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Saving half of your income seems impossible, but it can be done. Here are the best strategies to save more without living like a monk!
Are you ready to go big this year with your money? How about saving half your income?
Sounds crazy, but it's doable. The masterminds behind Stacking Benjamins want to show you how.
How to Save Half Your Income
Joe Saul-Sehy and Kathleen Celmins the minds behind the hit personal finance podcast Stacking Benjamins are here to share their best tips to help you increase your savings rate fast.
In this episode we get into:
the step by step process towards saving half your income
Joe Saul-Sehyis the co-host of the award-winningStacking Benjaminspodcast, which focuses on earning, saving and spending with a plan.
Since 2012, Stacking Benjamins has used the science of play to make finance more approachable, interesting, and fun.
While some podcasts hope to be the final expert in the chain of money lessons, Stacking Benjamins hopes to introduce you to the broad spectrum of ideas, concepts and technologies that can help you lock in a better financial future.
The Process to Saving Half Your Income
Most people might wonder how in the world they can save that much money, but it's really not complicated.
It comes down to five steps:
Figure out your magic number
Find ways to cut expenses while still living like a regular person
Find ways to make more mone
Where to put all that money after you've saved it
How to keep going for the rest of your life
The trick, though, is following through on the process. The good news is that it is possible.
Save More By Changing Your Systems
Changing your habits can seem impossible, but if you can set up systems you can automate some of the process.
This can help you stay focused on your goals without having to interrupt your routine.
One great suggestion from Joe –depositing your paychecks directly into savings. You can then set up transfer from there into check for the bills.
This change has been a tremendous help for couples, allowing them to save so much more than if they waited to save after the bills and other stuff comes out.
Save Half By Spotting Money Leaks
Reviewing your spending together can be worth the effort.
Joe pointed out two of the biggest culprits when it comes to money leaks were:
entertainment
eating out
Many couples don't have a budget for entertainment and eating out is usually way underestimated.
There are a few ways you can keep your spending in check, depending on what motivates you:
Alerts: You can set-up through your bank, credit union, or services like Mint to text/email you when you spend a certain amount.
Envelope system: take out the cash and put it in a small envelope or a fold of your wallet. Once that money is gone, you're done for the month.
I personally like the alerts, but my husband is more of a cash man.
Earn More and Build Wealth
While saving and optimizing your spending is crucial, it's only part of the process. Making more can help you reach your financial goals quicker.
While side hustles can be a wonderful to boost your income while expressing your entrepreneurial spirit, it's not your only option.
Joe suggest negotiating with your current job better salary. You can come from a position of strength if you prepare ahead of time. Reserach what value you can add to the company (along with the corresponding pay).
Save Half Your Income
Community is critical if you're looking to make big changes. The comadarie and accountability can make all the difference.
If you are looking for a supportive and encouraging tribe to push you to save half, please check out Save50.
They have resources including a private Facebook group that will help motivate you when things get tough.
If you're a Stacking Benjamins listeners you know that they put out great content for their community. This course is wonderful way to stay focused all through 2016.
Even if you don't save half, you're more than likely to be in a much stronger position having tried.
Thoughts on Saving Half Your Income
Whatever your savings goal, I wish you the best!
I'd love to hear what you have planned this year. What changes have you already made to help you achieve it?
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At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
A key to building long-term wealth is saving and investing a portion of your income. 'Super savers' who save more than 50% of their income track their spending and set specific goals. They also focus on increasing their income so they have more money to save.
The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.
The $1,000-a-month retirement rule says that you should save $240,000 for every $1,000 of monthly income you'll need in retirement. So, if you anticipate a $4,000 monthly budget when you retire, you should save $960,000 ($240,000 * 4).
Fidelity Investments recommends saving 1x your salary by 30. At the end of 2021, the average annual salary was $49,920 for 25 to 34-year-olds and $58,604 for 35 to 44-year-olds. So the average 30-year-old should have $50,000 to $60,000 saved by Fidelity's standards.
The short answer to what happens if you invest $500 a month is that you'll almost certainly build wealth over time. In fact, if you keep investing that $500 every month for 40 years, you could become a millionaire. More than a millionaire, in fact.
But when it comes to what they need to be saving, it depends. So, if we're starting with a 30-year-old, they should be probably saving close to $580, $600, at least, a month. And that's if they're going to earn a high rate of return. So it depends on how aggressive and risky that they're looking to be.
Whether $5,000 is sufficient for your emergency savings fund depends on your unique personal circ*mstances. For instance, a fund of $5,000 may be plenty for a bachelor in their early career but completely inadequate for their neighbor who owns a home and has four kids.
If you have a large amount of debt that you need to pay off, you can modify your percentage-based budget and follow the 60/20/20 rule. Put 60% of your income towards your needs (including debts), 20% towards your wants, and 20% towards your savings.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.
The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
Save 20% of your income and spend the remaining 80% on everything else. 60/40. Allocate 60% of your income for fixed expenses like your rent or mortgage and 40% for variable expenses like groceries, entertainment and travel.
But amid ongoing inflation, the 50/30/20 method no longer feels feasible for families who say they're struggling to make ends meet. Financial experts agree — and some say it may be time to adjust the percentages accordingly, to 60/30/10.
“Ideally, you'll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that's fine. The important part is that you actually start.”
The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.
If you want to live off even half of your final salary in retirement, you need to save 40% of your income over the next 30 years, she says. That calculation, which is based on academic research from an MIT economist, takes into account a few assumptions. The biggest is that you want to retire at 65.
Introduction: My name is Twana Towne Ret, I am a famous, talented, joyous, perfect, powerful, inquisitive, lovely person who loves writing and wants to share my knowledge and understanding with you.
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