How to Save Half Your Income in 7 Steps

I know what you’re thinking. “I can’t save half of my paycheck!” You’re already thinking of reasons that’s not a possibility.

But you’re thinking about it incorrectly! If you want to get ahead financially, you must save.

Saving money is more important than making money. Seriously! Let’s play a game. Who’s better off, the woman who makes $100,000 and spends $95,000 or the woman who makes $60,000 and saves $30,000?

Sure, the woman making six figures appears wealthy. But those appearances are harmful to her. She is spending everything she makes.

I’d argue that saving half your income should be a goal, and if you reach it, great! Congratulations! Even if you don’t, though, you’re leaps and bounds ahead of your peers.

Read below on a simple 7-step process on how to save half your income.

  • How to Save Half Your Income 1 of 8
    save half your income
  • Get a Paystub 2 of 8

    Or take a look at your pay statement online. How much are you bringing in? You can't save half until you know what the total is! People don't usually realize how much they make until they take a long look.


    Image by mensatic

  • Decide to Save 50% After Taxes 3 of 8

    I find it somewhat impossible to save 50% of pre-tax income. I mean, do you see how much the various government bodies take out? Let's just decide, together, that we'll save 50% of our after-tax income. Take the bottom line of your pay statement, and divide it in half. That's the number we're saving.


    The key here is to decide to save. Take the excuses bubbling up (I can almost hear them!) and throw them out. Tell people you're saving half your income, from this point forward.


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  • Use "Funny" Math 4 of 8
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    This tip will exclude me from ever becoming an accountant, but that's okay. I want you to use funny math here. I firmly believe that debt repayment "counts" as savings. Look at it this way: if you have a debt that you're paying 5% on, any time you make a payment on that debt, you are essentially earning 5%. So, the number you had? Half your monthly income? See how much is leftover by the time you've finished paying all your debts.


    Know this: the best way to start saving money is to get out of debt.


    Image by FrugalPortland

  • Open a New Account 5 of 8
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    You're going to want to hide your savings from yourself. The absolute best way to do this is to open a new account, specifically for the purpose of savings. Your inclination might be to open another account at your current financial institution, but don't do that. You want to make it slightly (or more than slightly!) more difficult to access your savings.


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  • Split Direct Deposit 6 of 8
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    Talk to the person in charge of payroll at your office about splitting your pay in half. Put 50% in your normal "bills come out of this account every month" account, and 50% in your new account. Don't panic -- the money is harder to get to, yes, but if it comes down to the end of the month and you need to borrow from your savings? Go ahead.


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  • Track Your Progress 7 of 8
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    It's a fantastic idea to check your progress annually. If you want to see how I do it, click here to read my process. Basically, you add up the dollar amount in debt you paid (that's savings, even though you don't feel it!) then add the dollar amount in your savings. Take that number and divide it by your after-tax salary to get the percentage you saved.


    Image by FrugalPortland

  • Sit Back and Watch the Balance Grow 8 of 8
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    That's it! Just like when you use your slow cooker, you can set it and forget it! Periodically check your balances, and obviously stay on top of your finances so nobody sneaks in a fee or something, but otherwise, if you follow the steps, you should see your savings grow.


    And again, paying off your debts is truly the best way to beef up your savings. I'm constantly astounded when I check my accounts at how easy (seriously! easy!) it has been to build up my savings account.


    Image by FrugalPortland

Article Posted 3 years Ago

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