Living on half of your income. Is it possible? While the target might seem daunting, it is attainable if you are ready to make some sacrifices and follow a strict financial diet. 

Saving half your salary, while not a necessity, can accelerate your progress towards big financial goals especially ones such as an early retirement. 

A person earning Rs 1 lakh a month and saving Rs 20,000 a month can build a wealth worth Rs 1 crore at the end of 15 years by investing in equities. And if he manages to save Rs 50,000, his wealth puffs up to Rs 2.5 crore. In the process, he will hit the Rs 1 crore mark years earlier.

Focus on the big three: If you want to save big, think big. Pull out your card and bank statements and highlight the major expenses. 

Housing, food and transportation expenses usually form a major component of household expenses. If rent is a big expense, consider moving to a cheaper location. If transportation costs are higher, consider moving near the workplace or using public transport. 

Go for across-the-board slashing of discretionary expenses. Limit your expenses as much as possible on things that are really important to you and your family. The idea is to sacrifice certain things so that you can literally buy your freedom earlier.

Budget planning 

Figure out the areas where you could axe your expenses and incorporate it in your budget. Put things on autopilot mode – by automatically transferring money from your bank account into retirement funds, debt-repayments and paying other expenses. Automation saves you the trouble of having to make choices on how much (or where) to invest or spend. Moreover, it’s hard to frivolously spend the money that you don’t see.

Some expenses (school fees, for instance) are irregular and can jack up expenses in some months. While you might not hit the 50% mark month-after-month, endeavour to achieve the saving target over the year. 

Boost your income

It is relatively easier to save more, when household income levels are higher. That’s because household expenses flatten out after a point and don’t increase proportionally with your income.  

So, think of ways to increase income either by switching jobs or side hustling. Dual-income earning couples can find ways to live on income of one of them, while saving the rest. 

Get out of debt

Freeing up EMI payments can release sizeable chunk of money for investing. So, repay costly debt on a priority basis. Credit card debt, personal loans and car loans typically carry higher rate of interest. Ensure you repay them at the earliest.

The whole exercise of saving big cannot succeed without the support of the family members. Especially if there are kids in the family, they need to be taken into confidence. Involve them in the budget planning process and make saving a fun family activity.

Take the family into confidence

The whole exercise of saving big cannot succeed without the support of the family members. Especially if there are kids in the family, they need to be taken into confidence. Involve them in the budget planning process and make saving a fun family activity. 

Tell them about the new spending plans and what it will achieve for them. An honest communication will make them more responsible and careful in their spending requests. 

Takeaway

Saving 50% of your income is a lofty goal. It requires pulling the two levers – of reducing the spends and increasing income – to get there. While it might involve making some radical choices and sacrifices, pursuing it relentlessly will also take you closer to financial independence – sooner than ever.