Examining the 50% Solution
Trent over at The Simple Dollar wrote an interesting article recently that encouraged saving/investing a full 50% of take home pay. As I read this, I felt somehow targeted by the advice. I am young. I am (relatively) new to the workforce.
So I asked myself, could I pull off the 50% solution?
After a recent promotion at work, my total take home pay ends up at $3,544.06. So I’ll need to save or invest $1,772.03 each and every month. I don’t add in the two additional checks I receive each year. Those I’m already used to saving anyways so it only helps me.
Each month my required expenses add up to $1,698.00
- Housing (includes rent, utilities, cable), $900.00
- Car Payment, $253.00
- Car Insurance, $100.00
- Student Loans, $225.00
- Gas, $200.00
- Petty Cash (laundry quarters), $20.00
Wow, now that is close. Far closer than I had originally thought possible. Of course this assumes that I spend absolutely no money on anything else.
- No tolls, and thus no long trips
- No eating out
- No entertainment
- No fitness
- No gifts
- No vacation
Honestly, the most difficult thing on the list to give up would be gifts. In fact, looking at my yearly totals, of all my non-essential spending categories, gift giving is hands down the most expensive.
The best part in all of this is that the goal gets easier if I can eliminate bills. I have under $3,500 left to pay on my car. Within this year, that will be paid off leaving me with an additional $253 each and every month for savings. My student loans are another issue. It’s $225 each month but the balance is staggering. It will take a few years to eliminate it.
Saving and investing 50% of ones salary is a great goal. I’m not there yet but I believe it is possible within a year or so.