Saving Half of Your Monthly Income?

[Iggy aka IG]

Do you think it's possible?  Have you ever?

I'm asking because it's been one of my goals for a few years now.  For me it would be easier if I didn't office business expenses which average $1400 a month.

[Deleted]

We live off one of our incomes after 401k max, the key was limiting lifestyle creep when getting raises/promotions

I could do it now on my own but I certainly couldn't the first 10 years of my career.

[Iggy aka IG]

I just reconfigured some numbers.  Interesting.

Monthly commissions - business expenses / 2.  With my monthly IRA contribution, and an automatic transfer to savings, I'm a little more than halfway to my goal of saving half my gross income. 

[Iggy aka IG]

alwaysbeoptimizing, good call.  My calculations don't include quarterly taxes (I'm 1099'd).

[NastyWoman]

I save 23% of my pre-tax money (max out 401k plus catch up) and than save a little over half of my take home.  If I add the numbers up as if taxes don't count my savings are just over 60%. But this is a fruit basket approach since I have no clue on how to make it an apples to apples calculation.

[Ryan]

We save over half our income each year, but we only do it because we make decent incomes (enough to suit our tastes) at our day jobs and then we just save the business income.  I wouldn't be able to live off 50% of our income from our regular jobs.

[swasat]

I believe it's certainly possible to save 50% of ones income, but it's very income dependent and stage in life dependent as well.

We didn't during the first 5 years of our careers. Then careers took off for both DH and I and we have saved ~50% of income ever since. But thats due to the income level AND focus on avoiding lifestyle creep.

[Iggy aka IG]

Agreed, it's certainly easier when income is higher.  I've been studying my personal monthly expenses and if it's a bare bones month (no auto insurance payment, hair appt, quarterlies) it's down to $1,388.  Trying to get it even lower is my challenge today.

[NastyWoman]

Mar 10, 2017 17:58:38 GMT -5 swasat said:

I believe it's certainly possible to save 50% of ones income, but it's very income dependent and stage in life dependent as well.

We didn't during the first 5 years of our careers. Then careers took off for both DH and I and we have saved ~50% of income ever since. But thats due to the income level AND focus on avoiding lifestyle creep.

 with my single income (which is easy enough to calculate based on my statements above) I can only save as much as I do because my kids are launched, my condo paid off, and I don't like buying "stuff". Nor do I have any desire to buy top of the line when I do buy.  Now I could save a significant chunk more each year if I didn't like travelling. But I do and I don't want to wait until retirement only to discover at that time that I no longer have the energy to visit the places I really want to see.

[NastyWoman]

Mar 10, 2017 18:05:07 GMT -5 Iggy aka IG said:

Agreed, it's certainly easier when income is higher.  I've been studying my personal monthly expenses and if it's a bare bones month (no auto insurance payment, hair appt, quarterlies) it's down to $1,388.  Trying to get it even lower is my challenge today.

But why use a monthly approach? I use a month-by-month budget but for the year it has everything in it including property taxes, insurance premiums, car stuff, etc., etc.

I add it all up and divide by twelve to get my average monthly spending. But let me tell you there are a few months where the picture in not pretty. And that is putting it very politely.

My main reason for this approach is that I wanted to know how much net income I need to replace when I retire. That x% of your last income crap is only good for people who send almost every penny they make. At this point I would have enough money coming in to replace my spending plus a nice buffer each year. However, I don't trust the stock market so I am going to stick it out for another 4-5 years or until I am completely fed up with my job, whichever comes first.

ETA: my vacations are in my budget so I could travel as much as I do now if I retired based on money coming in

[cronewitch]

I did my last few years working. I maxed the 401K and ROTH but still saved more money. My mortgage is low and I had roommate paying me about 800 a month so very low cost of living. I was making about 90K and saving about 50K.

Now retired it is hard to say what income is or saving, total gains on investments was about 110K and I withdrew 60K so is that 50K savings? Of the withdrawn money I saved about 10K so maybe I saved over half. I am not a big spender, much withdrawn was medical expenses or gifts.

[Iggy aka IG]

Mar 10, 2017 18:18:32 GMT -5 NastyWoman said:

Mar 10, 2017 18:05:07 GMT -5 Iggy aka IG said:

Agreed, it's certainly easier when income is higher.  I've been studying my personal monthly expenses and if it's a bare bones month (no auto insurance payment, hair appt, quarterlies) it's down to $1,388.  Trying to get it even lower is my challenge today.

But why use a monthly approach? I use a month-by-month budget but for the year it has everything in it including property taxes, insurance premiums, car stuff, etc., etc.

I add it all up and divide by twelve to get my average monthly spending. But let me tell you there are a few months where the picture in not pretty. And that is putting it very politely.

My main reason for this approach is that I wanted to know how much net income I need to replace when I retire. That x% of your last income crap is only good for people who send almost every penny they make. At this point I would have enough money coming in to replace my spending plus a nice buffer each year. However, I don't trust the stock market so I am going to stick it out for another 4-5 years or until I am completely fed up with my job, whichever comes first.

ETA: my vacations are in my budget so I could travel as much as I do now if I retired based on money coming in

I do this, too, in an Excel spreadsheet.  It's helpful at the end of the year to see what line items are higher than others, to see if there is a way to reduce that particular expense.

In January, I used the spreadsheet when meeting with my new financial advisor.  When he asked me what my current expenses were, and calculated how much I'll need in retirement, it was very helpful.  He wants me to wait until 67.  I don't want to wait that long.

Oh, and we added an extra $XX for travel when I finally do get there. 

[Apple]

Yes, I think it is possible.

Before I cut down my retirement contribution (last week), I was saving 17% retirement (all is gross pay), + 13% (for college for DS), + 13% (for the eventual new house).  If I wasn't paying for the property, I'd be saving another 12.5% toward the house (instead, it's my property payment, which could be looked at a mix of saving and spending, depending on who is doing it).  So, I'm saving 43% there (not counting the property).  Then I save for other things as well, but that percentage varies (vacation, other retirement savings, car replacement, stuff like that).  While I changed the retirement contribution, I'm still saving that money for the new house.

If you can keep your expenses as a small percentage of your income, you can really rack up the savings.  My mortgage + ins + taxes is 12% of my base income (not counting overtime), and I don't have any other debt outside of the property.  I think the biggest thing helping me save a large portion of my income is that I am no longer married to someone who has every penny spent before he makes it.

[justme]

If I was married to someone, it'd be real easy. Myself, I'm basically at the point where any extra earned is savings. I have a bit over 6k a year that goes to savings and like 1500 paying off a home improvement. The savings are sometimes used for vacations or other stuff. But I definitely could save anything I make over this for definite long term.

It'd still be a bit to hit 50% of gross, but we'd being talking maxing my 401k and putting same amount in a taxable to be able to do that.

[Iggy aka IG]

These are wonderful responses.  Thanks, everyone.  @sroo4, fingers crossed and congratulations!

At the beginning of this year, I was given the opportunity to take over a retiring fellow insurance agent's book of business for which I am paid $1,000 monthly.  I definitely don't need that much to survive, so the first thing I did was meet with a financial advisor.  The entire amount is put automatically into a Roth.  I'm middle-aged, and have some retirement funds catching up to do.

In true SS fashion, I use coupons and shop sales at the grocery store, spend an average of $300/mo, saving an average of 28%.  I don't have a car payment, but my truck will eventually need to be replaced.  With a used one again, of course.  I'd really like to start a vacation fund, since most of my friends are on either coasts, lol.

I've had a bare bones budget for some time now, and the focus has been on increasing income.  Being commission only really helps.  We had a record year last year. 

[thyme4change]

35% of our income goes to FICA, federal income taxes, state income taxes, and health inaurance. Theoretically, we could cover everything else with 65% of our income, but I don't feel the need to at this point.

We have hit the 'can't take it with you' point. Several funerals of people who weren't over 70 is pushing me to find a balance that includes working on at least some of my bucket list now. When both kids are in college, we may have a reversal of thought.

[Iggy aka IG]

Exactly.  I don't want to work so hard when I am in my mid 60's, like my mom and a friend of mine.  They seem to be bitter and resentful.

[grits]

I am fortunate to be able to save 34% of my income. I have a middle class income, high out of pocket medical bills but I save and want for nothing.  I am truly blessed. 

[thyme4change]

Spending it is so much more fun!!

[TheOtherMe]

I did that when I was fresh out of college.  I was paid by check and when I deposited the check, I put half in savings and half in checking.

That was how I saved the money for the down payment on my very first house.

I didn't have a lot of expenses then.  I shared an apartment with a roommate, so only half the rent, half the utilities, half the phone, etc.  No cell phones or cable television.  

My roommate and I also went out every Friday and Saturday night and had fun.  

Can't do it now because my mortgage is almost 50% of my take home.

[Deleted]

Taxes eat up 30%, so I don't think we could save 50% of gross income.  We manage 35% of gross, which is 50% of after tax income.  

So we do 30% taxes, 35% savings, and 35% living expenses.

[coffeegrl]

I can barely save anything right now from my income but I hope for that to change soon. As mentioned in another post, I received a promotion mid-September that came with an $8500 per year raise. My top goal is the debt. Once that starts to go down, I'll have more left-over money to be able to save.

I'm 35 and single, so still young, but definitely thinking more and more about my retirement years ahead.

[Blonde Granny]

Income being SS and VA disability, I easily live on 2/3rds of my income. The other 1/3 normally goes into savings at the end of the month.

[cktc]

I was living on half my income for a while when I was single. Half of the savings was going towards debt though. Now that I'm married with a house and family, expenses are going up, savings not so much

[countrygirl2]

We saved a ton for the 15 years hubs worked overseas, but we also
spent a ton. Wish I had saved more but DD and I traveled a lot and
we spent a lot on our house and rentals.

We would not have what we do now if we had not saved it. But with a
high income it was easy to do.

[seriousthistime]

Define "savings."

I contribute the max to the 401(k) including catch-up contributions.  I also have a ton of federal and state income tax deducted from my paycheck.  Plus deductions for health insurance, charitable contributions, etc. I take home about 45% of my gross. From that, an amount equal to 13% of gross goes to savings for what are essentially sinking funds.  

If I were to save (as in, put in and not touch the money in the foreseeable future) half my paycheck, I'd have nothing to live on. 

[Iggy aka IG]

I just checked-in with my spreadsheet.  I'm still only saving about 25% of my net which includes the IRA I maxed out a few months ago, my EF, and savings accounts.  After this month it will go up slightly once I finish paying off a small personal loan.  Then it's time to polish off the business CC balance.    I do still want to research how to open a SEP IRA....

[ilovedolphins]

After the first of the year I am going to try living on half of my income and see how it goes.

[seriousthistime]

Nov 19, 2017 16:31:07 GMT -5 ilovedolphins said:

After the first of the year I am going to try living on half of my income and see how it goes.

Gross or net income?

[ilovedolphins]

Probably net income.