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The Secret Behind How I'm Saving 40% of My Pay

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Hispanic woman counting coins from jar
Blend Images/Alamy
By Lauren Bowling

In our Money Mic series, we hand over the podium to people with controversial views about money. These are their views, not ours, but we welcome your responses.

Today, one woman shares how she went from being a spendthrift to saving nearly half of her income -- each month
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I've never been very good at saving.

Credit: Stacey Bode PhotographyLauren Bowling
I'm a spender -- shoes, trips, nights out, you name it. It's a fact that became especially apparent to me when I found myself saddled with $10,000 of credit card debt after graduating from college.

Despite this fact, I decided to move to New York City a year later to pursue a career as an actress. The only problem? The minimum payments on my credit cards were so outrageous ($300 a month) that I had to put auditions -- and my career dreams -- on hold and get a steady, full-time job just to keep up.

As it turns out, I'm great at paying off debt.

I found a job as an administrative assistant at a hedge fund, making $45,000 a year. Between sticking to my budget and putting 30 percent of each paycheck toward my debt, it only took me 14 months to pay it all off.

I celebrated the feat by printing out a screenshot of my zero balance statement to display on the fridge. Having that measure of quantifiable success was empowering, but the truth is that I still hadn't gotten the hang of saving -- the one thing that could help keep me out of debt.

The Side Gig That Turned Me Into a Better Saver

After living off ramen for much too long, I wanted to experience the "good life" while I still had the chance -- but in a city that wouldn't put me back into debt. So after two years of living in New York, I moved to Atlanta to be closer to home and to switch careers. I didn't want to be an actor anymore -- or an assistant, for that matter! -- and living with my parents seemed like the best place to figure out my next step.

Around the same time, I started a blog. Working at the hedge fund had inspired me to get a handle on my money, and I began writing about the triumphs and pitfalls of working toward financial responsibility. I put all my efforts into the blog -- and it ultimately helped me land a job as a content and social media manager for a start-up.

Thanks to my blog, I'd come to love thinking, writing and talking about money -- and it inspired me to constantly strive to be more responsible with what I have.

Along with this keen interest in personal finance comes the consumption of a lot of other money-related journalism and ideologies. One of the most interesting? A movement among other bloggers called the "50% Club," in which members challenge themselves to put away half their income each month. I loved the idea and hoped that by joining, I'd become a better saver.

My bank account certainly needed a boost: I'd put some of my bonus from my old job (the only "savings" I had to speak of) toward a down payment on my first home in Atlanta, and even though I'd gotten a good deal, it needed a complete renovation -- which, of course, went over budget.

The 50 percent challenge seemed like a good way to aggressively save enough to build up my emergency fund and reestablish solid financial footing.

My First Month on the 50 Percent Challenge

Between my full-time job, freelance income from managing social media accounts for a few clients and advertising revenue from my blog, I take home around $5,200 each month after taxes. Half, or $2,600, seemed like a reasonable enough amount to save each month ... until I ran the numbers.

Owning and living in a 2,000-square-foot home by myself means my utilities and insurance premiums are higher than if I lived in an apartment or with roommates. And although the home is much bigger than I need (I originally bought it with my ex), I still need to live here another year or two in order to recoup my investment costs.

I still wanted to improve my savings habits in a more sustainable way, so I decided to name my own number.

So due to a large house and the associated costs, plus such fixed expenses as gas and groceries, I'm shelling out about $2,000 (40 percent of my income) a month before I've even spent any extra "fun" money.

So during my first month on the 50 percent challenge, I tried to trim back on expenses, like utilities and my cell phone bill, but it was tough. The home was old, so it used up a lot of energy. And I needed to use my phone quite a bit for my freelance work.

I also ended up spending my "lifestyle" money a little too freely. After working lots of hours between my full-time job and freelancing, I found it difficult to say no to myself more than usual when I wanted to enjoy my free time or indulge a little.

As a result, I ended up shuffling money back and forth between my checking and savings accounts to cover expenses -- and ultimately decided the 50 percent savings challenge just wasn't for me. But I still wanted to improve my savings habits in a more sustainable way, so I decided to name my own savings number.

A Retooled Money Challenge

I started by identifying my biggest money goals and working backward to determine how much I'd need to save in order to meet them.

It was January -- a perfect time to think about what I wanted to accomplish by the end of 2014. So I wrote a list: Pay off the last of my lingering house renovation debt ($7,500), increase my emergency fund to $10,000 (five months of living expenses) and fully fund my Roth IRA ($5,500).

Even during the months when I miss my goal, I try to remember that it's important to save something -- even if it's a small amount.

Tackling these three goals would cost a total of $23,000 for the year, which was $1,916 a month, or 36 percent of my take-home pay. To make it a nice, even number, I bumped it up to 40 percent, which meant saving only another $144.

Since I'd had trouble saving in the past, I was determined to adopt better habits in order to stay on track this time. I started by vowing to deposit the $1,300 I make each month from freelance work directly into my savings account, so I never see that money or feel it's free to spend. With those funds stashed away, I only need to save another $780 to hit my goal.

I also set up an automatic transfer to my savings account for $340 each pay period -- something I'd never done before. And it turns out that I don't really miss that money, either. I know everyone who automates their savings strategy says that, but I've finally learned how true it is!

The best part: Now that I've adjusted my savings number to something I feel more comfortable with, I rarely have to pull money out of savings to cover overages in my discretionary spending.

My New Life As a 40 percent Saver

With the money I've saved so far, I've been padding my emergency fund, as well as paying off student loans and credit cards that I ran up again while doing renovations.

After I pay off my debt near the end of the year, I'm planning to funnel the funds into my retirement account. Since we're only halfway through 2014, I've focused on paying down debt to save money on interest. It's been really exciting to see these numbers shrink with very little manual effort on my part.

I've also gotten better at saying no to social invitations or home improvement projects if my budget doesn't allow for it. And if I ever need to dip into savings (for emergency car or home repairs, for instance), I try to replace the money the following month.

Hitting the financial targets I've set for myself feels incredible, but perhaps the best thing I've learned from the challenge is not to beat myself up about what I can and cannot do. Some months I've saved closer to 45 percent, and others just 10 percent to 12 percent because an unexpected expense cropped up.

But even during the months when I miss my goal, I try to remember that it's important to save something -- even if it's a small amount. I plan to continue to save 40 percent for as long as my lifestyle allows, while also keeping in mind that life can change quickly. Just six months ago, I was saving only around 6 percent of my income.


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13 Comments

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elwood.randall

Congrats to her. It takes hard work and dedication for sure to put away money like she is. I have some things that have worked for me really well to. This is the best of what I have been doing lately to save:
1. I eat out at least 1 less time per week, This saves 50-$100 per week minimum, and if you skip fancy meals it saves even more.
2. I make all my own coffee now. Sorry $5 a day Starbucks runs. I think they will be just fine without me somehow.
3. It's embarrassing to admit what I was paying, but some hotshot financial advisor sold me this life insurance policy for $290 a month. I understand it saves a cash value, but it was ridiculously expensive, and I can get a higher return investing that money in other places. After doing some research I realized that you can get Term policies for the same coverage online for way less. I got mine from Life Ant Insurance and it only costs about $14 a month.
4. I save the maximum in my 401k that my employer will match. It is free money and I was stupid not to do it all along.
5. I was able to negotiate a better deal on both rent and cable. I didn't even know that cable companies negotiate with you until my friend told me. Between the two I save an extra $55 a month. Not huge but over time its going to add up big time.

Do what it takes basically to be on the winning side of saving/spending, and try to win big ;).

June 27 2014 at 5:17 PM Report abuse -2 rate up rate down Reply
1 reply to elwood.randall's comment
Valerie

@ elwood --- How many times are you going to show up here and cut and paste the SAME list of saving tips????

June 28 2014 at 8:32 AM Report abuse +1 rate up rate down Reply
1 reply to Valerie's comment
Ed

UNTIL YOU START FOLLOWING THE TIPS!!!

July 03 2014 at 7:15 PM Report abuse rate up rate down
petpetdon

When you take home over 5 grand a month it is easy to save money. This is a useless story based on nothing anyone can really do.

June 27 2014 at 9:17 AM Report abuse +3 rate up rate down Reply
crimeslawyer

Living with your parents! LOL

June 26 2014 at 11:17 PM Report abuse +2 rate up rate down Reply
sgogator

Hello Lauren,
Thank you for your informative article. I wish I knew how to go and find your "blog" but not really sure. I'll try google and see if it comes up, I don't know if people respond to a "blog" in an open forum but I'll see what I can find.
So besides not being the internet tech savy person I am also a saver. I would have to say I am addicted to saving, sounds nuts but I guess people can become addicted to anything. Like your story, I spent my earlier time earning money, saving a little in my 401K and living life to the fullest. All though I do not regret those choices I try to stress to my younger fellow co-workers the importance and benefit of saving at a younger age then I started. The benefits of compounding your savings over time are incredible, especially using the tax shelter of the ROTH.
Annually I save around 45% of my net income every year. I accomplished hitting this number by doing what I read day in and day out. 8.5 years ago on Jan 1st I made a resolution to start a excel spread sheet and log in EVERY penny I spent and what I spent it on. This sounds like a daunting task but between having access in your handheld phone or back then I would just carry a piece of paper and a pen, write it down then take 10 mins each night to transfer the info to my excel sheet. I also catagorized each expenditure in, FN ( fixed bill necessity, such as rent), FE ( fixed bill entertain, such as my direct tv account or cell phone), DE ( Discretionary Entertain, such as going out to a bar or movie or even just buying a candy bar when I was at the store), and H ( health related, such as the co-pay on a regular prescription). I wasn't making any hasty changes, I just wanted to know where the heck all my money was actually going.
After about 4 months I started my analysis and started saving and saving fast. I made a deal with myself that I would save 75% of any changes I made to my budget towards that rainy day fund nobody wants to have to use and/or my retirement. The other 25% I would put in a seperate account and use for a vacation as a reward to myself. I found out I barely used 2% of the data I paid for on my cell phone and changed my plan to something that matched my usage. I found out that going out to dinner or ordering delivery is not the cost effective way of doing things. Now I go to the grocery store once every 2 weeks and changed my food expenditure from 500 a week to 150, even including the 1 dinner I don't cook for myself each week. So my opinion and advice to anyone ( especially the younger people) who wants to start saving is to do a life cost analysis first, find out where your "excess" money is going and make small changes, save that money and you have made a great start for your future.
If I can find your Blog I would enjoy sharing more. Auto Investing plans, awesome advice. You didn't mention much about where/how to invest your money and am hoping that is one of the topics on your Blog

June 26 2014 at 9:56 PM Report abuse +1 rate up rate down Reply
lafeef

Great, this article offers nothing to anyone except for singles with great jobs. The rest of the country lives in the real world with spouses, children, college tuition, bills, and long hours for less pay. Good for you sweetie, enjoy your life and money alone.

June 26 2014 at 9:34 PM Report abuse -1 rate up rate down Reply
shldd

Do you have any kids? Stop slapping yourself on the back!!!

June 26 2014 at 7:52 PM Report abuse -1 rate up rate down Reply
1 reply to shldd's comment
millyoob

Why should she stop? If you chose to have children, and now can't afford them, that's your problem, why down someone doing something positive? Maybe if you'd planned and saved prior to having them, you too could be in the plus.

June 26 2014 at 9:08 PM Report abuse +1 rate up rate down Reply
Valerie

Please don't beat yourself up for past mistakes. Your past is like the wake in the water behind a speedboat --- just something you had to go thru to get to where you are, today. What matters most is what you are choosing to do, now.

Women are constantly bombarded by advertising campaigns to "buy buy buy". Makeup, hair dye, fad fashion clothing, purses, shoes (!), jewelry, expensive styled haircuts, acrylic nails, cosmetic surgery --- and the list goes on and on. It just never stops Unfortunately, women have been brainwashed to think this crazy constant spending on outward appearance is "normal". (It isn't.)

Most women never have the courage to break away from the shopping herd. So, what you have achieved in just six months is truly impressive. You should be proud of your accomplishments, this year, and I hope you are.

After you are debt free and have achieved your goal for your emergency fund, I suggest you do some reading and research on Stock Dividend Income Investing strategies. It's not a hard concept to learn. And, with your long time horizon before retirement, it might be a perfect fit for you. Even if you have to hold those stocks in a taxable account, you could be a millionaire (or even a multi-millionaire) by the time you are ready to retire.

June 26 2014 at 7:21 PM Report abuse +3 rate up rate down Reply
dwbiker

Congratulations! If you save and manage your money properly, you do have more money to spend. Spending is okay, but spending money and going into debt is what has caused problems for so many of us. Also, I encourage giving to causes you believe in.

June 26 2014 at 6:45 PM Report abuse +2 rate up rate down Reply
audioknot1

Stop spending and the country goes into Depression. The GDP is 70% consumer driven. Spending is good. It makes jobs. Conservatism is evil.

June 26 2014 at 5:57 PM Report abuse -3 rate up rate down Reply
1 reply to audioknot1's comment
alfrankenfool

Just keep spending yourself to oblivion just like your favorite Dunce at 1600 Pennsylvania Avenue.

June 27 2014 at 8:21 AM Report abuse -1 rate up rate down Reply