One of the best ways to rapidly build up a cash reserve is to make it a goal to increase your monthly savings rate. In this article I’ll share how to save 50% or more of your income – which may sound crazy. According to the Bureau of Economic Analysis, the average American saves only 5.2%.
Many personal finance experts recommend that you should be saving between 10% to 20% of your monthly income.
What if you wanted to get extreme and save 50% or more of your income?
For a while Katie & I had some life circumstances which allowed us to save 90% of our after-tax income each month. It was a stepping stone that allowed us to retire early.
Conventional wisdom suggests that the easiest way to save 50% or more of your income is to increase earnings while decreasing expenditures. You’ll be able to reach your financial goals much quicker if you can sock away more money.
In this guide, we’ll provide suggestions on how you can save 50% or more of your income.
Save 50% Or More Of Your Income By Examining Your Daily Routine
You could potentially save hundreds per month by thinking of different ways to eliminate or reduce your daily expenditures. In this exercise, grab a sheet a paper and begin writing out the things that you do on a daily basis.
If any of these activities cost money, ask yourself if you’re gaining value from this expenditure. If the answer is no, consider cutting this activity out of your daily routine. When you list out your day-to-day costs, you’ll be forced to make some tough decisions. You’ll be required to think about:
- Spending $5 on that gourmet coffee every day before work
- Wasting time watching that expensive cable/satellite subscription
- Buying a $4 energy drink at the gas station
- Spending money at lunch when you could have brought something from home
- The weekly pedicure
- A long commute in a gas guzzling car
You get the picture. If you’re wasting money on a daily basis, it may be difficult to reach your 50% monthly savings goal. This exercise directly helps you determine whether or not you are excessively spending money on nonessential items.
For more information on coming up with a spending plan, see how to get started budgeting and the lazy person’s guide to budgeting
Implementing Unconventional Methods of Saving Money
If you’ve completed the exercise above, you should have a list of all of the activities that cost you money. If you’ve scrutinized the list and you’re still struggling to find items that you can slash from your budget, consider implementing these unconventional money-saving strategies.
Start or Join a Carpool – Perhaps you have coworkers that live nearby; Try coordinating a daily carpool between those near your home and those who work near your workplace. The eRideShare app could help you organize regular carpools. This strategy could help you save on fuel costs associated with operating your vehicle, as well as general wear and tear associated with adding mileage onto your car.
Coupons For Purchases – Set aside 30 minutes to an hour each week to find coupons that you can use to gain discounts on items that you already purchase. Most commonly, people will use coupons for grocery purchases.
The Krazy Coupon Lady blog is an excellent resource that matches up coupons with products that are on sale at your local grocery. You should also subscribe to your local Sunday paper to gain access to more coupons.
Utilize Online Resources – When you buy products online, be sure to search for coupon codes tailored to that particular retailer. Another idea is to buy gift cards for everyday purchases.
Raise.com sells gift cards that let you make purchases from your favorite retailers at a discount. You can also use the ReceiptHog app to get paid for uploading your receipts. Consider using SwagBucks or Perk to help monetize your mobile devices and earn gift cards for the retailer you use the most.
Learn to Cook – There are lots of cookbooks at the library and millions of recipes on Pinterest. Cooking at home is less expensive and healthier than eating out.
According to the US Healthful Food Council, the average American buys a meal or snack close to 6 times a week. Since that is the average, there are those out there eating out much more. Eat at home and watch your savings pile up!
Reduce Your Home’s Power Consumption – Smart home technology gives you the ability to reduce home’s power bill. Nest says that its smart thermostat helps save between 10% and 15% on heating and cooling costs.
Contact your local utility company, as they often have programs that help customers streamline their power consumption and save on their monthly bill.
Reduce Monthly Bills – Could you save money by refinancing your home or consolidating your debt? If you are managing credit card debt, paying these balances off would be a fantastic method of hitting your 50% monthly savings goal.
If you are unable to pay these balances off, you could elect to get a personal loan to help save on monthly interest charges. LendingClub provides peer-to-peer personal loans that can be used to pay off high-interest credit card debt.
What about your auto insurance, home insurance, and cell phone bill? These monthly expenses likely eat up a good part of your income, so negotiate where you can, switch plans, and decrease these as much as possible.
Make It Your Mission to Increase Your Monthly Income
Reaching a 50% monthly savings rate may not be feasible for some people unless they increase their monthly revenues.
Some of the most common ways of increasing your income involve getting a new job, asking for more responsibility at your current job or developing a side business. Another route is to invest in a skillset that is in high demand or to seek out money making opportunities online.
Compared to just a few decades ago, people have more choices when it comes to generating new streams of revenue. Let’s carefully examine how you can generate more income to help hit your monthly savings goal.
Get a New Job
If you are currently employed, one of the easiest ways to increase your monthly savings rate is to get a new job. Utilize all of the online resources at your disposal including Indeed and Glassdoor.
Indeed is a great resource for finding a new employer.
Glassdoor gives you an insider’s perspective on the company culture, as well as what you may expect to get paid.
Asking for a Raise or More Responsibility
For some people, sticking with their current employer may be their best option. If you plan on asking for a raise, Forbes has published an excellent article on how to go about it the right way.
If you decide on asking for more responsibility, start the discussion out by asking if overtime opportunities are available for your position. Your leverage may be limited if you are a salaried employee. You could volunteer to be “on call” more often, which you could use as leverage to ask for a raise.
Develop a Side Business
Think about your talents and skills that you can turn into a side business. You could perform labor-intensive tasks for those in your neighborhood such as landscaping, snow shoveling or painting.
If manual labor isn’t an option, you could always develop a side business online. You could rent out a room on Airbnb; you could become a pet sitter on Rover, or you could even drive for cash using Uber or Lyft.
If transporting people isn’t your thing, you could always become an independent logistics specialist with uShip.
See these articles on earning extra income:
- 50 Legitimate Ways to Make Money from Home
- 112 Legitimate Ways To Make Extra Money Fast in 2017
- Popular Ways to Make an Extra $1,000 a Month
- 10 Ways to Make Money from the Comfort of Your Own Home
- How To Make Money Blogging
- How to Become a Full-Time Freelancer
Investing in a Skill Set
Luckily, the internet provides us with several different mediums for learning valuable skills for free (or at a reduced cost). With your new skills, you will be more qualified for higher paying jobs or you could elect to start a business providing your skills to others for a fee. Here are a few websites that will help you develop a marketable skill.
Udemy – Udemy offers free and paid classes taught by industry experts that will provide you with skills that can help you generate more income.
edX – Free college level classes taught by world renown professors. EDx offers an extensive collection of college materials that are taught in top universities such as Stanford, Harvard, Berkeley and more.
Microsoft Virtual Academy – Do you have a passion for technology? If you enroll in the Microsoft Virtual Academy, you will gain expert insights from Microsoft product developers on the latest enterprise technologies.
Money Making Opportunities Online
The explosion in online services has created a new digital economy that has provided new opportunities for individuals that are savvy. Here are a few websites that offer ways for you to make money online:
UserTesting – Get paid to become a beta tester of apps and new online services.
LiveOps – Have a landline and some extra time? You can become a remote customer representative for some of the largest companies in the world.
Upwork – Do you enjoy freelance writing, graphics design or technical jobs? Upwork is the world’s largest community of freelancers and contract employers.
Putting Your Plan into Action
With the tools in this guide, you should have enough resources to begin deviating methods of increasing and saving your income.
The hardest part about savings 50% or more of your income is having the discipline to follow through with your plans. In our consumeristic society, you will be tempted on a daily basis to stray from your budget. Try not to put yourself in positions where you feel like you may compromise your budget.
Without discipline, your plan to put 50% of your income into savings may ultimately fail.
If you find yourself being undisciplined with your finances, don’t abandon your plan. The best thing to do is to evaluate the situation, refocus on your goals and figure out what you need to do to get yourself back on track.
How To Get Started Investing
The international bestseller by CERTIFIED FINANCIAL PLANNER™ Scott Alan Turner. Choose the right accounts & investments so your money grows for you – automatically. No jargon, confusion, or pie in the sky promises. Just a proven plan that works.