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Try living on 50% of your income

Some people have managed to do it, and they've found the freedom that comes with spending much less than they earn.

By MSN Money Partner Feb 7, 2012 10:45AM

This guest post comes from J. Money at Budgets are Sexy.

 

Can you imagine if you lived off only 50% of your income -- how much less stress and more freedom that would open up for you? I know it's not possible for everyone to do since we're all in different phases of our financial lives, but it's at least worth a few minutes of your consideration -- even to just formulate a plan on how to actually make that happen.

 

This popped up in my head for two reasons. The first was because of a comment "JMK" made on our post on always keeping a $100 buffer in your checking account

We've cut our expenses to the basics so that we can live on ~55% of our take-home pay. This doesn't include savings or things spent on rarely and (we) can't predict the timing (restaurants, clothing, household and car repairs, etc). Most weeks none of these things happen so all the excess after paying off the Visa gets swept out to our retirement accounts or an extra mortgage payment. If we had to buy new sneakers for the kids, repair the washing machine, or buy a new lamp, we simply transfer slightly less that week. When we want to take a holiday we just let the excess pile up for several weeks and then go. It's a little unconventional but it's a system that works for us.
Because we live on way less than we earn, we have a weekly opportunity to fund unexpected expenses or little splurges, but most of the time it all gets moved somewhere sensible. I find that by not budgeting for entertainment, clothing, etc., we don't feel entitled -- as if we've preapproved ourselves to spent that amount without pausing to question whether we really need it. Instead there is no planned budget for these items and anything we spend is coming out of what would otherwise be available for the Friday transfer to savings or the mortgage.

Pretty sexy, right? She's oozing with freedom and the luxury of living life on her OWN terms. I'm loving it. Post continues below.

The second thing that caught my attention recently was a show on Oprah (yes, guys watch Oprah too). They had this family on that was making bookoo bucks, but their daughter didn't think they were doing enough to give back and somehow convinced Mom and Dad to completely change their lifestyle.

 

They ended up downgrading their home and donating more money and time to charity, and it was all because they cut back on expenses and started living off of only 50%. (Here's the book on their story: "The Power of Half.")

 

Now, that's obviously an extreme situation, but I recall them saying it wasn't that hard at all to cut things out and learn to just spend less over time. Many of us are already trying to get to that, and it's a great idea to keep in the back of your mind when you're poring over that budget or financial game plan of yours.

 

Another thing people do which is killer is living off only one paycheck and saving/investing/paying down debt with the other one (provided you're married or living with a partner). It doesn't necessarily fall into the 50/50 category, but the point is that if you could live off of only one person's paycheck each month, you could do some serious upgrades to your financial life. And if, God forbid, something happens to one of your jobs -- like a layoff or demotion -- you know you could at least survive with the other person's paychecks.

 

These are just different ways of saying "spend less than you earn," and if you can do that at the 50% level you're a rock star.

 

I accidentally fell into that when the Mrs. started attending grad school four years ago, but I'd like to think it was possible even without that. I can't even imagine what it'll be like once she brings home a sizeable income again. Even $30,000 or $40,000 would be a nice change from the $12,000 she's made over the past handful of years. (Something tells me, though, that a baby around the corner may keep us on the current track a bit longer.)

 

Any of you living off one paycheck right now too? How about 50% of your income?Tell us your secrets. We need more motivation.

 

More on Budgets are Sexy and MSN Money:

6Comments
Feb 7, 2012 7:54PM
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Great article. Definitely something we can all aspire towards.
I am currently a student but am about to move to London where I will be on £27,000 a year starting salary. I cannot comprehend saving 50%. Once the taxman's taken his cut and I've paid my rent I'm down to about £12,000. I hope to be saving around 20% initially but I can certainly see that I will save a larger percentage in the future.
I plan to simply save 80% of all pay rises in the future. I realise this seems extremely steep and I don't know where I'll be in the future, still it feels good to plan. Doubling my salary will very quickly lead me to saving half. I have mentioned this and a couple more techniques in my article on budgeting on my blog.

Feb 7, 2012 4:27PM
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Our base bills should we not save, pay extra on mortgage, or put money into other savings goals is 50%. Being small business owners in January of this year our income was down by almost 60% and we still were able to save a small amount. $1 further ahead is still progress.

I consider all of those extra money placement as "regular monthly obligations" though to keep us laser focused on achieving our goals within the time frame we have set. I also keep the monthly line items in the budget for things like kids school expenses, clothing, and gifts so these categories don't rob our other goals.

 And I maintain an annual sinking fund (with monthly deposits) in that for those over and above annual expenses as well as some small household improvement projects that we plan on doing that year.

Lastly, in addition to our emergency fund, we also have a sinking fund for car repairs or maintenance issues and household (should a washer/dryer/etc. go out) If we deplete a portion of one of those we will adjust a portion of our other savings back to replenish.

Aug 30, 2012 3:56PM
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It varies month to month, since DH's income is largely seasonal, but annually, we save 55% of our income in retirement accounts, taxable stocks, bonds, and a liquid emergency fund.  DH and I are both aiming to retire in our 40s.  We are currently in our late 20s, so many things could change, but we are already homeowners and have two children, so hopefully there will be no more major hurdles.  Our expenses add up to about 40k/year, with half of that going towards paying down the mortgage, which is on track to be paid off at age 35.  Sometimes I think we are saving too much, and should spend more on fun, but I really can't think of anything we are really missing out on.  We enjoy cooking at home, and we like the (free) outdoors.  I am expecting our savings rate to decrease when our kids reach the expensive teen years, but hopefully, our income will also have increased by then.  Still...there are a lot of variables and anything can happen.  Fingers crossed. 
Jun 12, 2014 5:00AM
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I am 32 years old and make $13.05 an hour. I save about 70% of my income. SO many things go into this. My house is paid off (inherited), I worked 2-3 jobs in my 20's to pay off my student loans, car and credit cards. 20% of my pay is automatically deducted and put into my 401k. I take home about $650 after taxes every two weeks. Then, $500 is immediately transferred to my interest earning savings account. I live off of the other $150 for the next two weeks which is for gas and food. I also have a roommate that pays me $500 a month rent + 1/2 of cable & electricity. This goes into a separate account and pays my yearly property taxes of $3,500 + $500 car insurance + $500 homeowners insurance. There's usually a little extra ($1,500) which I use for my yearly vacation. When it's automated, it's automatic. I don't even have to think about it. If I want some new clothes or something, I get them at cheap places like Ross or TJ Maxx, and usually get the money from recycling cans I grab from the garbage at my job.
Feb 7, 2012 11:38AM
Feb 7, 2012 12:18PM
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We also live on half... One of us is unemployed, so we are forced to. So each of us lives on half my paycheck. Yet, we are not writing books and getting video-taped.
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