Did I save half my income?

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!


  1. plantingourpennies says

    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.

    • Frugal Portland says

      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!

    • Frugal Portland says

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

  2. moneybeagle says

    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!

    • Frugal Portland says

      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?

  3. says

    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!


    • Frugal Portland says

      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.

    • Frugal Portland says

      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. :)

  4. Budget & the Beach says

    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!

    • Frugal Portland says

      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.

  5. says

    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%.

    • Frugal Portland says

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

  6. says

    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.

  7. says

    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!

  8. John S @ Frugal Rules says

    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.

  9. says

    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…)

    • Frugal Portland says

      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!

  10. Caitlin says

    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!

  11. Living Debt Free Rocks! says

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

  12. says

    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.

    • Frugal Portland says

      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.

  13. momoneymohouses says

    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.

  14. says

    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…

    • Frugal Portland says

      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.

  15. says

    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. :)

  16. says

    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.)

  17. Lena @ WhatMommyDoes says

    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.

  18. eemusings says

    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.

  19. seedebtrun says

    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..


  20. kimberly says

    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


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