How to Save a Third of Your Income

The Bucks Blog details the experience of how one author used to save a third of her income:

The biggest thing was where my husband and I chose to live. We lived in a one-bedroom apartment long after we could afford to live in a two bedroom or three bedroom. We basically never upgraded our lives after school and just continued living like college students.  . . . We also made sure to always live near public transportation so we only needed one car . . .  and we make sure to cook relatively inexpensive nonmeat-focused meals most nights at home so our grocery bill is pretty low at about $120 a week.  . . .  Another big thing was we use old clunky cellphones that are definitely not glamorous but saved us money, and we skipped cable a couple years ago.  . . .  Just across the board, we tried to live more frugally than we could have actually afforded to.  . . . It’s not like we denied ourselves everything. I think giving ourselves some small indulgences like a nice television made it easier to make the big sacrifices.

So, the key is keeping spending low -- especially on high-ticket items like homes and cars. Who would have ever guessed that? ;-)

It's interesting to note that they are no longer saving a third of their income. They have bought a more expensive house, have a child, have new expenses (like daycare), etc. But they are still saving 15% -- not a bad level at all. And since they are young, they certainly have time on their side -- several decades for the money saved to compound like crazy.

I've been saving a third of my salary for some time now, so I can agree with their basic premise -- live well below your means. Of course, it's much easier to live well below your means if you take my other bit of advice and grow your career/income to its potential. After all, it's easier to save 1/3 of $150,000 (still allowing you $100,000 to live on) than it is to save 1/3 of $50,000 (giving you only #33,333 to get by on), isn't it?

Comments

[jeffinwesternwa]

Less "spac" t live means "les stuff", pretty smart! I did just that in my 20's and 30's and managed to also save 15%~ (when making below $20K a year) to over half (when making $400K, taxes were $150~K). IT can be done!

[DJ]

Am I crazy or does $120 per week on groceries for two people seem really high?!? My wife and I spend between $30-$50 at the grocery store each week and might spend $30 each week eating out. We eat meat every week (usually boneless skinless chicken) and maintain a very healthy diet otherwise. I also live in the south, but we don't normally have more than a few dollars worth of coupons each week. That just seems really high to me.

[Mark]

This may be a stupid question, but do you count taxes, insurance, SS, and everything else in the 30%, or is the $150K example salary the take home?

[MC]

I spend at least $120/wk on groceries for me & 2 kids, so I think that sounds very reasonable for 2 adults.

Also, some people include other household needs like paper products, cleaning products, and light bulbs in their "groceries" budget category. I know I do.

[FMF]

Mark --

The $150k is gross income. The items you name are "expenses" and would be deducted from the $100k you have left over.

[TJ]

Weird article. Maybe just me, but she was supposed to be the expert who made saving a third of her income work by not upgrading her life on the big things....until she upgraded her life on the big things....

She's obviously doing just fine, I'm in no way questioning that. I'm just not going to read an author preaching frugality that says things like its "impossible" for her to save more than 15% of her income now because of the "financial shocks" of buying a house and having a baby. The numbers (like the $120/wk grocery bill) bother me less than the philosophy.

[Mark]

Thank you MC, that's what I was thinking, and I just wanted to make sure.

[jim]

$120 / week for groceries for 2 people is higher than average for husband/wife only. Average spent on food at home for married couple is $76/week. If you add in household supplies then its up to about $93/week.

Since its above average I wouldn't consider $120/week to be frugal but I don't think it makes them spendthrifts either.

[MrAtoZ]

TJ -
I totally agree with you that touting the virtues of savings...until you save alot less because life happens...waters down the whole argument. When we were DINKS, my wife and I saved tons. Now I work, she doesn't, and we have 2 kids. We still manage to save nearly 25% of our AGI, but it's always a balance between living for today and saving for tomorrow. We try to do both.

[Charles]

Saving 1/3 of income is news and book worthy? We're at 50% net of our single worker take home income, 2 children, 2 adults and house w/ mortgage. We're working at increasing the percentage in January once we get rid of PMI. We make it work by renting 3 rooms in our 5 bedroom home, cell phone is a prepaid for emergencies, no CC or car debt, entertainment is Netflix and borrowing video games from friends. We also rent a 1/2 acre of farmland and grow some of our food in the suburbs of Chicago, selling the excess.

I guess we gotta work at writing a book =) (Though I do admit the salary is $56K, so that helps us keep 50%).

[Holly]

Great job, Charles...you had better get the fingers to the keyboard and get your story out; it is an inspiration for many to see how it can be done.

[Mike Hunt]

Saving more than 50% is pretty near impossible, simply because my effective tax rate is very close to 35%.

-Mike

[blake]

Charles... I like your comment. Reminds me of my wife and I. We are not quite at 50%, but much higher than 1/3. Have one kid right now. Wife is back in school for another degree and not working. I just finished an MBA while still working full time.