Simple Way to Save 50% of Your Income

That’s right. Save half of your income. It may sound crazy but I assure you that it is not. The following post will show you how to save 50% of your income while not sacrificing anything that matters (happiness, ethics, sanity, etc.).

What to Do if You’re Struggling to Save Any Money (Let Alone Save 50%)

If you’re struggling to save money right now, you have a simple choice to make: do you want to earn more money or spend less money? But spending less money has its limitations. There’s only so much you can save. On the other hand, your earning power is infinite. So if the idea of giving up your morning latte is painful, you don’t have to give it up. You don’t have to become extremely frugal to save 50%. In fact, you don’t have to become frugal at all to save 50%. Think about it like this. Grow your income to $100,000. Then you can spend $50,000 per year while still saving 50% of your income. Easier said than done, of course, but it is doable.

How to Create a Savings Plan

What I’d like for you to do is write down exactly how much money you want to spend in a given month. Don’t focus on saving money right now. Simply write down what you’d like to spend money on: travel, groceries, mortgage, date nights, Hulu Plus, automatic car washes, contact lenses, whatever. How much money will each of those areas cost you per month? No need to make these categories look cheaper than they are – it’s fine.

Alright, now that you have each item listed with a price assigned, create a total. How much money do you want to spend each month? $1,000? $2,500? $7.000? Now double that number. That’s how much you have to earn each month to meet both your spending and saving goals. The 50% split. If you want to blow $100,000 a year? Earn $200,000. Again, easier said than done but it is possible.

Why 50% Is the Magic Amount

The beauty of saving 50% is it’s just a percentage. You can always earn more money. If you’re struggling to live on 50%, simply make more money. Just remember that for every $100 extra you make per month, you should only spend $50. And keep in mind, the other $50 is still yours. But it’s helping you in a more passive way. It’s earning you more dollars. You’re securing the future of yourself and even those charities and people you love. Don’t look at this as having to put away 50% of your income. Think of it as simply dividing 50% of your income for today and 50% for tomorrow.

It’s also magical how this works. It’s such a perfect divide between focusing on the moment yet saving for tomorrow. And it’s easy to remember too. Some financial advisers will have you focusing on saving an odd ball percentage like 10%, 15&, etc. But most people are bad at math. When you get a raise at work – it’s much simpler to readjust your savings plan for 50% than 15%. Even if you can quickly do the math it’s harder to envision the number of what you’ll save and what you’ll spend with a number like 15%. And with 50%… it’s a perfect balance between focus on today (YOLO, carpe diem, etc.) and tomorrow.

What to Do with the 50% You’ll Save

I briefly touched on this already but it needs further explaining. After all, it is crucial you understand why you are saving 50%. It’s a big number and you need to stay motivated.

The 50% will go towards your future. The first place the money will go is into an emergency fund. That can take shape in many forms. Most people just keep about 6 months’ worth of expenses in a savings account. So if your annual expenses are $30,000, you’ll need $15,000 sitting idle in a savings account to sleep well at night. Or you may choose to go with a bigger number – like 9 months’ worth of expenses. Whatever makes you feel comfortable.

Next, you’ll want to put money into your retirement accounts. If your employer matches through the 401(k) program, that’s where you should go first. Contribute up to the matching max. Then you’re free to put further retirement savings into other retirement accounts such as a Roth IRA. This is how you save for the future. And if this feels selfish to you for any reason – it’s not. A lot of parents, for instance, focus on spending money on their kids’ college before their own retirement. That sounds admirable but what happens when the parents don’t have money to support themselves? Then the kids usually step in and any benefits you gave them will be erased. What’s usually best is that everyone puts their own basic needs first. There’s a saying… ‘If everyone swept their own porch, the world would be a beautiful place.’

Once you max out your retirement accounts (or if you’re planning for an early retirement and they already have enough) then you can look into other forms of investing. These include taxable investment accounts or even investing in a business of your own.

Putting 50% towards your future will get harder as you begin to earn more income. That’s the beautiful thing about using a percentage-based budget. You’re never at a set limit. There’s always room to expand and, to me, that’s very exciting! Because, of course, when you increase your savings, you can also increase your spending.

How to Spend 50% of Your Income

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Some people really love percentage-based budgets. And one reason may be because it’s a way to happily reward yourself will a bump in lifestyle. Because every extra dollar you put towards a sports car, vacation home, wine collection, shoe closet, etc. is an extra dollar you’re also putting towards your future. There’s a balance and you’ll never lose.

Saving 50% Takes Discipline and Constant Tweaks

It’s something that needs monitored. With most of us, either our income or our expenses fluctuate (or both) so somewhat of a budget is in order for making sure you stay motivated to save 50%.

For me, I’ve found great enjoyment in saving such a large percentage of my income. But it also gives me the opportunity to buy nicer things than I’ve had in the past. I grew up with a pretty low standard of living. In college, that standard of living didn’t change much. But now I have the ability to up my luxuries while also upping the amount of my income I save. And I gotta say… it’s a great feeling.

Will you save 50%?

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