Accidental Frugality – Can You Live on Half of Your Income?Posted by Cap on September 14, 2009 |
Maybe you just got robbed by Zorro or maybe there’s now an unexpected child support payment (oh snap!?) — whatever the circumstances are, would you be able to live on half of your income?
A few years ago, I was reading a blog post by Trent at The Simple Dollar regarding living on half of your income, and at the time I thought to myself: “Well that’s nice. So instead of thirty Cup Noodles per month, I get to eat only fifteen? That’s totally doable.*”
(*Cool kids often use the word doable back in the days).
But time has changed. I’m now a hard-working member of society (sort of) and I’m no longer a dreadful leech on my parents (again, sort of).
Huh. I Could Have Sworn I Made More Than This…
In the past couple of months, I’ve again uprooted myself from Southern California and moved up to the San Francisco Bay Area to work on various projects, spending some good part of my time at the very cool BillShrink.com.
Being the ever disorganized person that I am, for the past few months I was being a little late on the invoicing for my contracting jobs — and by a little late, I meant a couple of months late. And when I said disorganized, what I really meant was that I was busy working hard, of course.
So in effect a good portion of my income was not flowing into my checking account. These are by no means small amounts too as they were more than enough to pay for a couple months worth of rent. Things got a bit silly when I was finally asked by the consulting clients: “When will you invoice us so we can pay you?”
Ohhh right. Money. Yeah, I need those things don’t I?
The interesting thing I noticed though was that my living standard didn’t change too much during these past couple of months — even though the cash wasn’t flowing in. You can surmise a few things from this:
- Maybe my living standard just sucks to begin with.
- Maybe I make soooo much money that half of it is still a crap load.
And the truth usually lies somewhere within the middle of those two extremes. I realized now that I do indeed have quite a no-frills life style: my expenses consist mainly of food, lodging, and transportation cost. Entertainment? Who needs to pay for entertainment when your excitement consist of weekly Settlers of Catan sessions with a fellow personal finance blogger?
Still, literally living on half of your monthly income because you forgot to ask for your paid is STUPID. When you’re not receiving your cut from the man, you’re doing yourself a major disservice: you can diminish your cash-on-hand to invest and any potential realized savings toward your retirement. Sure, timing the market is generally stupid, but missing out on tax advantages because you don’t have cash available (when you should) is even more stupid.
Having said that, being able to live on half of your income (or much less) can be great way for you to achieve your saving goals — and it is much easier thing to accomplish for recent college graduates, many of whom may go from making $0 per year to tens of thousands of dollars per year.
How to Live on Half of Your Monthly Income
- You should have a clear idea of the type of living standard you would want to enjoy. This is key, as a mortgage payment or a car loan won’t fit into the scenario unless your salary is gangbuster-high.
- You need to understand the actual expenses involved for the living standard you’ve decided to live by.
- You need to be willing to trim or cut down on certain expenses.
- You need to acutely keep a budget — unless you’re one of those type that can maintain their expenses by willpower.
- You need to understand that not everyone can live on half of their monthly income. This is especially true if you have dependents or other financial obligations. Just because some frugality tip tells you to rock a “50% savings plan” doesn’t mean that you can apply the same tactic to your life situation.
For more tips, check out this AOL coaches article: Live Your Life For Half the Price.
Regardless if you can or can’t live on half of your income, thinking about the situation can be a good mental exercise in the type of expenses you’re currently incurring. Personally, I think if you have frugal lifestyle and mentality, living on half the monthly salary will probably be a cake walk. However, if you were having issues balancing your checkbook a month or two ago, and then you suddenly decided to switch to a savings style of “living on half your income” — you probably won’t get very far.
Not a Fan of “Living on Half of Your Income”
Before you think otherwise, you should know that I am NOT a proponent of a “50% savings plan” or some “living on half your monthly income” savings tactic.
Money, at the core of it, is meant to be spent. Money affords us options and choices in life. Although I’m a pretty frugal guy, my basic financial outlook is this: If you can afford it, spend it. Just don’t be a moron and cry about it later.
I’m not a real believer in hardcore saving tactics unless its for a very specific and concrete goal (e.g. you want a house within so-and-so years). If you’re ever considering living on half of your income so you can do a 50% savings plan, you should think carefully about the trade-offs from the savings.
Sure, a vacation after a first few years of work straight out of college may be a bit lavish, but there are only certain things you can do while you’re young and have flexibility in life. Yes, maybe remodeling your entire backyard can’t be classified as a frugal move, but if you can enjoy more family time together with the new grill, patio, or jacuzzi — why not?
For some people, living on half their income is as easy as a stroll through the neighborhood (Compton, CA excluded). Their life style isn’t impacted and they’re making great headway toward their saving goals. For others, forcefully living on half their income can often be stressful and difficult. If you’re in a situation where you’re considering living on half of your salary, you need to carefully weigh the pros and cons. At the end of it, it’s all about balances and your own preferences.
What do you think about people that choose to live on half of their income? Or maybe you’re already doing it and you love it? Feel free to share your view and tips in the comments below!
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