It’s one thing to set a goal to save half my income, but actually doing it is an entirely other story. Here’s a (brutally honest) look at exactly how I’ve managed to hit my savings goal over the past few months – because I’ve been consistently hitting it every month since October.
Well, OK, not in January, because January was bananas, but even then I hit a 48.5% savings rate, which is not what I’d call a failure by any means.
Anyways, it’s exciting, and awesome, and has been a huge giant boost to my savings goals and my timelines to hit those goals, which is why I did this whole thing in the first place.
Pro tip: It’s way easier to stick to a financial goal if you know why you’re doing it in the first place.
But I’ve also learned a lot from the year I spent not hitting my goal, and that experience helped me really pinpoint the one change that helped me consistently save half of my income.
It’s my income.
It’s not frugality, or that time I tried to make my own coffee using paper towels as filters (lol never do that) or getting rid of everything I love spending money on.
It’s definitely income.
I earn enough that 50% of my income is my comfortable spending point.
When you earn too little, it’s hard to push past a certain point without hating everything. There are so many articles – seriously, so many – that tout the benefits of having a roommate, and taking public transportation, and a zillion other frugal things. At some point, though, you can’t really frugal your way into a bonkers savings rate if your income isn’t high enough.
Don’t get me wrong, frugality and compromise on your expenses matter a lot, and both can be huge in terms of hitting your goals and living within your means. You’ll probably also want to be frugal while you’re rocking an entry-level salary, or launching a new business, just to make your monthly money situation work.
But there’s only so much you can cut out of your budget, and if you’re doing all of those things but hoping to upgrade to slightly nicer digs, or a bigger Starbucks budget, or ordering an app and a main once in a while?
That’s OK. I wanted those things too, so when my income went up, I got them.
In fact, I probably spend at least $800 more per month than I did a few years ago, because my expenses rose as I took on new commitments that I had been itching to take on, like a car and a dog and a house in the suburbs. (Yes, I’m boring af, but I like what I like.)
Those things happened when my income was high enough that I could comfortably afford them, and to this day I maintain that having laundry in my own house is way up there on my list of best-things-to-ever-happen.
It sounds like a classic case of lifestyle inflation, because it is.
But then, I got to a point where I was over-the-moon happy with my life. I love having a dog, and living with The Boyfriend in the suburbs, and my monthly budget is almost entirely on autopilot. I spend about the same amount, give or take $100, every month without even trying.
So as my income went up after that point – my comfortable spending point, a term coined by Our Next Life – so did my savings rate. I didn’t feel like I needed to spend more, so I just… didn’t. And trust me, there is a laundry list of things I intentionally don’t spend money on, like fancy clothes or going out to bars, because I’m just not about that life.
But at the end of the day, when it comes to maintaining a high savings rate, the real trick has been my salary. It’s enough to allow me to live the way I want and still save a big chunk of my income without feeling totally deprived.
That said, I had this salary before I started consistently hitting my savings goal, so it’s also not the whole story. Even with all of my planning and budget awareness, my comfortable spending point used to be around 60% of my income.
Enter, side hustles.
I have more than one stream of income.
The really big change in my ability to hit my savings rate came in October, when I consistently started earning money from my freelancing clients and my blog.
Yup, Half Banked makes a wee bit of money every month, and I write for some pretty amazing clients in the financial space on a freelance basis. (If you think we should be working together, check out the details here.)
I have a lot of Thoughts about side hustles, including the fact that I know I’m pretty lucky to be able to pursue one. I’m healthy, I’ve got oodles of formerly-free time to invest in my business, I’ve got one heck of a supportive partner who gives me tons of time and space to work, and I happen to love the work that I do.
That’s why I’m always careful when I think about pitching people on “just start a blog!” or “just monetize your skills!” It’s worked out for me, and I love it, but it’s a lot of work, and not all that easy or accessible for everyone.
It is 100% the reason I’m able to hit my savings rate goals. I’d be lying if I said it wasn’t, and my savings have not been funded by frugality alone. (Lol again, remember that time I tried to make coffee without a french press? Yeah, those days are over.)
It seems disingenuous to pretend that I’m not relying on my side hustle income to help fund the things I want to do, since I 100% am. I’ll probably end up talking more about it, if only because my knowledge of how freaking helpful it is will at some point trump my unease over recommending it to everyone, since I know it’s not always an option for people to take on that kind of commitment.
But if you can? It’s something you should strongly consider, and something I wish I had looked at more closely earlier.
I have very clear plans in place for my money.
Let me be so clear on this: earning more isn’t the only answer.
I’m so grateful for both my experiences starting my career on a low salary, and my experiences trying-and-failing to hit my money goals. Both of them forced me to take a hard look at my spending, cut back on certain categories of purchases, really look at which ones I value, and track my spending to make sure I kept myself accountable.
I know a lot of people who make more than I do, by a long shot. Some of them are amazing with their money, but some of them likely have less in savings than I do, or are wildly less careful with their money than I am.
It’s nothing against them, since no one is born knowing how to handle their money.
But whether you’re making $11 an hour, or $1000 an hour, it’s incredibly easy to let money slip away without really knowing where it went, or using it intentionally to do the things you want to do. In fact, I’d argue that’s pretty much the default money setting for a lot of us, given my personal experiences!
Having a plan for your money is so important, and it’s why my side hustle money hasn’t gone straight to PetSmart to upgrade all of my dog’s toys and gear. (You guys know how I feel about that dog.)
Nope, it’s (almost) all going to one of three places.
- 25% goes into a savings account to pay taxes on it.
- 20% goes into a savings account to fund investing back into Half Banked.
- 50% goes to my highest-priority savings goal.
- And yes, 5% stays in my account to fund my latte habit.
I figured out what that highest-priority goal was using the Bankroll Your Goals system, which you can find out more about right here. And in case you’re like ugh, this is just another PDF download, it’s also exactly what I used to rearrange my savings goals when I finished my house downpayment savings goal in January.
That’s right, I’ve got a new top savings goal!
That’s right, it’s top secret (just for now you guys, you know I can’t keep secrets to save my life.) But it’s getting funded like crazy, thanks to my side hustle, and I’ll be able to hit it in no time.
And yes, I spend less than I make.
This probably doesn’t even need to be said, because the title of the article was pretty clear that I spend about 50% less than I make in any given month.
But getting into this habit isn’t something new, and it’s definitely not something I’d want to be starting on my current income if I hadn’t had plenty of practice.
I started saving money automatically as soon as I had a steady paycheque, and while it wasn’t a ton of money, it was something. If you have dreams of quitting your job to travel the world, or buying a house, or taking a year off to have kids, then your very first step is to start spending less than you make, whatever that looks like for you.
You can start with as little money as you want – $10 a month? $20? – but here’s what I want you to do rightnow. Go set up an automatic contribution from your chequing account to one of your savings accounts for that amount of money, and have it come out of your account the next time you get paid. (If you’re self-employed, send the money to your savings right now instead!)
You can always pull the money back out if you end up needing it, but here’s the real magic: Once it’s in your savings account, and it’s in there to help you fund whatever your big dream is? You’ll probably do whatever you can to make sure it stays there. Over time, that monthly contribution will grow into something pretty impressive.
So how can you save half of your income?
Here’s the Cliff Notes, for those of you who might have skimmed to the end. I got you fam.
- Figure out your comfortable spending point, ideally by tracking your spending. How much feels like “enough” to have the life you want? Stick to that spending level as your income rises.
- If it’s an option for you, look into building other streams of income. They can be a huge boost to your savings, and help you hit your goals way faster – but they are a ton of work, so they might not be a fit for everyone.
- Put a plan in place for any “extra” money that comes your way. Whether it’s a raise, or a bonus, or side hustle income, you should know how much of it is going to each one of your goals – and yes, that includes spending.
- Start spending less than you make, even by an extra $20 or $50 a month. Save what you can by setting up automatic contributions, and if you don’t miss that amount, set up another one to save even more.
That’s really it. And yes, a lot of these things take time, and might not change overnight – but when I look back at the past year and a half, they really are the big things that got me to the point where I could save half of my income.
Do you have a lofty savings goal you’re working towards – and a big “why” behind why you’re saving the money? Tell me about it in the comments – and let me know what steps you’re taking to make it happen! You might just inspire someone else to do the same.