Last month I was excited to announce my goal to save at least 50% of my monthly take-home income by the end of this year. I understand that it’s easier said than done. But don’t worry, I’m going to share every detail, every success, and every setback right here on Frugal Portland.
The first step toward saving half of my income would be to create a new budget and determine how much I’ll have to live off when I start saving half. I’d imagine that it would be easier to keep half when you make a lot of money. If you don’t make that much, it’s still not impossible but a little trickier to pull off.
I currently earn a very modest salary, and while I’m working on increasing my income, I’d still like to be realistic and work with what I have so far. So far, saving half of my income would require me only to have $1500/month to cover my living expenses since I’m bringing home around $3000/month between my day job and side hustles.
It doesn’t sound like much (I’m currently spending more than $1500/month), but I’m confident I can make it work.
It All Starts With Housing
I’m a big fan of keeping your housing costs low. A good rule of thumb is never to let your living expenses exceed 30% of your income. Right now, my living expenses are around 15% of my income, and I love it. Since I currently rent, I’m drawn to affordable but beautiful areas that offer reasonable prices for their apartments.
I don’t believe the common myth that the more you spend on housing, the more value you get or the better your home is. I’m perfectly fine with driving an extra 10 minutes to get to the mall instead of having to pay extra to live closer to it. As long as the landlord is professional and prompt with fixing any issues, I don’t mind.
Since I split housing costs with my boyfriend, I currently pay $315/month for our 850 square foot two-bedroom apartment. Soon we will be moving though, and I expect my new rent to be about $525, which is still doable. When we move, we will be about 20 minutes west of my job. It’s funny to point out that if I moved closer to my job – preferably 5 or 10 minutes away – we would be expected to pay about $1500-2000 to rent a 2-bedroom apartment. Both neighborhoods are fairly similar with the same amenities and benefits, but it’s interesting how much location matters in terms of cost. When we buy a house eventually, I don’t expect my portion of the mortgage to exceed $800.
Bills, Bills, Bills
Utility bills, insurance, auto expenses, and household expenses can all add up. I save money in this department by setting a strict budget and being very conscious of my spending. My ultimate goal is to keep our electric bill at $80/month. Since no one is home during the daytime, we don’t leave on lights, the television, or the air/heat.
I shop around for lower insurance rates every year and if I didn’t have any auto or health incidents throughout the year, I believe I deserve a discount whether the insurance company wants to grant me one or not. I’m not that loyal when it comes to insurance companies so if someone else can offer me a lower rate and a better plan; I’ll jump ship in a heartbeat.
There are plenty of ways to cut household expenses like making your cleaners, using coupons, and just maintaining your home to avoid costly repairs. I usually do all of the above and shop for household items at Dollar General. They carry the same brands you would find at any other store, but they cost less of course :)
I’m a Frugal Foodie
It’s no secret that I love food. I’m a big eater, and I’m always up to try new foods. I transformed my love for food into a hobby and started cooking and baking more instead of dining out. I love the savings I generate by eating at home most of the time and buying ingredients instead of ready-made food.
Processed food and some frozen food is not the best for you so just knowing that motivates me to keep cooking and planning meals. Since I’m the designated meal planner for my family of three, I created a $300/month food budget that include work lunches and so far so good. We’re eating and snacking well. I can’t buy a $25 package of gourmet crab legs (my absolute favorite) to prepare every month but it was a sacrifice I was willing to make.
I May Give Up Some Things Permanently
I’m already aware that in order to save half of my income, I would have to give some items and expenses up. But now I’m realizing that my sacrifices could be long-term, or permanent.
I gave up cable TV last year in order to put money toward savings and other more urgent expenses, but now I’m considering ditching it for good. When I think about my overall financial goals, there will always be something I need to save for.
Right now, I’m all about paying off debt, starting my retirement fund, and increasing my emergency fund. In the following years, my goals will most likely involve saving up for a house and investing more. Then, I will focus on making extra payments to my son’s college fund, and maybe a nice vacation. Once I tackle one goal, there will always be another one lined up.
This is why I’m content with living frugally for life, not just until I pay off all my debt. At the end of the day, I would choose financial freedom and security any day over the unnecessary expenses I eliminated in the past.
What About Fun and Shopping?
I don’t just plan to live on $1500 each month, but I also intend to thrive and keep enjoying my life. I will still dine out, go shopping, travel, and attend fun events, but I will incorporate these expenses into my budget.
I will save up for traveling in advance obviously, but I usually give myself a restaurant budget of around $50/month. It’s low, but I don’t make it a habit to dine out often. Shopping isn’t done every month in my household and when we do we shop seasonally. There are so many deals around the holidays and at the end of each season. That’s where all the hidden gems are.
I’m confident I can continue to spend little to nothing on entertainment. When you get to know your area and engage with others, you’ll discover that there’s so much to do. And the bigger more expensive outings like concerts, sporting events, and amusement parks can always be budgeted for.
Have you ever had to live off on a portion of your income that would be considered a ‘low income’? How do you increase your savings rate and decrease your expenses?