Do you want to live on half your income? Save 50% of your paycheck every month? This isn’t just a dream. In this article, I explain exactly how I live on half my salary. It will change your life forever!
Do you think that saving 50% of your income is not something that you can achieve?
The basic formula is simple: the more you invest, the more you earn in (potential) returns, and the faster you will reach financial independence.
If you want to pursue financial independence and/or early retirement, it’s important to keep the amount you save each month as high as possible.
Living on half your income will do this.
You can read here how I live on half my income – and you can too!
In order to live on half your income, you have to reflect on your current situation and go from there. If living on half your income is what you truly want, believe me when I say that in the end, it will be so worth it! You will get to save half of your income!
6 Steps To Live On Half Your Income
Here are the steps to start living on half your income and put 50% towards your financial goals. Let’s go!
1. Start With The Basics
As with anything, we’re gonna start from the beginning. You don’t have to drastically change your life by decreasing your expenses immediately to save 50 percent. That would be too much.
The changes can be done over time. The important thing is to take whatever fits with you and implement that right away.
We are going to work on this from your after-tax income, and from there, we are going to look at the spending. We are not going to address the current situation unless just adjusting your current situation will give you the 50% savings rate. If that is the case,
Do some testing, research what works for you and what doesn’t, and living on half your income will be your reality in no time!
2. Half Your Take-Home Paycheck
Calculate what is 50% of your take-home paycheck.
As mentioned before, if you can simply adjust a few things in your budget to save 50% of your income, DO IT NOW!
If not, no worries, I will take you through the whole process.
When you have calculated half of your take-home pay, let’s dive straight into the good stuff.
Next, you are going to subtract your fixed expenses from half of your take-home pay. This is the end goal, so this is what we’re focusing on.
Do you want to track your net worth, your expenses, and your investments all in one tool? Empower is a great FREE tool that helps to get you started!
List your fixed monthly expenses like your car, your mortgage, and more.
After that, subtract the variable expenses that you have. Things like groceries, gas, utilities, and more.
It’s important to keep not only your regular expenses in mind but also the holidays that you want to have, self-care, insurance, and more.
When you take half your take-home paycheck and subtract all of your expenses, are you already deep in the red by now?
That’s okay. It’s all about knowing where you start from and going from there.
No need to worry about that!
Now look at this list and ask yourself: if I needed to live on half my take-home paycheck right now, how would I do it?
It’s all about seeing the possibilities and options that you have in your current situation.
I mean, if you got fired tomorrow and didn’t get a job until a couple of months down the line, you would survive. How would you do it?
There are most likely some serious spending adjustments involved.
That’s what we’re going to focus on now, trimming the fat.
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3. House Hacking
For everyone, the biggest gains will be most likely made by cutting your housing expenses.
Do you remember the time you were studying? Most probably, you lived in a single room and shared your bathroom, kitchen, and everything else.
Well, that’s actually how I lived the first two years of my working life. I still live in a shared apartment. I am sharing my bathroom, kitchen, and living with 3 others. My housing costs were less than $300, including utilities and internet.
Currently, I live with my partner, and I’m paying $350 in rent, which is still very cheap. We’re not allowed to rent out a room in our apartment. Otherwise, that would have been our other option.
I understand that when you have a family or live with your SO, this might not be an option. That’s okay. I believe that there are still ways you can make it work!
Rent Out A Room
If your apartment is big enough, you can rent a room with Airbnb. This will significantly reduce your living costs! Plus, you can choose when you have guests over.
If you don’t want people in your house that you don’t know, consider having a roommate. They will contribute to the rent, utilities, and, if you want, even food expenses.
On average, you can save around $500 per month when you have a roommate. In big cities like San Francisco or New York, these savings are over $1,000 per month.
That means saving over $12,000 per year when you live with a roommate!!
Living with roommates is great. You split the rent, split the utilities, they help around with cleaning, and cooking. What else can you wish for?
If you really don’t want that option, there is one final option left with regard to housing.
That is downsizing your home. Move into a smaller home to cut all expenses, and you will start ahead!
4. Cutting Transportation Costs
I will not write an entire post about money-saving tips into this post, for that, I’ll refer you to my post about 25+ Incredible Easy Ways to Save Money.
BUT, the ones that I want to point out are car costs and grocery costs, these are mostly the main expenses.
Cars can be very costly, especially when you buy them new.
That’s why I will urge you to buy your car secondhand.
In the first year, a new car will depreciate 20-30%. In the next year, another 15% will be written off. Generally, by the fifth year, cars will be only worth 40% of their initial value.
That is insane!
If you buy a car that is two years old, you pay around 35% less. Is that car less reliable? Is that car worth a depreciation of 35%? Hell no!
See it as a discount.
That is why buying your car second-hand is already a huge step forward!
If you’re having a car you can save money by sharing a car with your spouse or friends, biking to work, and keeping your insurance low.
Every time you renew your insurance, check if there are better deals out there for you. Think about: do I really need everything that this insurance covers, does it still fit my needs? (This is applicable for other insurances as well, including health insurance).
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5. Grocery Shopping
You cannot go out to eat 3x per week if you want to live on half your income, nor can you go shopping each month.
Another great saving is bringing your lunch to work, which can save you thousands per year!
Grocery shopping is one important factor since many friends of mine spend over 200€ per person per month on groceries. For me, that is just insane!
Normally I spend around 70$. But the point is, the difference is HUGE, and a lot of people leave money on the table.
Here are a couple of tips to save money when grocery shopping;
- Go to low-cost supermarkets (Lidl, Aldi, or something similar)
- Buy the generic brand (except for the things you really enjoy buying from the name brands)
- Always have a list of things you need so you don’t buy too much
- Buy in bulk, season, discount
- Go to the store only once per week
- Meal plan – this is actually a huge one. I can recommend you check out $5 Meal Plan, which is a weekly meal planning service where you get weekly recipes to make plus a grocery list, for $5 per month!
Want to read more tips on how to save money grocery shopping? Check out this article for more info.
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6. Know Your Triggers
Everyone has their personal triggers, things that you know will get you through your budget in no time.
For some, it’s going out to eat, the latest gadgets, expensive cars, you name it. It’s different for everyone. It’s okay that you have them, everyone has.
The thing is, when you recognize and know what your triggers are, you can plan.
Change your behavior around those triggers! Don’t go to the Apple store, have enough food in your fridge, only look at cars on the streets.
Most people pay for convenience if you want to save half of your income, that is not for you.
Frugality does NOT mean boring! Learn how to cook at home, have fun without leaving the house, buy second-hand, think before you buy, borrow instead of buy, and more. After all, saving money can be fun!
This will cost you some more time, but it will save you so much money it’s worth it.
It will be fun to learn all the new things and develop new talents, and you might even find your new passion or a new hobby!
If you want to join the frugal fun, here are 105 fun things you can do without spending money!
7. Make More Money Now
Okay, we’re done with the saving part, now on to the make more money part!
There are three ways you can make more money:
- Get a raise at your current job
- Get a side hustle
- Start building passive income
We’ll go over them one by one.
Get A Raise
One great way to make more money is to ask for a raise at your current job.
If you’re not up for regular review yet, ask them if there is an opportunity to talk with them about your performance. Find out what they find valuable in an employee and what you can improve, and you’ll be sure to get a raise when the review comes up.
While you’re having that talk with them, ask them if it’s possible to get a raise. You’ve already worked at the company for X amount of time, and you are adding way more value now than in the beginning.
Your career is your most valuable asset, meaning that you will get millions of $$$ from your career over the course of your career.
Getting a raise early in your career will help you later on make more and save more money.
That’s what we all want, right?
But, don’t you dare spend anything from your raise?
The goal is to save half of your income, which means you bank your entire raise.
Get A Side Hustle
Side hustles are a great way to increase your income and save more.
When you have a little extra time, you just do a little side hustle. When you have a lot of time, you do a lot of side hustling. It all depends on the energy that you can spend on your side hustles.
With a side hustle, you’re basically earning extra money besides your normal 9-5.
A side hustle can be anything.
A couple of examples are:
- Sell your stuff online
- Take photos and put them online
- Start a blog
- Build websites
- Walk dogs in your free time
- Type online to make money
You can build a side hustle around an existing hobby or think about something you would love to learn!
What side hustle really helped me to get going is starting my own blog through Bluehost, if you’re in doubt about whether you want to start a blog or not, you can start here:
Build Passive Income
Passive income is when you get extra money without doing any work on a regular basis. This is like making money while you sleep – who doesn’t want that?
You want to start building passive income? Let’s get started!
There are many ways to build passive income. The most common ways are:
- Dividend investing – you get monthly or quarterly dividends for your investments in the stock market. I’m a particularly big fan of low-cost index funds. If you are not familiar with investing, read here how you can invest your first dollar.
- Real estate crowdlending – when you are participating in real estate crowdlending, you are basically owning part of a real estate property. Here are the 9 platforms that I personally would recommend when you want to try it out.
- Rental property – this can be a long-term or short-term rental (like Airbnb).
- Peer-to-peer lending – one version of passive income is peer-to-peer lending, where you lend money to individuals or companies, and you get paid monthly interest for that. This is one of my major sources of passive income at the moment!
All In All – How To Live On Half Your Income
If there is one thing you take from the article, I hope it’s this. Living on half your income is possible for you, but it needs your dedication and energy at the start.
The first couple of moves will need some getting used to. Once you see the results and you see your investments stacking up like nothing else, it will all be worth it!
Change your mindset, and you will be able to save money while spending money on things you find valuable and cutting back on those things that don’t add any value.
The most important thing is to keep going, not give up despite how hard it might seem for you at this moment to take that extra step. It will be challenging, but you’ll be much better at it!
Cut back on your spending, look for a roommate, get your car secondhand, and be mindful about your grocery spending.
If you want to get the snowball rolling, make extra money and start building your passive income. This is your money-making money.
In time, your investments will be able to cover (part of) your expenses. That would be so awesome!
How do you plan to live on half your income?
Founder of Spark Nomad, Radical FIRE, Journalist
Expertise: Personal finance and travel content
Education: Bachelor of Economics at Radboud University, Master in Finance at Radboud University, Minor in Economics at Chapman University.
Over 200 articles, essays, and short stories published across the web.
Experience: Marjolein Dilven is a journalist and founder of Spark Nomad, a travel platform, and Radical FIRE, a personal finance platform. Marjolein has a finance and economics background with a master’s in Finance. She has quit her job to travel the world, documenting her travels on Spark Nomad to help people plan their travels. Marjolein Dilven has written for publications like MSN, Associated Press, CNBC, Town News syndicate, and more.