Before I started blogging, I thought a good percentage to save each month was anywhere from 10% to 20%. I have even read an article where a “finance expert” recommended 5% for retirement savings because they said it was good enough.
Now that I look back on those figures, that is just not nearly enough.
However, that’s what many news articles will tell you. They will tell you that anywhere from 5% to 20% is all you really need. That might work for some, but that’s just not good enough for me.
Recently, I was talking to someone who told me that they save around 85% of their after-tax income each month. I thought that was absolutely insane, but I was a little jealous.
This person goes a little to the extreme in order to save this crazy amount of money each month, but they are happy and that’s all that matters, right?
Right now, we save around 60% of our income. That amount could be a little bit higher but we recently had our wedding (and shoveled a lot of our money towards that), we have been traveling more (we have bought a fair amount of camping and hiking equipment in the past 2 months), and a lot of my business income each month goes towards taxes.
Here are different ways to save 50% or more of your income:
Make more money.
Making more money can really help you reach an income percentage goal of over 50%. This is because there is usually only so much money you can save, but the amount of money you can make is endless.
You could work a part-time job, a full-time job, multiple jobs, start a business, freelance, and so on. You could also search for passive income and bring in more money with minimal effort.
There are so many things you can do out there to try to make more money.
I recommend reading my article from the other day Would You Rather Work For Less Money Or More Money? I know of a few finance bloggers who have worked or are working jobs that pay extremely well (but are not jobs that they love), so that they can retire in their 30s. Yes, it’s extreme, but every person is different.
Lower your budget.
Okay, one of the reasons for why I am able to save so much money each month is because of the amount of money I make. I am not going to try to hide that.
However, just because you make less money does not mean that you can’t save money as well.
The person who I mentioned above who saves 85% of their income makes around $3,000 a month. Yes, so that means they spend $450 a month. I know this isn’t possible for everyone, but if this person can cut their budget then I’m sure others can save more than 20% of their income.
There are many different expenses that you can probably cut out of your budget or at least lower. Just because you are lowering your budget doesn’t mean that you are going to hate life.
Some expenses you can lower or ways to save money include the below. Like I said, everything isn’t for everyone, but even a small change can help you out.
- ATM fees. Why do people do this to themselves?
- TV. Cut your cable, satellite, etc. Even go as far to go without Netflix or Hulu.
- Restaurant spending. Start eating at home more! Become an amazing at-home chef and make your family love your new found skills
- Bring your lunch to work. When I had my day job, I always brought my lunch. This was to save money, but also because I hated wasting most of my lunch hour driving somewhere to get food.
- Pay bills on time. The goal here is to try to avoid any late fees.
- Shop around for insurance. This includes health insurance, car insurance, life insurance, home insurance and so on. Insurance pricing can vary significantly from one company to the next. When we were shopping for car insurance last, we found that our old company wanted something like $205 to insure one car for one month, whereas the new company we have now charges $50 a month for the same exact coverage. INSANE!
- Fuel savings. Combine your car trips, drive more efficiently, get a fuel efficient car, etc.
- Trade in your car for a cheaper one. For us, we are car people. Cars are one of our splurges. However, if you only have a nice car to keep up with the Joneses, then you might want to get rid of it and get something that makes more sense.
- Live in a cheaper home. I’m not saying you need to go live in a box, but if you live in a McMansion then you may want to think about a smaller home. This way you can save money on utility bills and your mortgage payment.
- Learn to have more frugal fun. We don’t spend anywhere near the same amount of money on entertainment as we used to. There are plenty of ways to have frugal fun.
- Cut your travel budget. There are plenty of ways to travel on a budget. One way is to start earning credit card rewards. I like the Barclaycard.
- Lower your cell phone bill. Instead of paying the $150 or more that you spend on your cell phone bill, there are companies out there like Republic Wireless that offer cell phone service starting at $5. YES, I SAID $5! If you use my Republic Wireless affiliate link, you can even get $20 off their already super cheap prices.
I spend less money than I used to and I am happier than ever.
Are you trying to save 50% or more of your income? Why or why not? What is your savings rate right now?
What are you doing to reach your goal?
Image via Flickr by Sheila Sund