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.
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:
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.
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Editor Bev O'Shea lives and works in the foothills of the Appalachians. A former copy editor for The Atlanta Journal-Constitution and the Orlando Sentinel, she joined MSN Money in 2007. She's a fan of sunsets, college football and free shipping, among other things.
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A writer for MSN Money since January 2007, Donna Freedman won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. She also writes about smart money tactics for magazines and on her own site, Surviving and Thriving.
Mitch Lipka has been warning people about scams and shining light on questionable business practices for more than 20 years. Mitch, the consumer columnist for The Boston Globe, has also been a reporter and editor at The Philadelphia Inquirer, Consumer Reports, South Florida Sun-Sentinel and AOL. He won the 2010 New York Press Club award for best consumer reporting online and was honored in 2011 for his reporting on child product safety.
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