversifying your retirement and maximizing your savings

Find a financial advisor near you.

Working independently means I need to open my own retirement account. The account I’ve chosen to open for myself is an SEP IRA which allows me to save up to $56,000 per year (2019).

3 Retirement Plans Every Entrepreneur Needs to Know About

Fun savings

Of course we couldn’t forget to save for all the fun stuff in life. Things like travel and…well…travel.

We are big believers in paying for experiences over things and have worked really hard to allow ourselves the financial freedom to be able to do more together as a family.

The Savings Builder would be another great option for saving for vacation. My second recommendation would be a traditional Money Market Account.

What is the quick solution?

There is, of course, no quick solution especially if you find yourself with serious financial struggles.

I hate to break it to you, but saving half your income is going to take some work on your part.

I will however, break it down into simple steps and strategies that will eventually allow you to get to a place where you are able to save a larger part of your income. Stick with these steps and you will eventually have worked your way toward saving half your income.

Assess your financial situation

There are some basic percentages to live by when it comes to your budget. They look a little something like this:

  • Housing: 25% – 35%
  • Giving: 10% – 15%
  • Savings: 10% – 15%
  • Food: 5% – 15%
  • Other: 20% – 50%

To really breakdown these percentages, and the rest of your budget, I have several printouts in my Fun Sized Budget Bundle that are designed to help you every step of the way.

If you are on the low end of these percentages, you’ll find yourself with 50% of your income left to spend! In a perfect world, with no medical bills, clothing, car repairs or debt, this would be a quick fix to saving half your income. Unfortunately, we all know, it’s not always that simple.

The higher end, you’ll find yourself with around 20% of your income left. That can make things a little tighter, especially if you do have medical bills and debt to pay off.

So what do you do?

Cut the waste

It’s time to look at your budget and see where you can “trim the fat” so-to-speak.

Reducing your monthly bills

With the categories listed above, the only budgeting section you probably aren’t able to make any simple changes with is your housing expenses.

Sure, you can turn off the lights more or try to save water, but you won’t be able to reduce your budget instantly. However, there are some ways that you can reduce the cost of your utility bills

$10 Phone Plans – You can save big on your phone bill by switching to Tello where you can get phone plans as low as $10 per month!

Get a cheaper paymentTrim is a company that will look at your recurring bill payments and will then find you areas where you could reduce your monthly payment. They will even negotiate this with your provider for you!

How to Turn $5 Per Day Into $30,000

What about charitable giving?

Reducing your giving or savings amounts is never something I would recommend although sometimes it is necessary in order to help get you back on your feet.

I am a firm believer in the power of giving and saving…well…that’s what we’re here for, right?

Reducing grocery expenses

The best way to limit your spending on food each month is by coming up with a practical, sustainable grocery budget.

Personally, I love Jordan from Fun Cheap or Free’s super simple method of giving yourself a $100 per person per month food budget. I have stuck with this method ever since we began getting serious with our finances.

Checkout my exact grocery haul that was totally healthy, gluten free and under $100:

If you are not the greatest at meal planning, don’t miss The $5 Meal Plan. Created by a busy mom of 4, there are meal plans and grocery lists to match almost every diet need.

Cutting other expenses

The best way to find waste in your “other” budget is by literally busting out your monthly statements (you can usually do this online) and calculating all of your unnecessary spendings.

In the past, for us, this has meant alcohol, nail polish, speciality coffee, fast food stops and random strolls through the clearance section of Target. Can I get an “Amen!”

If you are not living your life on a budget, I guarantee you will be crazy surprised to find just how much money you are wasting each month on tiny little purchases under $5!

Take note of this excess spending and just imagine for a second what it would mean for your family if you started saving that money instead of carelessly spending it!

Pay off any debt

Now it’s time to tackle that debt! This is the absolute best way to get more money permanently back in your budget!

Just like you took the time to look at your “other” spending, take a moment to add up how much you spend each month on your debt payments.

Once you have calculated how much you are spending on debt each month, you’ll know just how much money you could be saving each month instead.

How do you start debt payoff?

There are many different methods that work to pay off debt. My personal favorite is the Debt Snowball. Using this method, you don’t have to be great at math. It’s a simple, easy to follow process that works!

With the Debt Snowball, we were able to pay off $6,000 of debt in only 6 months! Then (like fools) we took a break from debt payoff!

When we started up again, we paid off over $17,000 of debt in 12 months! Now, for the first time in our entire adult lives, Tom and I can say we are debt free!

For the full guide on how the Debt Snowball works, check out my YouTube video that explains it all and be sure not to miss the Debt Snowball printouts in my Fun Sized Budget Bundle.

Create a budget

Now that you’ve gotten to really dive into your finances, the next thing to do is get started on a budget!

As I said, I have all the budget, debt payoff, and savings printouts you could ever possibly want in my Fun Sized Budget Bundle. So if you feel like you would really benefit from some hands-on budgeting materials, you don’t want to miss this handy bundle.

How to start a budget

To get a basic budget started, simply start with how much you make each month. If your income is inconsistent, you can take the average of 3 months worth of pay.

Next, do the same 3 month average to determine your gas expenses. Doing this will help give you a more practical idea of how much money you should be planning on spending on gas each month.

  1. Once you have your monthly pay and gas determined, subtract all of your bills and payments for the month including gas expenses and additional debt payments.
  2. After this, subtract the amount you decided on for a grocery budget.
  3. Now you should have an idea of just how much money you have left at the end of the month that you could potentially start saving. This might also be a rude awakening if you find yourself with very little money left or negative money.

Additional help:

Live frugally

Now that your eyes have been opened to how much money you’re wasting and where you are wasting it, use this as an opportunity to make some serious changes.

Instead of carelessly spending your money each month, start taking steps toward being more frugal.

Never miss an opportunity to save on a planned purchase.

What does this mean?

This means that hitting up every SALE you see is not being frugal. It means that when you have thought long and hard about a purchase, take time to also explore your best money saving options. Can you buy the item at a discount? Could you purchase a refurbished version of the item?

Being frugal does not mean you buy things just because they are on sale!

Frugal help

My favorite savings app that you can download on your phone is Dosh.

The reason Dosh is my favorite is because there are no adds to click through and no scrolling temptations. Dosh links up with your most used cards (hopefully debit cards) and will refund you any money for any qualifying purchases you make.

This is great because you are less likely to spend money on things you wouldn’t otherwise need. Instead, you make some extra cash only on the things you were already planning to purchase. Download Dosh here.

[click_to_tweet tweet=”Being frugal does not mean you buy things just because they are on sale! #frugalliving #recoveringshopaholic” quote=”Being frugal does not mean you buy things just because they are on sale!” theme=””]

Stop living above your means

We’ve all heard about the dangers of trying to “keep up with the Joneses'” but are you guilty of it?

Checking your budget percentages should have given you a pretty good idea as to whether or not you are living above your means.

Are you house poor?

If you are spending more than 30% of your monthly income on housing expenses (rent/mortgage/utilities) then, you are definitely pushing your lifestyle to the breaking point.

When we bought our “big house” 5 years ago because we could afford it. —At least on paper. We were approved for the loan amount, we had enough monthly income to pay for it…but we quickly found ourselves house poor.

If this sounds like you, it might be time to have a talk with your spouse and consider a change.

Downsizing doesn’t mean that you failed. It means that you see more value in other areas of your life and you want to make sure you are financially secure.

Must read posts:

Bring in additional income

So besides reducing wasteful spending, revamping your budget and paying off debt, the best way to have additional money is to work for it!

What do ya know!?

Finding small, easy ways to make extra cash is the best way to either help you pay off debt or start saving half your income in order to create financial security.

Easy start ways to make money

While there are tons of ways to bring in additional income to help save half your income, I have compiled a list of the most practical, easy start options available:

  • Start a blog – This is how our family started making additional income. While there is definitely a learning curve to blogging, it’s possible to make a small amount of extra cash in a few short months. How to Make Your First $1,000 Blogging.
  • Instacart – Get paid to shop! Set your own hours and choose how involved you want to be! Get started today!
  • RoverWatch dogs or walk dogs and get paid for it!! Apply for Rover.
  • Uber – Become a driver with Uber. Set your own schedule and get paid up to 5 times her day along with chances for additional incentives in your city. Apply for Uber!
  • UberEATS – Earn extra money when you need it, day or night and deliver food instead of people! See if UberEATS is in your area.

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  1. From trial and error and accruing serious debt, I learned today to be really frugal with my spending habits. In fact, I find myself putting money back on my card that’s considered chump change.

  2. Great and informative! I’m always looking for some new tips (I definitely need to read more about your food shopping tips!). While I have always been money savvy, it wasn’t until a few years ago that my husband and I started looking at the life we were living versus the life we want to live, more closely. Right now, we save 33% of our gross income. Of this savings, we max out my husbands 401k and an IRA for me, then the rest goes into our savings account (going to open up a CIT account now, thanks to you!). So happy that I found your website!

    1. That is so awesome!! I’m so glad do hear you are doing so well! And YES that Savings Builder account is absolutely amazing!!

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