New Plan: Save half of my paycheck

Save Half My Income

I’m going to save half my paycheck every month. Extreme savings strategy ahead:

The other day, I got caught up in the comments of Financial Samurai. If you don’t read his blog, you really should. He’s smart, he lays things out in a simple way, and he makes his opinions seem like the only way to go. He’s a bit like Ayn Rand (oh, dear, hold on while I get my beret and other pretentious items) in that I want to disagree with him, but the way he writes, it’s really hard to argue with the logic he lays out.

He linked to an article he’d written in February, one that I didn’t happen to read. And that article (or post, or whatever you want to call it) has been on my mind ever since.

You should go read it, but his basic premise is this: save 50% or more of your take-home salary (after taxes) and you can retire early.

His charts are a little ridiculous, or I’m severely underpaid (a little of both, I bet) but his advice is sound.

I realized that I’m already doing that, really. Only instead of saving, I’m putting about half of my income toward my debts. So, once they are gone, I’ll be able to save that same money in many places.

I’m already super frugal (with occasional splurges to keep me on this path for the long haul), so I’m already living on just about half of my take-home pay.

So, once everything is paid off, here’s what my bills will look like (provided I don’t move):

Rent plus utilities: 825

Car Insurance: 67

Various charitable donations: 100

And that’s all. Health insurance is taken out of my paycheck, so, while I do pay it, I do not feel like I’m paying it, if that makes sense.

I’m a commissioned employee, which means that my monthly paycheck varies. But, this month is a good example month, where I took home 2400, after taxes and insurance.

That means, I should be putting $1200 in savings, and $1000 toward bills, leaving me with $208 for the month.

This is doable, provided I allow myself to use savings for travel (sorry, future self, but that will mean you’ll have more memories to look back on) and I divide any extra money between current self and future self (one for me, one for me!).

This makes me think I should look into cheaper housing, or find some clever ways to add a few hundred dollars to my take-home pay each month, because as it stands now, I spend more than $200 just on groceries every month.

Does anyone else do this? Do you save a high percentage of your take-home pay? I would love to get to the point where my problem is, “golly gee I have so much money just sitting in my checking and savings accounts, how can I make my money work harder for me?”


  1. says

    This is what we're doing now, kind of. Around 60% of our take home pay goes towards extra student loan payments. But eventually that'll be gone and I'll start working towards saving more.

  2. says

    I would love to save 50% of my takehome pay, but I don't make nearly enough for that. I can save about 25% if I deprive myself, lol!

    • says

      I feel the same way, that I don't make enough, and you can see, I don't! But it's a really good challenge anyway, and will help me not blow money once my debts are all paid off.

  3. says

    First, I couldn't really right now because 1/2 my income goes to rent. Yeah, I know. But even so, it seems a little extreme. Maybe I'm one of those weird people who really isn't that into retiring early. I don't know, it's a balance thing. I guess as long as you don't feel deprived daily. That doesn't seem like a fun way to live. On the other hand, yes saving is important.

  4. says

    I am currently saving around 65% of my take home pay. This is because of my recent mortgage payoff. Once I get married, it will be around 50 or slightly higher. Living off of 50% of your income or one person's income if you're married can really set you up for a great future with less stress.

  5. says

    Maybe this sounds bad, but whenever someone is saving 50%, 60%, 70%+ of their income, the only thought that runs through my head is "wow your life must be boring".

    What if you don't even make it to retirement?

    What's the point of retiring at 40 to travel if you could just travel at 25 and 30 and 35 and 40 and just retire later?

    And what about just finding work you enjoy for the entirety of yoru lifetime?

    Also I'm a bigger fan of just earning more money lol I definitely couldn't live on $200/mo (which is what I'd have left too if I banked half my income) so I'd rather just earn more..

    • says

      My savings is just so low now that it's a plan for savings, and not necessarily for an early retirement. It would be great to have a cushion for if I have a baby or other unexpected expenses. Saving gives a level of freedom that designer handbags do not.

    • says

      I am a huge fan of making more money as well. Keep in mind that saving 50, 60, or 70% of your income is all relative to what a person makes. A higher income means you can live on much less, especially if you have minimal or no debt. I am a huge fan of traveling now versus later, (of course if the vacation is paid for in cash) and have travelled to many countries. I have an aunt who passed away a year before she retired. She was waiting to retire to travel, it never happened.

    • says

      It's a good thought, but it's a thought for those who make excuses for why they aren't saving.

      I've traveled to over 30 countries and have taken 6 weeks off a year for what will be 4 consecutive years by the end of this year. If travel is what you're angling for, I've checked your box. Three trips to Hawaii in 1H12 for a week each isn't so bad either right?

      My point is, you can have lots of fun while saving! No excuses!

  6. bogofdebt says

    I'd love to save half my income. I just looked and I save roughly 25% on an average. It of course doesn't feel like that because I end up spending it down the road. Granted, I'm saving it to be spent (i.e. medical fund–I save every pay check but I also spend it on doctors/dentists/medicine/etc). Eventually I would love to be able to save half my money just to save it. (also, I just pictured myself like Scrooge McDuck rolling around in his money bin and really would love to do something like that someday. Maybe…)

  7. says

    I'd like to save half of my income but like you I would enjoy travel as well. So if I could make it happen while traveling also I would definitely do it.

  8. says

    I’d like to save half of my income but like you I would enjoy travel as well. So if I could make it happen while traveling also I would definitely do it. (Sorry, submitted to soon)

    My goal is to continue saving and investing 10% and work my way up to at least 25%.

    • says

      We still travel while saving ~50% of our income… ever looked into mystery shopping? You can get great discounts on hotels and (often) free plane tickets. :)

      • says

        Free plane tickets? The mystery shopping I've seen is the "drive across town to a Chrysler dealer and spend a dollar" types. I'm missing out, aren't I?

  9. says

    Between the bf and I, we save about 8% of our take home pay for short term travel, clothing and other irregular expenses and save about 45% on long term savings, like our retirement and investment accounts. If you include my pension contributions through work, then perhaps it's around 50% but like you say, I don't really think about that amount since it's automatic.

    We'd like to save more but I am still paying off my student loans! :)

    I think it's a great goal, but it's definitely easier on two incomes than one.

  10. says

    Although I do not save 50%, I do save about 35% of my income. Savings provide options or choices. Savings for me helped me buy my first apartment building. It was the start of my first business. Savings led me to financial freedom and a lot more choices a long time ago.

  11. Amy says

    I'm impressed that you save so much, and that you give such a large amount to charity. (I wish I could say the same, but I don't think my Goodwill bargains count as charitable donations). For now, although your rent seems higher than you'd ideally like to pay, don't forget that the location/flexibility/included utilities count for a lot. Beware of the false economy of cheaper apartments: spending more on commuting, being locked into a lease, and watching your bills stack up. Our wireless internet costs $60/month! And you never know when the 'voice of reason' might find himself in PDX…

    • says

      I read this comment thinking, gosh, this girl is smart, who is she?, then I recognized the email! You're right — my month-to-month option is worth at least $200/month!

  12. says

    HALF?! Nope…not gonna happen. I mean, I'm a SAHM bringing in very little of the funds, so maybe that's why I'm saying h-e-double-hockey-sticks-to-the-no. But even if I were working full-time…and let's just pretend I don't have children that would require daycare, I don't think we could ever do that! I guess I'm screwed and will just work til I'm 90 :( I don't think my house is crazy expensive for how much my husband makes, but maybe we are living above our means and I just don't realize it.

  13. says

    My first reaction to your post was, wow, you really do live frugally! $825 for rent + utilities in a city? $208 for just food, fun, and all non-essentials? You're doing really well to devote half of your income to debt/saving, in my opinion.

    Saving half is wonderful, a great goal, but I think few have what it takes to do it (you being a shining exception). For working couples, maintaining the capacity to at least get by and pay essential bills on just one (either) income I think is a more appropriate goal than saving half.

    When that debt's paid off, you're going to be socking away a lot of cash!

  14. says

    I can't do that with kids. However, I absolutely think that the more you save, the better off you are. In other words, if I could, I would. Most people don't see the reality that saving as much as possible when young, letting grow via compounding, and investing intelligently is what it takes for people to retire. Nobody will be there to bail us out, it's up to each of us individually!

    Bottom line is that I think saving 50% of your income is a great thing, if you can pull it off. If not, as in my case, do the best you can.

  15. says

    I save about 40% of my pay. That doesn’t mean it’s always like that every month, but I aim for it. Almost 20% goes towards retirement/investments so I like to think of that as saving, and another 20% goes towards my actual cash savings. I like to think that I save this much because I can right now – factor in children, a mortgage, and a bunch of other responsibilities later and I’ll have to cut back on saving. We should do it now while we are younger!

  16. Katie says

    I save about 50% of my take home pay but if you add my husbands to that then I only save 25% of our combined take home pay. I would love to get to the point where I could save 50%. And it would be awesome to say "I have so much money sitting in my bank account"….one day.

  17. says

    I aim to get to saving half my income. At the moment our expenses got blown out of the water because our daughter needs a lot of speech therapy, but prior to that I was saving well.

    I think it is about balance though. I have a bucket list of things I want to do, so my aim is to save, but also budget in doing things on my bucket list. My mum died at 37, so I have always been conscious of living in the now, while saving for the future.

    As my income increases, I increase my savings instead of spending up to my income if that makes sense. So, I am continually saving a larger portion of my income.

  18. says

    I think you forgot food costs in that calculation. :)

    Throw me in the anti-retiring early boat. Too much time off and I go stir crazy and start spending money. But currently, we are a two-income household and we are saving a good 30% of our after-tax income. We mostly live off of my wife's income (the stable, full-time, year-round one) and use my income for major purchases, like our annual vacation to visit family back East.

  19. says

    We save a bit more than half of our household income, though the vast majority of that "saving" is paying off the mortgage/doing so faster. We are also able to do this because we both have high paying jobs. When I was making $15K/yr you can bet there's no way I was doing that! Given that we are in the process of committing to living in a place I don't love for 2 additional years, we have also consciously decided to spend more on travel (partly because my new, higher paying job is a reason we're staying, so the $$ is there). I'm even looking for a road trip this weekend!

  20. says

    I can't imagine saving 50% of my take home pay. Between saving and debt repayment, we save about 25%, so I guess it's better than it seems, but it doesn't seem like we're making enough progress right now.

  21. says

    I think it is GREAT you are using 50% of your income to pay off your debts! That is the exact same thing as saving 50%. Once you have this mind set, then it becomes very easy to continue for long periods of time.

    If you get used to saving 50% of your after-tax income, all the stuff about happiness, experiences, etc also calibrates and you will be as happy as you always were.

    • says

      Thanks! I do need to earn more so that it's not SUPER tight on the ol' budget, but it'll be awesome when that money goes from my paycheck to my future self, rather than my lenders.

  22. says

    Wow Big Sis! I did the math, and even though my student loan payment seems really high, it is in reality only 20% on my monthly income… Assuming I can get my spending under control (working on it!) should I put more to my student loans or start an emergency fund?

  23. SavvyFinancialLatina says

    I'm really trying to get us to save 50% of our after tax after retirement after espp contribution income. We are close.

  24. Susan says

    Read the blog by Early Retirement Extreme. He did it on $40K/yr … Mr. Money Moustache is another early retiree and Lacking Ambition. All in their 30s and retired by living far below their means and saving.

  25. Lena @ WhatMommyDoes says

    We haven't done this yet (still getting the hang of affording three kids on one income), but when I was working in the year or two leading up to my first baby, we saved my entire income and really racked up the savings. We even had $25,000 extra to invest in a business when the opportunity arose. Our strategy now is to live normally and fairly frugally in the toddler years, but then anytime I make extra going forward we'll throw that at our mortgage and start investing more. I think it's the same concept, only expanded to two earners. What do you think?

  26. says

    Kathleen, this is just such a good way to go with your finances. Can you imagine if most of our society acted responsibly. Our nation would be doing so so much better. If you keep this up you will one day be looking at a fat bank account that you can use for investing in a diversified portfolio of no-load and index mutual funds. Then your money will start to work for you! Great job.


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