Sometimes Paying More Up Front Saves You Money

pay more save moneyI hate printers. I hate them with a passion. Why?

For as long as I can remember, I have always had an ink jet printer.

I rarely ever used the printer, but whenever I did, it seemed like the printer would have to clean the printer cartridge or perform some task to waste a major amount of the oh so expensive ink.

Often the ink would have completely dried up right when I needed it most.

I’d then take a trip to Wal-Mart or my nearest office supply store to drop anywhere from $20 to $60 on new ink cartridges that would end up performing the same exact way.

Typically, I might get less than 100 pages out of an ink cartridge, which was an outrageous idea to me.

Why are we paying so much for ink? There had to be a better solution.

We Spent Money Up Front To Save Money In The Long Run

Recently my wife and I decided it was time to have a reliable printer in our home again. We were sick of having to wait to print our documents at work the next day or dig out our awful inkjet printer and buy yet another inkjet cartridge.

So what did we do? We spent some money up front on a printer that would fit our printing needs. We bought a laser printer.

For comparison, the printer we bought cost $120 up front. That is four times more expensive than some of the cheap inkjet printers out there. It’s well worth it to us, though.

Why We Bought A Laser Printer

Laser printers work differently than inkjet printers. The ink can’t dry out. The print heads can’t clog with ink. Instead, we can leave our laser printer for months without printing a page and it should work right away when we decide to print something in the future. Laser printers use a powder toner that doesn’t dry out or clog.

On top of the awesome fact that we won’t have to go out and buy new ink every time we leave our printer dormant for a few months, the toner cartridges print many more pages than an inkjet ink cartridge does.

The toner we’ll need for our new printer will print 1,200 pages on a normal cartridge or up to 2,600 pages for a high yield cartridge. This should save us a ton of money over the long haul. While toner cartridges are more expense than most inkjet cartridges, they’re much cheaper on a per page printed basis.

Of course, our new laser printer only prints in black and white and it doesn’t do an awesome job printing pictures, but we’re okay with that. I can’t remember the last time we needed to print something in color and color laser printers would have easily cost of hundreds of dollars more.

Instead, we’ll just pay $0.59 a page at our local Office Max to solve any color printing needs we may have in the future. I’m sure we can even find a coupon to get a better deal.

How Does This Have To Do With Your Finances?

How does a laser printer vs an inkjet printer have anything to do with your finances? The laser printer was the optimal choice for us and will save us money over the long run. While we don’t spend a ton of money printing, we do spend a lot of money in other areas of our lives.

Think about your car, for example. How much thought did you put into your car purchase? You could have examined every aspect of the purchase to figure out if spending more on a car up front would save you thousands of dollars over the long run.

Related: Never Make A Car Payment Again After Using This Easy Trick

You would need to look at gas mileage, average maintenance costs and many more items to come to the total cost of ownership over the lifetime of the car. Compare that to the other cars you are considering buying and you might find out that the more expensive car up front could save you money over the long run.

The difference could easily be thousands of dollars and most people never give it a second thought.

The same exercise can be run on many other purchases you will make during your lifetime. Think about how huge of a purchase a home is.

You could probably save tens of thousands of dollars by buying the right home that will end up saving you money through energy efficiency and the proximity to the places you spend the most time driving to.

Related: The Definitive Way To Know If You Should Pay Off Your Mortgage Early

What If You Don’t Have Enough Money To Pay Higher Up Front Cost?

If you don’t have enough money to pay the higher up front cost, you have a few options available to you. You may want to consider delaying the purchase until you can take advantage of the most cost advantageous option.

If that isn’t an option, you can buy the cheaper up front option and sell it later to recoup some of your costs and upgrade to the most advantageous option later.

Finally, you could take out a loan if you would still end up ahead after paying for interest. I only recommend this for very well thought out purchases that are needs, not wants, so almost nothing should fit into this category.

A little bit of up front effort can clearly save you a ton of money and frustration over the long run. The bigger the purchase is, the more you should consider the long run in your decision.

What purchases have you made that might cost more up front but save you money over the long run? How did you come to your decision and how much did you save? Let me know in the comments below!

Photo by: Stephen_Clarky Text added by: Lance Cothern

How To Build Wealth In 3 Simple Steps – It’s That Easy!

Want to learn how to be rich? Living a rich lifestyle may not mean what you think. Learn the 3 simple steps to living a wealth lifestyle on MoneyManifesto.com.Everyone wants to build wealth. After all, who wants to end up poor?

Unfortunately, way too many people aren’t able to build wealth because they fail at the three simple steps you need to follow to build wealth.

The steps are easy to both understand and enact. The one thing most people lack when it comes to following these steps is discipline.

If you can follow these steps, you will grow your wealth over time.

Step 1 – Earn Money – The More The Better

The first step to building wealth is earning money. The best part about the first step of building wealth is the fact that it has unlimited potential.

You can earn as much money as you put your mind to earning which is pretty awesome. Why?

The amount of money you earn directly relates to how much wealth you can build and how quickly you can build it, especially in the beginning of your wealth building journey.

While your wealth will help itself grow toward the end of your wealth building journey, the beginning can be the most important due to the amount of time you have available to you to build wealth as you will see in step 3.

Step 2 – Don’t Spend All Of Your Money

Step 2 is super important, because if you spend all of the money you earn, you can’t grow your wealth unless you’re already wealthy. No matter how much money you end up earning, even if you earn $1,000,000 a year, if you spend every penny of it, you’ll never have any money available to grow your wealth.

The best part about this step is if you spend less money you will have more money available to grow your wealth through implementing step 3.

Related: How Anyone Can Live Off Half Of Their Income Or Less

Related: 123 Money Saving Tips

Step 3 – Invest The Money You Didn’t Spend

Even if you follow steps 1 and 2, you won’t get wealthy without following the third step to growing wealth. In order for your wealth to truly grow, you must invest the money you didn’t spend. Luckily, there are many different ways you can invest your money!

Investing is key to growing wealth due to the effect of compounding. Essentially, compounding is the effect of the earnings on your investments generating even more earnings. Over time, compounding will allow you to grow your wealth enormously. Here’s a quick example.

Let’s pretend you make a one time investment of $10,000 at a 5% interest rate. How much money do you think you would have after 5, 10, 20, and 40 years? Here’s the results:

  • After 5 years you would have $12,763. (Earnings of $2,763)
  • After 10 years you would have $16,289. (Earnings of $6,289)
  • After 20 years you would have $26,532. (Earnings of $16,532)
  • After 40 years you would have $70,400. (Earnings of $60,400)

As you can see, compounding is pretty powerful. The longer you invest your money, the more your money grows due to compounding. Add the fact that you’ll likely continuing investing as you have more money available each year and you’ll end up growing your wealth in no time flat.

If you are able to earn better investment returns, your wealth will grow even faster. Just make sure that your investments are in line with your risk tolerance and the timelines you have for your goals.

Growing wealth is simple. All you have to do is follow the three steps above. The real trick is finding the discipline to enact these three steps consistently throughout your life. If you can do that, you’ll be able to allow time and hard work to grow your wealth through investing.

What do you think about the three steps to building wealth? Is there one step that you find is more important than another? Or another step that I didn’t list here? Let me know your thoughts in the comments!

Photo by: Ervins Strauhmanis Text added by: Lance Cothern

How To Save Money While Living Paycheck to Paycheck

Are you living paycheck to paycheck? Do you want to stop the awful paycheck to paycheck budget? Learn exactly what to do on MoneyManifesto.com. Hint: There are other ways than skipping lattes.Living paycheck to paycheck is flat out stressful.

Stretching your last $20 bill until your next paycheck hits your bank account on Friday is an enormous challenge when you need gas, groceries and your kid needs money for a field trip on Thursday.

While it may seem impossible, you can save money while living paycheck to paycheck.

In fact, saving money is exactly what will get you out of the paycheck to paycheck lifestyle. So, what can you do to save?

Here are four ways how to save money while living paycheck to paycheck and a guide covering what to do with the money you save.

Pay Yourself First

The easiest way to save money when you’re living paycheck to paycheck is to pay yourself first.

You can accomplish this a few different ways, but I find it is most effective to have your workplace split your direct deposit into two parts.

The first and largest part will go to your checking account, as always, while a second smaller portion will go directly into a savings account you vow to never touch. I personally like using an online savings account, like Capital One 360 (read our review here), so it makes it harder to get the money for splurges.

If you don’t have direct deposit at your work, you can manually do this when you deposit your check at your bank or set up an automatic transfer to take money from your checking account to your savings account a couple days after you normally deposit your paycheck.

If you don’t have a bank account at all and keep all of your money in cash, I highly suggest you get a bank account that charges no fees at your local credit union. However, if that is not an option, take set amount of cash out of your paycheck after you cash it and put it in a safe place that you promise you will never touch.

Sell Things Around Your House

Once you start paying yourself first, you can accelerate your savings or supplement your income by selling things from around your house. Start out by going through your home and making a list identifying anything that you might be able to sell for a decent amount of money.

Next, look at the list of items you compiled and see what is unnecessary. The best way to do this is think about how often you use the item versus how much cash you could get by selling the item. Which is worth more to you?

Then, list the items for sale on websites like eBay or Amazon or have an old fashioned yard sale to free up some cash from your unused or underused items.

Take this cash and add it to your savings and you’ll be well on your way to escaping the paycheck to paycheck lifestyle.

Grow Your Income

While selling items from around your house is an awesome way to raise cash, it is only a temporary measure. In order to continue to have more money available to save every paycheck, you need to grow your income.

Many people assume you can only make more money by getting a raise at work, which is just simply not true. Instead, you can start a side hustle to grow income on the side.

Of course, you can try to get a raise, work more hours, earn overtime or find a new, better paying job. Since most of your income likely comes from your day job, it makes sense to try to maximize it as much as possible.

However, don’t discount the idea of a side hustle. Many side hustles end up growing into full fledged businesses that end up earning their owners more than they make at their day job.

Related: Get Job Loss Insurance By Starting A Side Hustle

Cut Back On Certain Expenses

Growing your income is awesome but the extra money may not start rolling in immediately. That’s why it is important to begin cutting back on expenses that are excessive. Begin by tracking your spending.

The easiest way to do track your spending is to gather all of your bank account statements and credit card statements and categorize the transactions for the past month.

Once you have a list of your spending, look and see what looks unreasonable. Does it really make sense to spend more money eating out at restaurants than you spend on groceries? Does it make sense that you spend more on your car than you do for you rent every month?

Find areas where your spending does not align with your values and cut those expenses. Then, take that money you don’t spend and put it in savings. If you don’t, you’ll accidentally end up spending it somewhere else.

Related: 123 Money Saving Tips 

What To Do With Your Savings

Saving money is great, but what’s the point? Once your savings reach the following goals, you can take the following actions with your savings.

Get One Paycheck Ahead

Getting to the point where you have one paycheck in the bank is awesome because you’re essentially one paycheck ahead of the game. When you reach this milestone, you can budget for your next pay period using money from your savings and put your current paycheck straight into your savings account.

This will allow you to know for certain how much money you can spend in the next two weeks without worrying about changes in your paycheck.

Note: Don’t spend all of the money just because you have it. Your goal is to continue to add to your savings.

Get A Month Ahead

The next milestone is to get a month ahead. Once you reach this goal, you can set a budget for the whole next month with money you already have. How awesome is that?

Of course, you’ll want to continue saving so you can reach the next goal, too.

Build An Emergency Fund

Never want to live the paycheck to paycheck lifestyle again? You need an emergency fund. Once you’re a month ahead, try to save anywhere from three to twelve months of living expenses in a savings account. This money will help you weather any unexpected circumstances like a job loss.

If you have a reliable job and no dependents, three months of expenses may be sufficient. However, if you are self employed and have an extremely variable income, you may need twelve months of expenses to feel comfortable.

Related: Everything You Need To Know About Emergency Funds

Digging your way out of the paycheck to paycheck lifestyle can be extremely difficult. Using the four tips in the post, along with the action plan of what to do with your savings, escaping the cycle will hopefully be at least a little bit easier.

Make sure to use the related resources above to supercharge your journey whenever you need a little extra help.

What’s your favorite tip to help people learn how to save money while living paycheck to paycheck? Share your thoughts in the comments below to help others along their journey.

Image by: Images_of_Money Text added by: Lance Cothern

The Economy Didn’t Make You Poor – You Made You Poor

Help me I'm poor is a common phrase you'll hear in the current economy. Sadly, poor people normally make themselves poor through bad decisions. See how you can make the change from living poor to living a rich life on MoneyManifesto.com.The economy took a nosedive in 2008 and has since recovered despite what you hear in the news.

The recovery hasn’t brought everyone back to the same financial position they were in before the crash, but overall, our country is ahead of where we were before everything went downhill.

Unfortunately, I still hear people constantly complaining about how the economy has ruined their finances. They say the economy has dealt them irreparable damage and they’ll never be able to recover.

While a down economy can hurt individual finances, you must take ownership for what has happened and how you prepared for the downturn. The economy didn’t make you poor. You made you poor.

Our Economy Has Predictable Cycles

Our economy goes through a very predictable cycle every few years. First, our economy grows. It may grow slowly at first before accelerating to grow even faster later. Eventually, growth starts slowing down and we reach an economic peak.

Once at the peak, the economy starts slowing down, even if we don’t immediately realize it. Next, the economy starts decreasing even faster and we enter a recession or a depression. Finally, the economy will reach a bottom and the cycle will start over again with growth.

This cycle isn’t hard to predict at all. What is hard to predict is where exactly we are in the cycle and when the top and the bottom of each cycle will be. However, armed with the knowledge that the cycle happens over and over again, people should be smart enough to prepare for the recessions when times are good.

Unfortunately, many people never do prepare for the down times and live life to the limit while times are good. This ignorant behavior is what makes you poor, not the economy. The economy is predictable so why don’t we do a better job of preparing for the lean times?

Actions That Make You Poor During The Boom Times

When the economy is booming, sometimes it seems like the good times will never end. People get comfortable with their finances and assume things will continue to get better forever.

Based on this false assumption, people begin living on money they have not yet earned at a time when they should be preparing for the coming downturn. This action is what makes people poor.

Here are some specific actions that will make you poor when the next downturn becomes apparent.

Spending As Much Or More Than You Earn

Spending as much or more than you earn will put you in the poor house when the economy takes a nose dive. Spending more than you earn means you’ll be taking on debt either through credit cards, car loans or excessive mortgages.

Even spending just as much as you earn will make you poor, because that means you aren’t saving for an emergency fund or retirement. Without these key tools, you’ll be poor during the next recession as well as when you can no longer work and should be able to retire.

Don’t fall victim to this cycle. Spend less, and hopefully significantly less than you earn.

Related: How Anyone Can Live On Half Of Their Income Or Less

Avoid the following actions so you won’t end up poor during the next recession.

  • Racking up credit card debt
  • Taking out a car loan
  • Relying on future income to finance a nicer life
  • Buying a home that maxes out your budget
  • Spending emergency fund money for non emergencies
  • Spending money that should be saved or invested

How It Works

Here’s a quick story about how you would become poor during the next recession by doing the things above.

When the economy heads for the worst, you could easily lose your job, have to take a pay cut, or run into one of many other financial pitfalls. You won’t have the buffer to ride out the storm without taking on even more debt on top of the debt that is already suffocating you financially. After all, you’ve already maxed yourself out with a huge home loan and a luxury car loan.

By the time the economy recovers, the only way you’ll participate in the growing economy will be paying off the debt you incurred toward the end of the boom and all of the way down through the bust just trying to stay above water.

Then, when your debt is finally paid off, the economy may be booming again and trick you into taking out debt again just in time for the next recession.

How To Prosper Financially – Even During Recessions

Now that we all know about the predictable economic cycle we all live through every few years, it makes sense to prepare for it. By preparing for the next downturn during the boom times, you’ll be able to ride out the recessions without your finances taking a major blow. Here’s how.

Spend Less Than You Earn

Spend less than you earn so you can survive a pay cut or even a job loss. If you and your spouse both work, hopefully you could even live on one income instead of two without cutting back too much. During the boom times you can take this extra money from spending less than you earn to prepare for the next steps.

Pay Off Consumer Debt

If you have consumer debt, you’ve been living based on money you don’t currently have. While the economy is booming and you’re raking in the money, take this time to pay off your consumer debt.

Pay off your high interest rate credit card debt, pay off your car loan and even pay off your student loans if they aren’t at a low fixed interest rate. You can start on the next step while you’re paying off your debt, or begin it after you’ve paid off your consumer debt.

Related: How To Pay Off Your Debt When You Don’t Know Where To Start

Build an Emergency Fund

Save enough for a true emergency fund in the boom times so that you can outlast the recessions. Spending less than you earn will allow you to squirrel away money every month until you eventually build up anywhere from three to twelve months of expenses in cash, depending on your situation.

Combine the emergency fund with no consumer debt and you’ll be in great shape when the next recession hits.

Always Invest for the Future

Once you have a full emergency fund, or even while you’re building your emergency fund, you should be investing for your future. The key with investing is to make sure that you continuously add to your investments over time. That means investing during the downturns as well, since you’ll be able to buy investments on sale.

You should be able to continue investing during recessions due to the fact that you spend less than you earn, you don’t have consumer debt and you have a full emergency fund to sustain you should you lose your job or run into a different emergency during a recession.

The investments you buy on sale during recessions will help you grow your wealth more than any other.

How It Works

Here’s a quick example how the above actions help you stay ahead of the game during recessions.

You work hard to spend less than you earn during the booming economic years. Due to the extra effort, you were able to pay off your consumer debt and build an emergency fund. Now you invest regularly.

The recession hits and your pay ends up being frozen. Luckily, that isn’t a problem since you’re living below your means. In fact, you’re still able to continue investing while investments are on sale.

The economy begins to recover and you escape unscathed. In fact, you notice your wealth has grown as the investments you bought on sale during the recession are now worth more.

While you may not be able to complete all of the actions above during just one economic boom, continue working toward these goals and you’ll eventually get to the point where you will prosper, even during recessions.

The economy doesn’t make you poor. The cycles the economy goes through are predictable, we just never know when they will happen. Prepare now and you won’t end up poor at the end of the next recession.

Do you think the economy makes people poor? Or that people don’t make smart financial decisions during the boom times that makes them poor during the recessions? Let me know you thoughts in the comments below!

Photo by: bradleygee Text added by: Lance Cothern

Here’s How Anyone Can Live On Half Of Their Income Or Less

http://www.moneymanifesto.com/heres-how-anyone-can-live-on-half-of-their-income-or-less-7717/Living on less than your income may seem like a very difficult task to complete.

We thought the same thing until we realized that we have been living on less than half of our income this past year.

While the concept of living on half of your income or less is a simple exercise on paper, it is much more difficult when you introduce the human element into the equation.

Luckily, there are some actions you can take to make living on less than half of your income easier and I’d like to help you get to that point if that’s your goal.

Even if you only want to live on 70% or 80% of your income, these tips will help you get there.

Two Ways to Live on Less Than Half of Your Income

There are only two ways to make living on less than half of your income a reality. The first way is to increase your income until your expenses are less than half of your income.

Alternatively, you can cut expenses until your expenses represent less than half of your income. These concepts are both easy to understand but can be difficult to pull off.

Living on Less

Living on less seems like the easier of the two options initially, but it isn’t for everyone. You can see immediate results by spending less starting today, but continuing to live on less may be difficult for some as you begin to miss the things you have cut from your budget.

Other people will realize that they don’t miss that extra spending at all so cutting expenses may be easier for them. Really, it varies from person to person.

Decreasing Variable Expenses

When looking to live on less, immediate results can be found by decreasing expenses that vary from month to month or expenses that can be cancelled immediately.

You’ll want to look at cutting back on things like eating out at restaurants, even for your lunch at work. Next, look to cut back your grocery spending by shopping smart and by avoiding food waste like throwing away leftovers.

Another place to look to cut your variable spending is with subscriptions. First, cancel any subscriptions you don’t use at all. Then, look to cut other subscriptions that don’t provide enough value for the money you pay.

Really think hard about things like magazine subscriptions, cable TV (which I personally will never cancel), Netflix, Amazon Prime and cell phones (we switched to Republic Wireless and save hundreds of dollars a year).

You can also reduce your spending immediately with some of your car expenses. Shop around for car insurance to see if you’re really getting the best rates. This could be a quick big win. Another way to save is to be more mindful of your driving habits to reduce your gas consumption.

Decreasing Fixed Expenses

Once you’ve cut the easier variable expenses, you’ll need to think hard about cutting your fixed expenses. Fixed expenses include things that are difficult to change, such as your monthly mortgage payment or rent, your car payments, student loan payments and any other expenses that don’t vary by much and a difficult to change.

While it may not seem like you can change these expenses, you can. It just takes dedication. Making these changes can pay off huge, especially in the long run. Think about it, these expenses are your biggest expenses every month. If you reduce them even by a little bit, you’ll be saving a big chunk of change every month.

First, if you owe money on your car, consider selling your car. Take the proceeds (after you pay off the loan) and buy a more affordable car that doesn’t require a monthly payment. If that isn’t possible, you could at least get a car that has a smaller monthly payment.

Cars are built to last for much longer these days, so even a cheaper car could last you for many years. You’ll save both on your car payment and your insurance with this sacrifice. Additionally, if you buy a more fuel efficient car you’ll save on gas, too.

Next, consider changing the biggest expenses in your budget, your mortgage or your rent. If you have a mortgage at a high interest rate, consider refinancing to save money on interest. Just make sure you don’t increase the term of your loan or else it will take you even longer to pay your house off.

An even better way to save is to move into a less expensive home by downsizing or moving to a cheaper area. Whether you buy or rent, this is a major lifestyle change that could result in some of the largest savings possible.

Make sure that you’d be comfortable living in a smaller home before you make the move because figuring out you moved into a home that was too small would be a costly mistake. Think about your current home and think of all of the wasted space before downsizing.

Remember, you’re paying for the extra space either through your rent or mortgage payment and you’re also paying to heat and cool that space. By eliminating extra space you’re saving in more than one way.

Alternatively, if you move to a cheaper area you can buy a similar sized, suitable home for a much cheaper price. Just make sure your income won’t be dropping at the same time or else you may end up losing ground financially.

These are just a few ways you can get started on living on less. For more ideas, consider checking out our post that highlights 123 ways to save money.

Earning More Money – The Other Option

If cutting your expenses doesn’t sound like a sustainable option for you or your family, then earning more money is the alternative if you want to live on half of your income or less.

Luckily there are multiple ways you can increase your income. On top of that, your income potential is theoretically unlimited. Only you limit how much money you can make.

Make More Money Through Part Time Jobs

The easiest way to start earning more money is to start earning extra income on the side. You can get a part time job that you enjoy, start a small business or even do odd jobs around your community for extra money.

Part time jobs may be fun for a short period of time, but unless you love the part time job you work at, you may be looking for a way out after the job gets old. However, for some people this is the perfect way to increase their income enough to live on less than half of it.

Earn Extra Income Through Side Gigs

Side gigs and small businesses are a great way to start earning extra income. Think about what skills you have that other people need and you may have a side business idea to get started with.

The great thing about side gigs is the fact that they can grow into a full time business that can increase your income even more than what you currently earn at your job.

Some ideas for side gigs include building websites for others, freelance writing, preparing taxes on the side during tax season, mowing lawns during the summer, shoveling or plowing snow in the winter, tutoring and other freelance careers.

Get A Raise, Promotion Or A New Job

If you don’t want to put in extra time after work then you may have to put in more time in your day job.

It takes some hard work and potentially some time, but you can greatly increase your income at your current job by earning a big raise or promotion. Of course, you should only ask for a big raise or promotion after you provide enough value to earn them.

However, if you company has made it clear you’ve maxed out your potential with them, you may need to look for a better opportunity with another company.

Finding a new job that pays more may also allow you to spend less if you move to a lower cost of living area. Just be careful that it doesn’t limit your spouse’s earning potential or your own future career growth. Don’t be shortsighted when it comes to your career for a quick financial gain.

Grow Investments Or Rental Property Portfolio

This option may take a bit longer to get to the point where you are spending less than half of your income, but it is the perfect solution for some.

Investments can provide income through dividends or through growth of the investment themselves. Eventually, once you have a large enough investment portfolio you may earn enough investment income to supplement your current income and live on less than half of what you earn.

Another option for investment income is through owning multiple rental properties. As long as your rental properties are bring in more money than they cost you, you can build a portfolio that will give you enough extra income to make living on half of your income a reality.

The downside is the fact that rental properties add risk if you have to take our mortgages. If you don’t rent them out you could end up losing money. Additionally, if you get a nightmare tenant or a house that needs a lot of repairs, you could end up spending more than you earn from a particular rental property.

Becoming a landlord isn’t for everyone, but some people love it and make a lot of money doing it.

Defining Income And Expenses Can Be Tricky

This is where things get a bit tricky. What do you define as income and what do you define as expenses? Technically, income is every dollar you bring in and expenses are every dollar you pay out. However, many people say their take home pay is there income, which causes a couple of problems.

First, you don’t get credit for any of your retirement contributions as part of your savings for accounts like 401(k)s or 403(b)s that come straight out of your paycheck.

Second, your taxes, health insurance and other payroll deductions are not counted as expenses since they’re taken out before you get to your take home pay. Finally, you would be under representing your true income even though you never see every dollar of it.

Ultimately, it is up to you to figure out if you want to use your real income or your take home pay as the basis for living on less than half of your income. We personally use our total income.

Another thing to keep in mind is you might not live on less than half of your income every single month. Some months may result in living on only 30% of your income. I think if you live on less than half of your income when you look at a full year, you can officially say you living on less than half of your income.

Regardless of how you go about living on less than half of your income, it is a very achievable goal. Even if you think 50% of your income is extreme, try living on just 60%, 70% or 75% of your income.

Having all of that extra wiggle room will open up options for you down the road. It will allow you to grow your savings and investment. It could even allow you to retire early!

How much of your income do you live on? Do you ever think you could live on 50% or less of your income? Would you want to? Let me know what you’re thinking in the comments below.