You’ll probably know if you’ve been reading this blog for a while, that my husband and I like to save our cash. 🙂 Today I’d like to tell you about how we went from being able to save NOTHING to how we’re now saving on average 50% of our combined monthly income.
You’ll also know if you’re a long time reader of this blog, that being able to save a fair bit of money each month doesn’t make us rich. We’re not driving around in flash cars or sporting designer clothes, or relaxing on yachts (that’d definitely take a lot more than we could save).
One reason we can save around half of our income is because we DON’T SPEND a lot of money. After all, we have plenty of things to save up for now, after being in debt for so long. We’re practically starting over again.
However, once upon a time… we couldn’t save a bean
Quite a few years ago, I remember one of our friends mentioning that they were able to save £1000 per month easily because that’s what he had in disposable income. I honestly couldn’t believe my ears at what he said. Saving £1000 per month! I mean, that is big money, right?
This was before our daughter was born and both me and my husband earned a full time wage. We earned decent money, each making in excess of £30K ($42K) per year. Yet, we found saving extremely difficult. Around half of our income at that time went towards household bills and fuel bills, a quarter of it went towards debt repayments and the last quarter, well, it just got wasted somehow.
We just didn’t seem to have any spare money left at the end of the month. We could never afford big purchases without resorting to credit and the situation stayed like this for a number of years. We were always holding out for payday and then, when payday came, our wages were swallowed up in no time. We always lived in our overdraft.
Anyway, when I fell pregnant, we realised that if I wanted to take some time off work to be with our daughter during those early months, we would have to somehow save. Otherwise, we’d have to save for childcare in any case. We started to cut back on a few bills and this was our introduction to a whole new world where we learned that there were indeed savings to be made. We scraped together a small pot of savings just in time.
Things were going swimmingly, until we hit rock bottom with our debts when I was on maternity leave. Not only were we living on a reduced income plus the small pot of savings, we were also in serious trouble with debt too.
How we began to save money
It was at this point when things changed for us when it came to saving money. During the few years following, we learned how to really cut back and we made a lot of financial sacrifices.
We were living on my husband’s wages, but we couldn’t just survive on his wages alone. So we worked like troopers to earn money on the side and I set up a home-based childminding business so that I could raise my daughter at the same time.
We went from being in deep trouble financially, to being able to just about manage the debts and the drop in income. Gradually, with our savings (and a nicely timed PPI claim), we managed to clear our debt over 22 months. Eliminating those debts gave us a lot more money to save.
Through regularly checking that we’re getting the cheapest deal on our household bills, clearing our debts and only buying what we need, we’ve now managed to get to a point where we can live off my husband’s wages without the need for side hustles. As I’m writing this post, we can just about survive on his income alone.
Everything I earn, we save
I now work full-time doing freelance writing, blogging and social media management. Because I’m self-employed and my income is variable, this can work in my favour and sometimes I can have a really good month when it comes to income. We manage to now save around 50% of our combined income every month.
Now I don’t know your personal financial situation (and this will definitely be harder if you’re going it alone) but if you want to be able to save a decent chunk of your income, the same steps that we took can pretty much be followed:
1. Save, Save, Save
Cut back on your household bills and make sure your savings and investments are working for you in terms of interest rates. Changing your mortgage to a better rate is probably the save where you’ll see the most benefit because a slight decrease in the rate of interest could equal thousands of pounds/dollars in savings over the time of the loan.
Other big areas where it’s easy to save are your energy bills, insurances and downgrading your TV package. Even when you’ve cut back on your bills, there are some more clever ways you can save without really trying too hard.
2. Clear those debts
I know this is easier said than done, but if you have debt, this will be limiting how much you can improve your finances. With any savings you make, clear your debts first. Then your savings will really come into their own. You’ll notice a huge difference in how much you can save once you don’t have any debts to worry about.
3. Earn more money (and then save your extra income)
You won’t be able to achieve big savings if you only make cut backs and clear your debt. In order to save a lot of money, the best way is to earn more money in the first place. You could do this by doing overtime at work, taking a second job or by doing various jobs from home.
There really are plenty of ways to earn money these days. I even wrote a book about some of them, check it out: 101 Ways to Earn Money from Home.
There is one other thing that you’ll need to do…
Walking through those three steps isn’t all though. There’s a bit of work required of course. It does take a bit of effort to constantly keep checking that you’re not overpaying for your bills. It will take a lot of willpower to divert your savings towards debt repayment without spending elsewhere.
And finally, it will take more of your time and elbow grease to earn extra money when all is said and done. But if you want to get yourself into a better position where you can generate bigger savings, the hard work will be worth it!
Are you trying to save more money right now? Do you have any savings tips to share?
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Congratulations on the savings rate. I’m only at about 22% right now, but I’m working on ways to increase that…as long as I’m not killing myself with side hustles doing it though. I realize something has to give to have a normal, balanced life.
Thanks Tonya. 22% sounds great! Especially if you can do that without taking on TOO much more work. There’s earning more and then there’s working yourself to the bone. The former is definitely better for your overall health!
Wow, that’s amazing progress! Great tips, too. We make sure our investments, savings, and debt payoff comes out of our paycheck first thing, then make do with what’s left, which is no hardship if we’re frugal.
Thank you Kalie. Sounds like you’re doing really well! And you have investments too – bonus. We’re currently saving for our investments! (House deposit mainly).
Your story is so amazing and inspiring to me!!
My husband and I are working to pay off a lot of debt, and we’ve done a number of the things you mentioned, including refinancing our mortgage (5.25% down to 3.5% makes a difference!), getting rid of cable, and refinancing our consumer debt with a home equity loan. The latter is scary, since our house is now on the hook, but it’s the consolidation and lower interest rate is worth it!
Great tips and very similar to what Im trying to do. I wish I was at 50% and maybe someday I’ll get there we will see.
I’m a big proponent of saving your savings. Cut a bill down by $20? Well, then you’d better be able to point to that $20 either in a savings account or added to a payment on debt. Otherwise, it’s not really “saved.”
We’re definitely not able to save 50% of our income. Then again, we’ve got some major expenses that others don’t have to contend with. Like the 10% of my pre-tax income that goes to alternative medicine/treatment for my husband’s conditions.
But some of it we do fritter away just because it’s there. I’m working on tightening our belts a bit. For example, I’ve been reminding Tim more about taking his water bottle with him so that he doesn’t buy soda when he’s out. He’s got extreme, sometimes painful dry mouth. So if he doesn’t have water, he has to go buy something to drink while out and about. At $1.79 a bottle, that adds up fast!
That’s a high rate. I wish I could save as high as 50% of my income, but I gotta clear out my debt first. I know I have to do it because I am aiming for it and be out of debt for me to hit that 50%.
Your savings rate is really impressive! We’re always trying to save more money, but with our health issues and related costs, we haven’t gotten close to 50%. Still it’s always good to aspire to do more.
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We used to save everything I earned to and put in the savings directly. It really helped to not even think about it! At times we have had to use that savings and it’s felt good to have something to fall back on.
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That’s fantastic! It really helps to contact your bill providers and see if you can get a discount or a cheaper plan!
Saving can really be difficult and when you have loose money floating around it can get lost. We always said we didn’t have more money to save…yet we would be able to pull money out of the budget to get farther in debt? I noticed this and now all spare money goes towards paying off debt, I can’t wait to get to the savings stage!
50% of your income is awesome! Especially with a family. It’s so much easier to cut back and make things work on your own – I’m constantly in awe of married folks and people with kids who still manage to rock a high savings amount. That’s great teamwork between the two of you!
I think its important not to compare our personal financial situation with others. It’s not an achievable goal for us to save 50% of our income nor would we put extra money into a savings account where it would earn a pittance. Each family has unique challenges and needs and depending on where you live jobs may be hard to come by. Our bills increase every year whilst our consumption and income has been going down. We have three teenagers living at home who are growing, especially their feet, its getting harder to find size sixteen shoes at a reasonable price, four members of our family wear glasses which we have to pay for and our daughter had to have braces, also not covered. My husband and I have been through seven layoffs between us since we have been together, the last one was September 2015. He found another job but its part time in retail and our income has dropped by $600 a month. On the upside we have no consumer debt, we paid it off last year, which worked in our favor given our situation now. We make a lot of sacrifices and don’t stray too far from home, we buy most of our clothes at thrift stores. This year we have a fence and a roof to replace on our property so there goes any spare emergency money. I can’t stress enough the importance of having a budget, tracking where your money is going and being aware of your spending habits. Our budget about compromise without overspending but at the same time not completely depriving yourself either because that is hard to stick to.
Hi Viv, thanks for commenting, I absolutely agree that it’s important not to compare financial situations with others. Everybody’s life is different, not a bed of roses (mine isn’t either!). We might be able to save half our income at the moment, but that’s going on things like a house deposit and retirement savings (since we had so much debt we couldn’t afford to make contributions until recently). I totally hear you – the point of this post was just to give people hope that it’s possible to turn your financial situation around. 🙂