Living on half your income. Impossible? No. Daunting? Yes. How do we accomplish this? With willpower made of steely determination and making major sacrifices. Add to that a dash of honesty, and you’re on your way. Easy, right?
All joking aside, the obvious first step is to cut back on your spending, and the way you do that is by taking a hard look at your expenses. But first, let’s take a look at why anyone would want to save half of his or her income.
Given the recent challenges with the economy, it’s just smart to save half your income. Even if you can’t save half, you should aim to get pretty darn close to it. After all, you never know when you’ll face a rainy day due to a layoff, illness , car problems, legal issues, etc. Many people are just one paycheck away from financial ruin. Living on half your income prepares you to live on less while saving more for that rainy day. And you can do this whether married or single. The question becomes: Can you live on less to save more?
How to Get There
If you’re married, pick one income to live on or save half of your combined income. If you’re single, save half of your income.
1. Track your spending for 30 days. Think of the next 30 days as an examination of your spending patterns. As with any diet, prior to getting started you must look at your current eating habits, and decide what must change to reach your goals. The same concept can be applied to improve your financial health. Track your spending habits for 30 days. On a weekly basis review your spending, and take inventory of necessary purchases and any frivolous or impulsive buys. Cut the extraneous expenses the following week, and you’ll have renewed insight into where exactly your money goes.
2. Go on the no spend diet. For the following 30 days, challenge yourself to spend money only on the essentials. This is where the steely willpower comes in. Can you limit yourself to only the essentials? Or will the daily latte, weekly happy hours or monthly shopping sprees (aka “retail therapy”) get the best of you? If you’re successful, then your bank account will thank you.
3. Automate your savings. After you’ve tracked your spending and then limited said spending to only the essentials, now you’re ready to rock and roll. Open an account and set the amount to be saved weekly, monthly or biweekly. Ideally, the money shouldn’t hit your “spending” account – it should be automatically drafted into savings.
This all sounds great but how do you plan to avoid the hurdles that come along with living on half of your income? Read more at USNews to find out how to avoid the obstacles to getting there!