If you live in a two-income household I love the idea of living off one income and saving the other person’s entire salary! I have been reading up a lot on this topic and have found some really good tips and tricks in order to make this plan possible. By saving one entire salary this builds up your savings ridiculously fast and you find that you’re really not missing out on anything, either.
Begin by creating a budget and figuring out what your end goals are. You need to set a goal so you have something motivating you that you’re working towards: Are you saving to buy your first home or an early retirement? To pay for your kid’s college, pay cash for your next car or to take a nice vacation each year? Whatever it is have a goal in mind and stick to it!
Second make a list of all of your expenses for a year. This would include monthly bills and less occasional expenses like your 2 trips to the dentist a year. This will help you understand if it is possible to pay for all of your yearly expenses off of one salary. Below is an example of the expense tracking I made for myself to see how much money we would have left each month after paying for all of our bills/expenses:
Start planning on how you can cut your expenses. Cooking from home, tracking your spending, buy less house than you can actually afford, getting rid of cable, challenge yourself to find free fun, go shopping less often, these
What can you do with the savings? There are plenty of options:
- Double up on your mortgage pay down. It is possible for a couple to pay off their entire mortgage in just three to five years by living on one spouse’s income and using the the other income to pay off the mortgage.
- Emergency Fund. Set aside 3 to 6 months (or even 9 months!) of living expenses. Like in my previous post you should also create special sub-savings accounts I have one for house down payment emergency fund and vacations. You could get creative and make one for just about anything you are saving for.
- Make a car payment to yourself. You can put aside enough money to buy your next cars in cash create a sub account for this and it’ll add up so quickly!
- Max out all of your retirement account!
- Create a child’s college savings fund.
- Take a risk. Put aside enough savings so that you are able to start your own business or take some kind of major career or entrepreneurial risk. Or retire as early as age 35 or 40!
Living on one person’s income and saving the entirety of the other is one of the most effective ways to ramp up your savings and live a more financially free life!