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Did I save half my income?

Did I save half my income?

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Did I save half my income?

Did I save half my income?

Earlier this year, I vowed to save half my income. This was inspired by Sam, who wrote a really great strategy for how to retire early and never work again.

I wanted to know — have I done that? And further, how do I know if I have?

My first thought is that it’s probably a good thing that I don’t know, right off the top of my head, whether I’ve been successful, since I automate everything, and the day after payday, my bank account is much smaller. So, there’s never very much more than an emergency fund in my easy-to-access savings account.

I’m okay with this. I feel like a fat savings account is a luxury for people who are free of liabilities. And I am not, yet. I am, however, earning interest when I pay down the things that charge me interest. Interest saved is interest earned, right?

Steps to see if I save half my income:

  1. Set a time. For my purposes, I’ll use 2012.
  2. Figure out how much I made. My income is slightly variable, so thank goodness for software! After tax, in 2012, I took home $33,100.
  3. Figure out how much I’ve saved. In 2012, I contributed $4425 to my IRA, paid $5497 toward my student loan, and $1911 toward my car loan. I also paid off my credit card once and for all, which was $2700 at the beginning of this year. I have an emergency fund of $1000. Let’s count that, too. Why not? That adds up to $15,533.
  4. Do the math. According to division, I’ve saved 47% of my after-tax income in 2012.
  5. Pat myself on the back for a job well done.

Certainly, I can do better. The real challenge comes this year, when I add a mortgage and have whatever home-related unexpected-but-expected costs. Hopefully, with increased costs comes increased income.

Oddly, this calculation was harder than expected. I guess it would be easy if I could just look at my savings account and say, “oh, right, there’s half of my annual paycheck right there in savings,” but that is a long way from happening.

Why should we have much of anything in savings?

I have an emergency buffer, and that’s it. Why? Because every time I make a payment on a loan that is charging me interest, I am earning interest on that loan. Remember the cliche, “a penny saved is a penny earned?” It’s true. But what’s more true is that every time I make a payment on my student loan, I’m earning 4.75% interest.

So, it makes sense to throw anything over a reasonable savings cushion ($1000 minimum, 12 months expenses maximum) toward the things that are earning interest on my money.

Here’s the point of this transparency: I don’t think I make all that much money. Sure, I’m comfortable, but $33,000 isn’t a salary for anyone to envy. (Like I said before, it’s not enough to build a net worth that makes anyone want to put a hit out on me!)

But you know what? I did it.

And if I did it, then guess what?

You can too.

No excuses.

It feels good, really good, to save nearly half of my income.

In 2013, I’ll save 50%. I mean it!

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68 Comments

  1. MakingSenseofCents
    Dec 12, 2012 @ 05:21:49

    I think you did great! Here' to an even better 2013. :)

    Reply

  2. plantingourpennies
    Dec 12, 2012 @ 05:39:14

    That's fabulous! You're proving that it can be done at any income level. You don't need to make the big bucks to do it. =) Congrats on a job well done.

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:01:26

      Thanks! Glad you got my point — I felt a little funny disclosing the whole salary situation, but why should I? I think high income earners have every right to hide their true numbers, but I think it\’s okay to admit that at my income level, I can save!

      Reply

  3. Greg@ClubThrifty
    Dec 12, 2012 @ 06:19:48

    Great job! Saving 47% of your income is nothing to sneeze at!!! It will definitely be harder with a mortgage, so I'm interested to see how you do!!! Good luck my friend!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:01:59

      Thanks, Greg! I\’m interested too :) sometimes it feels a little out of my control, but hopefully that\’s just a feeling.

      Reply

  4. moneybeagle
    Dec 12, 2012 @ 06:22:29

    With fixed costs like a mortgage and such, it's hard to back into that for me without selling our house or other drastic measures. We have been increasing our retirement contributions even without an income increase for several years, which I'm happy with. Good work!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:04:41

      I\’m very interested to see how the numbers will change once I have a mortgage. I\’m guessing they\’ll be much lower, but a girl\’s gotta have goals, right?

      Reply

  5. Holly@ClubThrifty
    Dec 12, 2012 @ 06:25:13

    Sounds awesome! I think you got close enough at 47%. Good job!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:04:52

      Thanks, Holly! :)

      Reply

  6. Yakezie (@Yakezie)
    Dec 12, 2012 @ 06:51:37

    Wow, saving 47% of your after tax income on 33k is stupendous!

    For next year, hopefully the mortgage won’t be much more than equivalent rent, and I guess you can consider the principal pay down as savings each month. But obviously it is not liquid.

    Either way, sounds like a good goal for 2013 again. It’s like a game!

    S

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:09:42

      So glad you saw this, Sam! It\’s definitely a game — and though I didn\’t QUITE make it, it\’s not a game I\’m losing, by any stretch.

      Reply

  7. Jordann
    Dec 12, 2012 @ 06:56:51

    Wow that's pretty darn awesome! I think saving half your income is a great goal. Good job!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:16:32

      Thanks, Jordann!

      Reply

  8. Kurt @MoneyCounselor
    Dec 12, 2012 @ 07:34:20

    Congrats Kathleen! And interest saved (unless it's tax-deductible mortgage interest) is even better than interest earned because you pay income tax on interest earned!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:17:11

      Thank you, Kurt — you know, I didn\’t think of it like that, but you\’re right! I look forward to the stage in my life where I\’m paying income tax on interest earned. :)

      Reply

  9. Budget & the Beach
    Dec 12, 2012 @ 07:38:41

    Ambitious! I don't think I could..and I'm not making excuses. OK I should say under my current rent expenses and income I couldn't. If circumstances were to change perhaps. I think it's a great goal as long as you aren't a hermit, because then will it really have been worth it? Obviously I read your blog and know you aren't, so you're doing something right!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:27:16

      Ha you are so right — but I\’m a lame-o, and I stay in a lot. Is that because I don\’t want to pay? Maybe, but I think I\’m genetically part hermit.

      Reply

  10. Grayson@Debt RoundUp
    Dec 12, 2012 @ 07:52:46

    I wish I would be able to do that, but I have too many fixed expenditures, especially with a baby coming within a week or so. I do try to save as much as I can, but 50% would be a massive stretch. Congrats to you for achieving close to the 50%.

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:27:50

      A WEEK!?!? Congratulations! I know that it would be really hard if I had any responsibilities other than a house plant.

      Reply

  11. Pamela
    Dec 12, 2012 @ 08:27:12

    Good for you. And thanks for the transparency.

    When I'm working with first home buyers, Income has little to do with saving ability. I know people with $100,000 that save less than people on disability. The big thing is deciding to do it.

    You better believe I'll be using you as an example in my next home buyer's class.

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:38:19

      HA! Awesome, Pamela! Let me know how else I can help.

      Reply

  12. krantcents
    Dec 12, 2012 @ 08:40:49

    This shows what can be accomplished if you are determined enough. I believe even minimum wage earners can save. It may not be much , but it is a start. Once you get in the habit of saving you stick with it. Congratulations!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:38:45

      Thank you, Larry! I am more proud of this than anything else I did this year.

      Reply

  13. John S @ Frugal Rules
    Dec 12, 2012 @ 09:37:25

    Awesome job Kathleen! That's great work! It just goes to show you that if you're committed to accomplishing then they can do pretty much anything.

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 09:39:58

      Thanks, John! :)

      Reply

  14. therandompath
    Dec 12, 2012 @ 09:47:00

    That is so awesome Kathleen, that you were able to save that much! You are a rockstar :)

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 10:20:32

      Thank you! I kind of feel like one.

      Reply

  15. My Money Design
    Dec 12, 2012 @ 09:52:31

    First of all, that is a great accomplishment!!! No question there. But can you count debt payment to your car and student loan as "saving" part of your income (I didn't read Sam's post, so please forgive me if he already addressed this in his definition of saving half your income…)

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 10:22:31

      I can since it has interest associated with it. Every payment I make on my student loan is like a 4.75 percent savings account!

      Reply

  16. Caitlin
    Dec 12, 2012 @ 11:34:29

    This post is really aspiring. Similar to you, I am hoping to save a paycheck each month in 2013, which should be slightly above 50% since it will be after 401k contribution. Can't wait to see what you accomplish in 2013!

    Reply

  17. Living Debt Free Rocks!
    Dec 12, 2012 @ 12:25:51

    Seriously you did a great job! I also have the objective in 2013 is to save minimum 50% of my after tax income.

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 12:56:44

      Let\’s do it together!

      Reply

  18. Newlyweds ona Budget
    Dec 12, 2012 @ 14:35:01

    I'm flabbergasted that you can live on that amount!! Do you live in a shoebox and I don't know about it???

    haha, in all honestly, that is something to be majorly proud of!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 15:03:16

      not a shoebox, a basement apartment! :)

      Reply

  19. Pauline
    Dec 12, 2012 @ 14:54:34

    Bravo! It can certainly be done on a normal income, no need for six figures to achieve financial independence.

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 15:03:44

      agree! although it\’s hard to define financial independence.

      Reply

  20. Tb at Bluecollar
    Dec 12, 2012 @ 15:24:01

    No excuses. I agree and like that statement. No excuses. People are good at excuses but not good at actually doing. GREAT JOB on saving that much money!! Here's a question, when peopel talk about saving a certain amount of their income, do they mean before or after taxes? You did after taxes, but is that what everyone does? I think I'd like my wife an dme to see how we could do on something like this.

    Reply

    • Frugal Portland
      Dec 13, 2012 @ 09:42:52

      I think \”after taxes\” is cheating a little bit, because there\’s no way I could save as much of my pre-tax income as I\’d like, since a % comes off the top! It\’s better, at first, to track how much of your after tax money you are able to save because you are in charge of that. You can\’t blame Uncle Sam or Obama for getting in the way of your savings if you use the after-tax plan.

      Reply

  21. momoneymohouses
    Dec 12, 2012 @ 16:27:21

    I also don't make a salary for many (or any) people to envy, but I always think that shouldn't be an excuse to not save, save, save! For the past couple years I've saved about 40% of income, and I hope each year I continue to earn more, I'll save more too.

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 21:32:25

      Amen, sister!

      Reply

  22. 1stMillionisHardest
    Dec 12, 2012 @ 19:00:35

    Awesome job! I just set the same goal of saving half my income for next year. If I can write a post next December saying I saved 47% I'm going to be thrilled!

    Reply

    • Frugal Portland
      Dec 12, 2012 @ 21:32:09

      Thank you! Let\’s check in with each other in a year.

      Reply

  23. talesfromthescaffolding
    Dec 13, 2012 @ 01:34:54

    I’ve actually been wondering for some time how much you actually make in a year, because you seem to be able to pay down your debts Sooooo much faster than me. I assumed we had similar costs of living and incomes, and didn’t know a polite way to ask. Turns out, you make about twice as much as me in a year. :) Now I don’t feel quite so guilty about living at home and still making much smaller dents in my debts…

    Reply

    • Frugal Portland
      Dec 13, 2012 @ 09:43:37

      I would have told you! :) No secrets, here, and no judging either! We all have to make our way, don\’t we? Also, I have YEARS on you, girlfriend.

      Reply

  24. DC@Young Adult Money
    Dec 13, 2012 @ 05:25:17

    Very nice job! I want to set some ambitious savings goals for next year and every time I read a story about someone succeeding at a year-long goal I get excited!

    Reply

    • Frugal Portland
      Dec 13, 2012 @ 09:44:09

      Let\’s keep track of each other!

      Reply

  25. Victor Tribunsky
    Dec 13, 2012 @ 07:57:32

    Your life could end at any moment. Is the saving the reason why you were born?!

    Reply

    • Frugal Portland
      Dec 13, 2012 @ 09:44:43

      You\’re right — and if I die, then I\’d rather not leave my loved ones with debt.

      Reply

  26. Joe
    Dec 13, 2012 @ 08:36:38

    Congratulation! Great job on saving almost 50%. That's probably more than 99% of what most families can do. I think we saved more than 50% in 2012, but 2013 is going to change. My income dropped tremendously so I doubt we can save anything close to that especially if we go to farmer markets. :)

    Reply

    • Frugal Portland
      Dec 13, 2012 @ 09:45:07

      you stop it with the farmers market hate, mister! ;)

      Reply

  27. Brittany
    Dec 13, 2012 @ 10:00:41

    Nicely done!! I have not yet figured out what my savings goal will be next year, but I do have $300 a month budgeted to go to savings, but I'd like to do more. Just gotta take the time to think about it. Nicely done! ($300 to go into one savings account, not counting my side hustle money that pays for my trips, blah blah blah.)

    Reply

    • Frugal Portland
      Dec 13, 2012 @ 10:35:38

      Exciting! That\’ll grow faster than you think.

      Reply

  28. Lena @ WhatMommyDoes
    Dec 13, 2012 @ 10:38:38

    Wow! What an accomplishment. You are a testament to the fact that you really can live well on any income if you adjust your attitude and expectations. I know a family of three who lives just fine on $35k and another who struggles on $55k. Then I have another who is miserable on $100k and know another family who lives very comfortably on $80k. The differences are clear to me: attitude toward money and its role in life.

    Reply

    • Frugal Portland
      Dec 13, 2012 @ 12:04:26

      Yep — attitude IS everything.

      Reply

  29. Happy_Homeowner
    Dec 13, 2012 @ 14:23:55

    Holy guacamole…you, my friend, are a rockstar. Freakin' phenomenal….great work and keep it up in '13!

    Reply

    • Frugal Portland
      Dec 14, 2012 @ 09:01:16

      Thanks! :)

      Reply

  30. eemusings
    Dec 13, 2012 @ 15:03:54

    Congrats! I'll admit while I tracked my spending very closely last year, this year I don't really know how much I saved. I mean, I *did* save, I just haven't been tallying it up as I go, though I have been keeping an eye on progress toward various saving goals.

    Reply

    • Frugal Portland
      Dec 14, 2012 @ 09:01:03

      I didn\’t keep track either — I just noticed it recently!

      Reply

  31. seedebtrun
    Dec 13, 2012 @ 17:35:36

    You are just totally slaying it this year, Kathleen. Very, very impressive. I like how you think about your interest payments as well.. It makes far more sense to take out your debt and start hacking those high interest rates, than it does to drop money into savings..

    jefferson

    Reply

    • Frugal Portland
      Dec 14, 2012 @ 09:00:39

      Thanks, Jeff! Here\’s to more savings!

      Reply

  32. Ian
    Dec 13, 2012 @ 19:09:46

    Wow! That's great! I'm getting my saving rate up there but you are blowing me away.

    Reply

    • Frugal Portland
      Dec 14, 2012 @ 08:59:53

      Thanks, Ian. Nice to meet you!

      Reply

  33. Paula / affordanything
    Dec 13, 2012 @ 20:25:09

    That rocks!! Nice job.

    Reply

    • Frugal Portland
      Dec 14, 2012 @ 08:59:10

      hey thanks, Paula!

      Reply

  34. mbhunter
    Dec 13, 2012 @ 20:48:32

    Wow. I remember when I was able to save a whole lot more than I do now, but 47% is monster.

    Reply

  35. Kim@Eyesonthedollar
    Dec 16, 2012 @ 14:31:42

    That is very exciting. I love the no excuses. No excuses for me in 2013 for sure!

    Reply

  36. kimberly
    Jan 21, 2014 @ 12:54:52

    am i really the only one lost here
    paying down credit cards and auto loans isnt savings
    the money you put into a retirement fund – you saved that money
    everything else is bills paid

    Reply

  37. [BLOCKED BY STBV] Did I Save Half My Income in 2013?
    Jan 27, 2014 @ 06:24:30

    […] which doesn’t sound like much, but is nearly $20,000 more than I made in 2012. Take a look at this post to see my progress saving half last […]

    Reply

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