Saving 50% of Our Income – How to Control Your Money
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I know. We sound ridiculous. We couldn’t believe it ourselves. But after thumbing through the classic compendium “The Tightwad Gazette” (yes, we are weird), and calculating our savings rate, we realized that it is quite high. After some quick math, we realized we are saving 50% of our income.
Say whaaaaa?
It sounds crazy. We have two kids, we have a house, we aren’t outlandishly wealthy or working in high-paying jobs. But thanks to living intentionally, we were able to put away over half our income in 2024. We spend only on what matters to us, and save the rest.
Here’s how we did it, and how you can too!
Most Important Necessity for Saving 50% of Income: Keep a Budget
Before you can save like crazy, you need a way to keep track of your money. We keep a spreadsheet – actually, 3 spreadsheets – to track our income and expenses.
This is commonly known as a budget.
I’m sorry. Many people don’t like the word “budget,” but it’s a necessary evil if you want to get control of your money.
Why 3 spreadsheets, and not just one? Here’s the breakdown:
- Our personal family finances.
- Noreen’s business account
- Our real estate account
This keeps everything organized when we are earning and spending. We don’t buy our children’s clothes on our real estate account. I don’t pay my modeling agent through our personal account. Our tenant’s rent check goes to the real estate account, not my modeling business account. Everything goes and comes from where it ought.
If you are house hackers, too, please keep a separate account for your real estate investing!
At the end of every month, I track our expenses and income in each budget, and then if there’s money to move to savings, I move it. It’s best to get it growing as soon as possible!
Related: 9 Best Budgeting Resources
Please note: we don’t just track what we spent and leave it there. We aggressively move every unspent penny per category in a “zero-based budget” strategy.
Where We Save
We have three major savings locations:
- Brokerage
- Retirement Accounts
- Kids’ Education
Brokerage (Thanks to House Hacking)
Five bucks says that one of your top 3 largest expenses every month is your housing. Rent, mortgage, whatever – this is often hovers at 30% of a household’s income.
We are house hackers. That means we rent out a portion of our home to someone else, and they pay us for it. The rent from our 2nd floor apartment currently covers 91% of our mortgage (principal + interest + property taxes).
Talk about a HUGE chunk of money saved!
Instead of shelling out over $2k per month for housing, we are saving that money in a brokerage. Big win.
Is there a way you can lower your housing costs? Take on a roommate? Rent our your driveway or shed? Move to a different spot in town?
See also:
- House Hacking Strategy – What It’s Really Like
- House Hacking Real Estate: 9 Important Questions to Ask Yourself
- House Hacking a Duplex: Pros & Cons to Make You Think
Retirement Accounts
This is the crockpot approach to saving 50 percent of your income. Are you ready?
Route 15% of your income straight to your retirement account.
If you work on a W-2 income via direct deposit, you can likely do this automatically by filling out a form with HR. Sometimes it’s a dollar amount, and sometimes a percentage, depending on their capabilities. Either way, make it so that the 15% does not ever go to your checking account.
This is a tactic from David Bach’s The Automatic Millionaire. (Please read it. It’s very smart).
If you don’t have direct deposit, do this manually when you receive your paycheck. Since you’re working with a monthly budget, you’ll do this with no problem!
Does 15% sound like a lot? Tough cookies. Find a way!
(Pssssttt… after a couple months, you won’t notice it.)
Our approach: we auto-save whenever possible. Some of our income comes in many shapes and sizes, so we also manually transfer some money every month.
Kids’ Education Savings
We are just starting to get the hang of this category. Heaven only knows what college will cost 15 years from now! We assume it will be better to have a few bucks set aside than not!
Wondering where to start? Play around with Ramsey Solutions’ College Calculator to estimate expenses for your family.
Feel free to join me at a bar afterwards so we can cry together from seeing those numbers.
Our approach: We have a dollar amount goal each month (currently $250 per kid). Once we hit it, we move on.
Side note: This might not pay for all of their education. However, we aren’t going to sacrifice our retirement margins for a college savings account. We want our grown kids to have parents with their financial ducks in a row. They don’t need the stress of mom and dad needing money help.
Even if that means they’ll have to work while obtaining their degree, we’re fine with it. We think it will be healthy for our students to have skin in the game on their tuition payments.
What We Don’t Spend On
Ok, now that you know where the money is going, here’s what we skip when saving 50% of our income.
Debt
We don’t carry debt outside of our mortgage.
No car loans.
Or credit cards.
No student loans.
Or personal loans.
No IRS debt.
Or construction loans.
NO DEBT.
Finis.
(If you’re carrying personal debts, the best day to pay them off was yesterday. They’re holding you back!! Imagine what you could do without having those payments every month!!)
Food Budget
The food category can get way out of hand very easily, am I right?
We try very, very hard to keep our food spending under control. For example, instead of a weekly restaurant night, we have a monthly restaurant night.
As for groceries, we budget $650/month for groceries for our family of four.
This is not a big number considering the amount of food our bottomless-pit toddler, our super-snacker preschooler, and their trash compactor parents consume.
I’ll detail how we keep this number so low in future posts.
By keeping this necessary spending under control, we’re able to save more!
Subscriptions
I know, I know, it’s low-hanging fruit. We don’t do online subscriptions.
Ok, not for very long, anyway.
If there’s something special, like the Olympics or Thanksgiving parade, we subscribe for one month, and cancel right away.
I dare you to total the monthly cost of your Netflix, Prime, Disney+, Paramount, ESPN, Hulu, etc…
Not to mention… cable?! Is anyone even still paying for cable?!
If you cancelled all of them and re-routed that money, how much could you save?
Entertainment
This is a category related to subscriptions. We don’t spend a ton of money on entertainment. Here’s why.
Firstly, our kids are still quite young, and an afternoon at a local park is all the entertainment they need. We got bit by the 1000 Hours Outside bug and it’s been incredibly healthy for us.
Secondly, we cherish our date nights as times to talk to each other rather than watch something else. At our current season in life, we just don’t spend very much money here.
Check out: Free Entertainment – 13 Fun Ideas for the Whole Family
Bills Bills Bills
Frequently, we check on things like our car insurance, internet, and cell phone plans to assess if we can get a better price.
Often, you can call and negotiate a lower rate. Seriously!!
Internet
Last year, our internet bill was about to increase from $55/month to $60/month.
I called and complained.
With some hocus-pocus involving a Disney+ subscription we never activated, the kind sales rep got us a plan at $40/month instead. Isn’t that wild?
Car insurance
For car insurance, once Derek’s office went hybrid post-pandemic, we realized our monthly mileage usage had greatly decreased.
We called up our car insurance provider and let them know we were driving quite a bit less. They lowered our rate!
Btw, we are a “One Car Family” – check out how it saves us a fortune.
Cell phone
Derek reassessed his cell phone, too.
He realized he just wasn’t using all of the giga-whatevers. So, he lowered his limit and cut the bill in half, from $30/month to $15/month.
Call them up, you never know what you’ll save!
Then, you can route that extra money to a nice brokerage instead of spending the difference.
Travel
We spent about $3,500 last year on travel.
We went as a family to Florida for a week, Maine for a week, and Lancaster for a weekend getaway. They weren’t lavish trips.
True, I envy friends’ inspiring trips to Iceland, Greece, and Italy on Instagram.
But, I know that curbing our lifestyle right now will result in success later. Plus, I’m not taking my little kids on an international excursion… I’m not that crazy.
We keep our travel budget under control by:
- staying with family or through Airbnb.
- using budget airlines.
- packing our lunches for a flight or road trip.
- making sure we can either prepare food or catch a hotel-free-breakfast on our trips.
The Key to Saving 50% of Income
This post has been all about saving 50% of your income.
We’ve done it by strategically budgeting and only spending money on things that matter to us.
What’s the key to all of this? Once you cut an expense, don’t spend the difference!
Once you finally pay off your car, turn that money toward a savings goal instead of lifestyle inflation.
When your kids no longer need daycare, route that money where you want it.
When you kick the subscriptions, send the money to your next savings goal!
Tell your money what to do and you, too, will be on your way to saving 50% of your income!
You may also like:
- Awesome Side Jobs to Pay off Student Loans: Proven Ways to Crush Your Debt
- Paying Extra on a Mortgage – Why & How to Get Ahead
- Best Ways to Save Money – 23 Practical Techniques
