Living on half of your income allows you to save the rest of your money for something specific. Many people choose to save 50% of their income for retirement purposes. It might sound like a lot of money to save every month, but there are ways to do it and leave yourself enough money to live.
Why Do You Want to Live on Half of Your Home Pay?
They either plan on saving as much money as possible to retire early (a movement called FIRE – Financial Independence Retire Early) or are running behind and need to catch up.
Some people were late to the game regarding finances and realised they were not where they needed to be for their retirement plans.
And some people like the idea of stockpiling money to have fun later. It is their ultimate lifetime money plan.
Whatever the reason behind the action, the purpose is to reign in the spending to build savings.
READ MORE: How to Live Well with Little
What Needs to Change to Save 50% of Your Income?
Some spending habits and frivolous spending must change to live on half your income. Commitment and mindset are top priority actions to get the job done. It is a good idea to set a time frame and get to work on your specific goals.
READ MORE: How to Simplify Your Life without Spending Money
Commitment
Saving 50% of your monthly income involves some commitment. Pay yourself first – as soon as your paycheck hits, your account is the best way to ensure these things get done before you forget or life happens, and the money disappears.
Set a specific goal and have automatic transfers move the money into a savings account.
Creating a time frame is another first step. We plan on doing this for one full year and then re-evaluating where we are.
Mindset
It would be best if you were in the right mindset to take on this challenge. You need to understand that the majority of the things you buy, you don’t need.
You will also need to find ways to cut back on paid daily living activities to fit your expenses into the new budget.
It all comes down to what is most important to you. I have some big goals; to own a Tiny House overlooking a lake and the woods, and to travel.
Simple Steps To Live on Half Your Income
Track Your Spending
Before saving half your income, you must know where your money goes. You will easily understand your spending by looking at your online banking or receipts. This will make it easier to see where the spending holes are. At this point, being aware of your spending can be eye-opening.
Get Out of Debt
You can’t reach big personal finance goals with debt hanging over your head. First things first, knock that debt out. Follow the baby steps and take care of that once and for all, never to return. Things like student loans and credit card debt or even mortgage payments if you are towards the end of your mortgage period.
Create a Budget
Now that you have no debt and know how much you are spending, you can create a budget. There are a lot of resources out there for budgeting.
You can go old school and write your budget in a planner or spreadsheet or use an app. It’s all personal preference. I prefer using Notion.
The budget will keep you on track to know when you have reached your limits in spending and give you a good picture of how you are doing with savings.
Remember to cover all the basics in your budget, including insurance premiums, health insurance, public transportation, car payments, phone bills, and other essential expenses you cannot avoid.
Meal Plan
I’m an advocate of meal planning and I tend to plan meals from what I already have. I batch-cook dinners for 3-4 days, twice a week. This way, we always have healthy, home-cooked and nourishing meals in the fridge no matter how busy we may be.
Also, because we have an under-the-counter fridge with a small freezer box, I prefer to cook with fresh ingredients as much as I can, I buy groceries twice a week.
Lower Your Food Budget
It’s pretty easy to do. Buy where they have the best prices. I am a big fan of Aldi. They have the best prices, and I’ve done the research. I will buy a few staples from M&S as the quality and taste is better.
With all the stores going with online ordering – both pickup and delivery, it’s easy to see all the prices online and decide who has the best prices.
Consider a plant-based diet. You could save at least half of your grocery budget this way. If you’ve got a Farmer’s Market, seasonal produce is cheaper and more flavoursome.
READ MORE: The 50/30/20 Spending Plan
Turn Down The Hot Water
Turn down your water heater so it’s as hot as you want when on full blast. That way, the hot water isn’t being heated for no reason.
Better than this, purchase an on-demand water heater. The water is heated as you need it. You are not heating an entire water tank just to let it sit there and reheat. On-demand water heaters are not cheap. But they will save you lots of money over time in the long run.
Cook From Scratch
Instead of buying a pre-made lasagna, make your own for less than £5. Instead of ordering a £20 pizza, make your own for £2-3 or buy a frozen one for £5.
Lower Housing Costs
During my 16 years of living in the UK, we have downsized each time we moved ➡️ from a 2-bed house with a utility room and a garden to a 1-bed loft apartment. I haven’t had a bedroom for the last couple of years, I felt I didn’t need it – for me, it was just a waste of space and room. The set-up that has worked for me is turning the living room into a multi-functional space:
- Entrance/hallway
- Dining room
- Living room
- Bedroom
- Office
You don’t need nearly the amount of room you think you do. Remember, tiny house living is trending.
Buy Multi-Use Items
Discover new uses for items or purchase items that can be used for more than one thing. A nightstand with drawers can hold socks and a lamp.
A bench with a lift-off lid can be used to put your shoes on and store your shoes.
Simple things like mason jars can freeze leftover soup, hold cotton balls in the bathroom, or display buttons in a sewing room.
Using items for more than one thing can form frugal habits and allow you to get a little closer to saving half your income.
For example, I use my bed (a single bed) as a sofa during the day and transform it into my bed come nighttime (swipe to see the 2nd photo).
Cut Unnecessary Spending
This means being 100% aware of what you’re spending your money on. Look at bank account statements and receipts to determine where the money goes. After figuring out how to spend your money, you can decide where to cut back.
READ MORE: 30-Day No-Spend Challenge
Make a Grocery List
One of my favourite money-saving tips. Studies show that you will spend less money when you make a list and stick to it. It’s just the way it is. Making a list will reduce impulse buys and prepare you for the week or month ahead.
Substitute With Cheaper Alternatives
Does the store-brand corn taste as good as the original brand? Give it a try. For example, I buy my ketchup from M&S, it’s only £1 and the flavour, colour and texture are way better than Heinz which is £2-3 for the same sized bottle.
This method could also apply to clothes, cars, pens, coffee, hairspray, and toilet paper. Consider the cheaper alternative.
IMPORTANT: Do not put yourself in danger or make yourself sick, but consider that there might be a more affordable way to go.
Other Tips on How to Save 50% of Your Income
With the tips above, you are already on the right track, but there are more ways to get those long-term goals of saving 50% of your income.
Buy in Bulk
I love the idea of bulk purchases, but as it’s just Khushi & me, and we live in a small apartment – we don’t have the need or space for bulk products.
It’s essential to know your best prices. Sometimes, items are not cheaper in bulk. Knowing how much you are willing to spend is a must.
Make More Money
Maybe it’s a mindset thing. Perhaps it’s just a fact. If you want to have a goal of saving 50% of your income, yet your expenses eat up 70%, maybe you need to make more money. It might not need to be forever, just until goals are met. Like the side hustle to be debt-free, it can become a means to an end for retirement and savings goals.
Negotiate the Costs of Services
You can negotiate or call around other insurance providers a few times a year to lower those costs.
Cancel Cable
More and more people are cutting the cord on cable and finding alternatives. But keep in mind that those subscription channels can add up as well. You could pay just as much as you were with cable after Netflix, Hulu, Disney Plus, and NFL Game Pass.
We cancelled our cable a decade ago. I am more than happy with YouTube, while Khushi uses Netflix. We’re using family & friend’s Disney & Amazon Prime account. Up until a couple of months ago, we had a DVD player and a DVD collection. As I don’t own a TV anymore, I gave it all away and decided to buy my favourite movies on YouTube, this way I can watch them on any device – even when I am travelling.
Keep Savings in a Separate Savings Account
Not only in a separate account but also in a separate bank.
Invest
Learning how to invest is a substantial part of saving half your money. Putting 50% of your income in a piggy bank is insufficient. You must know how to grow that money and make it work.
Hiring a trusted financial planner who can guide you through reaching your goals is an element of this challenge you cannot go without – unless you’re interested in this enough and have some experience to take charge of your portfolio.
Use Vouchers
You can find vouchers for many things, from groceries to toothpaste, shampoo, laundry soap, books, medicine etc.
Cancel Memberships
How many of us are probably paying for things we are not using? Not only those gym memberships everyone finds so hard to cancel but all the other little things.
The only active membership I currently have is Spotify and I don’t even use it that much. But as it’s a family plan, everyone else uses it more than I do, but I am paying for it, so I’ve been thinking about giving everyone a month’s notice and cancelling the membership.
Ask for Discounts
Always ask for discounts and coupon codes. If you are following websites and bloggers and they have a product, ask for a coupon code. Sometimes they say no. But ask anyway.
Changes to Make to Save at Least Half Your Income
Delete Card Numbers Online
Both my phone and my computer have this great feature. They remember my debit card for me. Except it’s not such a great feature. It makes it way too easy to impulse buy.
Keep Food Stockpile
Having enough food can help in many situations, but it can also save you money by being able to replenish when there’s a sale.
I love a good stockpile of our food staples. Not only do I always feel like I have enough to feed my family, but I also have enough wiggle room to wait until my favourite products go on sale to restock.
Remember to buy what you eat and eat what you store.
Unsubscribe From Shopping Emails
Do not let them send you the sales emails. It can lead us directly into temptation, especially if we have a weak spot. Every time you open your email. Unsubscribe. This is something I do intentionally.
Automate Savings
Have your retirement removed from your check before it even hits your account. Pay yourself first. The same goes for emergency funds, too. There is something to be said for out of sight and out of mind when saving money.
Buy Cheap Foods
Food is expensive. It’s a tricky balance between cheap eating and healthy eating. Organic is best, but there is a balance. Because when you have significant financial goals, you have to find that balance. Know what you should buy organic and non-GNO and what doesn’t matter.
I buy seasonal produce from the Farmer’s Market as it’s affordable, healthy, full of flavour and most importantly, in season.
Automate Bill Pay
This is such a money saver. Pick those bills that allow direct debit and set it up. Many companies give us a discount for paying through direct debit. Then, there are no worries about late fees added to the monthly bill because you accidentally forgot to pay it.
Walk Instead of Drive
I don’t own a car, hence I walk mostly everywhere. When the distance is longer than an hour, I do opt for public transport.
Utilise the Library and YouTube
Instead of buying the book, borrow it. Instead of paying for a streaming service, watch YouTube. Instead of paying for a concert at a stadium, find music in the park. Find frugal and free things to do to occupy your downtime. Everyone needs downtime.
Consider a Spending Freeze
A spending freeze is a set amount of time decided ahead of time that you stop spending any money. It could be a weekend, week, month, or year. Set the ground rules and decide what you get to spend money on and what is a hard no.
Create an environment that is conducive to success. If you decide restaurants are off-limits, search for meals from your favourite places to try at home.
Most of us could take a break from clothes, shoes, accessories, and home decor.
Take a peak at past purchases and decide the average money spent. Then, put that into savings.
Final Thoughts on How to Save 50% of Your Income…
Those are the ideas that I have for ways to save half your income. It’s a pretty big goal to set, yet it’s rewarding.
First and foremost, you must get out of debt. This life is not accessible if you owe money.
Save. Save, save, save. Save when you think you should spend. Invest instead of buying new boots.
Then, keep your eye on the prize. Create a simple life without comparing yours to others, and understand why you are doing this. Remind yourself often how much you want to live by the beach or travel the world.
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