How We Save 25% of Our Income

As I mentioned the other day, we’re saving about 25% of our monthly take-home. We didn’t start out there, but we’ve come a long way since I started this blog. Back then, we spent every dollar we earned either on debt payments or living expenses. Now we save a substantial portion. As part of financial literacy month,  here’s a look at how we made the switch over the course of a year.

Dedication to Paying off Debt

First, we were both committed to getting rid of our credit card debt and at least two high-rate student loans. We still have sizable student loans, but those will take 30 years to pay off. Instead we focused on what was doable. Our primary goal was to reduce our debt-to-income-ratio so we could buy a house. We managed to take our monthly debt payments from about $2100 to around $1100 a month. A large chunk of that was credit card debt and the two student loans. We’ve also seen reductions due to declining interest rates on auto-debited loans.

Increased Income

We’ve been fortunate to see our income grow substantially in the last year, which also helped. My husband made a job change before I started this blog that saw a 40% increase in salary (he was grossly underpaid before.) We’ve both received sizable raises since, which resulted in a total income jump of about 60% in the last two years. We never would have gotten here without that, and we both worked hard to achieve that.

Financial Windfalls

The $28,000 in windfalls we received really put us over the edge. They allowed us to pay off a substantial portion of our debt. Of course, we also had to pay a third of them in taxes, so we had to dedicate ourselves to saving up money for that. As soon as the debt was gone, the need to pay the IRS really kicked us into saving mode.

Reduced Spending

We haven’t just reduced our spending on debt, however. We’ve also reduced our spending in several other areas, including clothing, auto (thanks to falling gas prices), and groceries. In addition, we eat out less and watch movies at home more often. My husband would probably like to go out more, but we have a backlog of 200 movies on our Blockbuster queue and the tyranny of the list, as we call it, keeps us home.

A Clear Savings Goal

We both want to save up an emergency fund and agree on the importance of that. We also need to buy me a new car soon. But the thing that really has us saving is the short-term goal of buying a house by the middle of this year. We have a hefty down payment already, but every extra dollar helps with closing costs, upgrades, and moving expenses. I imagine we’ll have a burst of spending after we close on things like paint, carpets, appliances, and flooring, but then we intend to return to our frugal ways to save up for the car down payment.


All of this boils down to one very important key to saving money: both spouses have to agree to save money. It won’t work if one saves and the other spends it all. It’s important that you sit down and work out your goals together.  Then neither of you will feel like you’re suffering or wonder why the other is so determined to save.

If you do one thing this month, sit down with your spouse (or a piece of paper if you’re single) and create one financial goal that relies on saving money. If you’re out of work, then the goal is clear – stay afloat until you’re employed again. If you have a job, then the goal might be bulking up the emergency fund, but it could also be saving up the cash to buy something that has benefit to you and your family. Once you have a goal, formulate a strategy for getting there.

Once you start saving, it becomes a habit that rewards you every time you look at your fat bank balance. Trust me, it worked for my husband.

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