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Did We Manage to Live On 50% Our Income This Year?

living on half your income

Luckily, we enjoy living large with cheap recreation!

My regular readers might have some big question marks about this post because I’ve never talked about living on half our income or made it a public goal. I don’t even know that we’ve been consciously trying to live on half, but we do try to invest and save as much as possible with the goal of leaving the rat race within the next decade.

I actually had another post title picked out but when I read this post on Budgets are Sexy, I decided to copy change the name in tribute to all those other people out there who are working toward a similar goal. When you track your spending it can be really eye opening, in a good or bad way, to see where your money went. So without further ado, let’s see if we managed to live on 50% of our income this past year.

I won’t  give  exact numbers as to how much money we bring home. Some people would say we are wasting our time with the amount we make and save. Others would say we are rich, and there is no way to save much because their income isn’t as high as ours. I get tired of whiners, so I’ll just use percentages. I am also not including rental income. In a perfect world, our rentals would cover all their own expenses and still make money each month. In reality, that isn’t the case, and we had to use salary dollars for rental repairs. Hopefully next year will be better.

I am basing percentages on gross income.

What Did We Spend Our Money On?

I’m happy to say that over a third of our income went toward saving, investing, and mortgage principle payoff. I know people differ on what they consider investments. Some people consider mortgage payments as an investment. We do not, because as of now, we do not count our house as retirement income. We do consider extra principle payments as investments. We totally count our HSA as an investment because it goes right into Vanguard funds that we don’t plan on spending for a long time. I know, confusing, but personal finance is personal.

24.84% of our money went toward 401K’s, Roth IRA’s, Betterment,  our HSA, and a 529 plan.

6.35 % went into liquid savings which will be used for a rental down payment very soon.

2.2%  was spend on extra mortgage principle.

Our total on these investments was 33.39%

Rentals: Good and Bad

Our rentals did not cover all their expenses this year, so we had to use 7.56% or our salary income to fund a major repair on the commercial building. We will also have some other rental expenses with the close of our 4-plex, but for now the down payment is sitting up there in liquid savings.

Big Bad Uncle Sam

The reason I’m doing this on gross percentages is to complain show how much we have to pay in taxes. Even while adding money to our tax deferred accounts until it hurts a little, we are still paying 31% in taxes and FICA. Most of my income is from self employment, so I lose the roughly 7.5% that an employer would pick up.

It makes me a bit sad to pay a third of our income to the government. I do like roads and police and all that, but I’m not sure it’s a good deal. Oh well, what can you do other than try to defer as much as you can? One day, the majority of our income will be from rentals, so we won’t be taxed as much.

The bright side, kind of, is that I think we’ve overpaid by a whole lot. This was the first year since I sold my optometry practice, and I think our accountant was being overly cautions with estimates. He knew of our plans to invest as much as we could, but sadly, I think most people make plans and never actually pull the trigger. He also did not count our latest rental property. If that closes by the end of the year, I’m sure we will get a refund. I don’t like to let Uncle Sam hold my money, but this was truly a learning curve year. If we get some of that back, it will probably go back into the rentals or into our 2015 investments.


The other biggest chunk of our income went toward housing costs. Mortgage payments, insurance, and property taxes for the house we live in took 10.1% of our income. Even with that percent, we are well below what most people pay for housing. That’s due to a combination of low housing costs in Southwest Colorado and refinancing at a low interest rate a couple of years ago. We should have this sucker paid off within the next 8 years!

Food, Warmth, Health

For our basic necessities, this is what we spent.

Utilities (Propane, electricity, water, trash removal): 2.54%

Food/Household Items/Dog Food: 4.45% ( I guess we eat twice as much as we like warmth!)

Auto Gas: 1.9%

Health Insurance: 2.1% We are lucky that Jim gets his insurance free from his job, and the daughter and I have a grandfathered plan. When and if they decide to cancel our plan, this will probably double or triple.

Fun, Life, Stuff

That leaves 6.96% of our income left over for everything else. I won’t break it all down because it would take pages, but basically, this is for travel, home and car repair, clothes, vet bills, dentists, clogging shoes, charity, eating out, getting our bar stools recovered, and everything else. Luckily, we didn’t have any major home repairs or health crises this year. We also didn’t buy any big ticket items other than a new bike for Jim and a washer.

Did We Live on 50%?

Actually we did better than that. Our expenses that didn’t  go into taxes or investments were 28% of our income. Granted, we do have a good income, but it’s certainly not off the charts.

I’m also happy to say that not one penny was spent on any kind of interest or debt outside of mortgages. I never tracked our spending when we were at the height our our credit card debt, but I bet easily a third of our income went to monthly payments of some sort. Sad.

I actually think we spend a whole lot, sometimes too much. I’m always looking to improve.I certainly don’t feel deprived in any way at all.  I am pretty proud of how 2014 shaped up, and I hope we can do as well or better next year.

Do You Track Your Spending? What eats up the biggest percent of your income?





About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. Have to ask… what are clogging shoes? =)

    • We cut back on our activities this year because I felt like we were overscheduled, but the one thing our daughter wanted to keep was dance class. She chose clog dancing this year. Think Lord of the Dance. I did not realize how expensive and how unavailable clogging shoes were, but she enjoys it and it’s really cool to see and hear the little cloggers.

  2. Love this post, and lots of good ideas to start making better choices. We have 4 kids, one is in college, 2 play travel hockey, (the middle 2 are just a year apart and will be in college at the same time! Yikes!) that is where most of our money goes. Thanks for sharing your journey 🙂

    • Kids are certainly expensive. We only have one and she is still pretty small. I certainly expect her expenses to grow with time, and that’s OK. We make the choices we do so we can afford things we value and letting our daughter participate in various things as she gets older will be one of those.

  3. Congrats on your fabulous financial accomplishments in 2014! We lived on just under 50% this year… if it wasn’t for our silly rent in England ($2000) we would have done better… hoping we will move to a lower cost of living area back in the U.S. in the next year or two! 25%-30% is our “eventual” goal! Best wishes to you and your family! 🙂

  4. I still don’t understand why there isn’t a better tax system in place for the self employed.

    • I think they try to throw self employed people a bone with things like solo 401K’s and other tax deferred options, but it does get harder as affordable HSA plans are getting more scarce and flex plan limits have gone down while the red tape has skyrocketed. I do think small to mid size businesses get the shaft on lots of things. We’re not big enough to be able to lobby like the huge corporations who tend to get most of the tax breaks.

      • Have you checked out adding a daycare FSA? And see if that will cost less than the taxes of $5000 of daycare for your kid?

        • I did have a flex for daycare before our daughter started school, but we don’t have daycare expenses anymore. That is a great alternative for anyone with small kids.

  5. Nice work Kim! We do track our spending and for 2014 it looks like we’re definitely within range of 50% (give or take 5-10%), though I’m thinking we’ll be a little over. I hear you on the self-employment taxes. I hate making out that check every quarter, though I know it’s technically a good problem to have, I still hate making out that check.

  6. I am still not there yet, but I am working hard to get rid of my debt so I can achieve such a goal. It has to be hard making a check out to Uncle Sam. I am planning on becoming self employed the latest a year and a half from now and I can’t imagine cutting that check when I am so use to getting a check from the government. Something I am not looking forward too.

    • You probably won’t get a refund check being self employed if you do make money. I would not trade it though. Someday, hopefully we can take advantage of the discounted tax rates on rental income and from capital gains. We just have to pay out in the mean time.

  7. Wow, great job Kim.

    For taxes, I assume you’re already benefiting on your real estate through write-off of depreciation and expenses. Since you’re unemployed, have you looked into a SEP? You can put up to 25% of your income on a tax-deferred basis, usually a lot more than the IRA limits. Could help shield some of your income from taxes.

    • Yes, we will get lots of write offs from the rentals. I have a solo 401K and have put in well over traditional limits of normal work plans. I guess that’s one bright side of self employment. I do believe we will get money back because our estimates were based on income, not taking into account the new rental or that we would tax defer as much as we did. Hopefully next year will be more reasonable.

  8. Wow, those are impressively low percentages to spend on your necessities! Great job!

    I think our biggest single expense right now is rent… it’s over 25% of my husband’s gross pay (which is all that we can count on now)!

  9. Great job Kim! I’m really hoping my income improves so I can make some big strides in the savings department. Housing is the biggest chunk of my income but it’s hard to give a percentage because my income is so variable. But I know it’s the biggest.

  10. Congrats Kim!!! Our numbers are wacky this year because of my erratic business income, but this is certainly a goal for us. We have made a lot of strides this year with cutting cable and our food costs and we plan to push ourselves harder next year.

    • I think your business is going to do really well this year. It’s hard to walk away from a sure salary, but I admire that you did it.

  11. That’s great news Kim! Right now a LOT of our income goes towards debt payments of some sort. We pay about $1k/month in student loan debt repayment, $1.3k in mortgage, and $500 in auto loan repayment. It’s a pretty sizable chunk and if we knocked out student loans and auto payments we’d have a lot of extra money to save, invest, etc. For now all we can do is keep paying it down.

  12. I have to do the year end math but I know we at least hit our target of saving/investing 50% of our gross income. There is still a lot of room for improvement when it comes to some of our expenses and I want to focus on that in 2015. Congrats Kim on those pretty sweet numbers!

  13. I’m looking to track our spending in more detail next year and have joined a challenge to save 50% of our income (using their calculations).

    We’re in our mortgage paydown phase, so I like to say we live on half our income instead of save half our income.

    • I know some people disagree, but I would love to have a paid off home. When we get closer to paying it off, we might throw everything at it for a year or two just to be done. We’ll see.

  14. It’s amazing that 10% of your income covers your mortgage, insurance, and taxes. I would say our biggest expenses are our mortgage and expendables. We did refinance to a 15 year mortgage about four years ago so it is a little higher than it could be but will be paid off sooner.

    • It is really cheap to live where we do. We sacrifice some ammenities due to our low tax base, but that’s one reason we are able to travel and show our daughter the things our area cannot provide. We also did not spend the max our bank told us we could afford. That would have been a ridiculous big expensive house we just didn’t need.

  15. that’s awesome, Kim! Our biggest chunk of our income goes to our debt right now. Can’t wait till that crap is gone for good.

  16. Nicely done! Looks like you had a great 2014! We track our spending very closely, which I agree with you, is so tremendously helpful. Gotta know where your money is going :)! Our biggest expense by far is our mortgage, but, looking forward to the day when it’s a rental property and we’re living mortgage free on a homestead. Congrats on having such a great year!

    • I think if you aren’t making yourself house poor, real estate is always a good investment. You have to live somewhere, so you might as well be building equity. I bet you can make as much on your one rental in Cambridge as we can on three rentals in our area. It’s all relative.

  17. Great job! I totally understand just using percentages, because people do get all emotional over exact amounts. People can be babies. You did great living on 28%! Most of our money goes to my TSP, IRA, my wife’s 401k and we also have a good chunk going to rental property repairs, which I would love to see get lower. I’ve never actually calculated all the percentages, but now I’m curious to know how much we live on.

  18. When I was on my way to early retirement I was paying 30% for lifestyle, 30% to savings (401K,IRA, Roth IRA), and 40% to taxes and Social Security. Debt free and my mortgage was so low we had little to deduct. It works out that I lived on half my income after the government’s take. I hate paying high taxes but its all relative to salary. The more I made the more I paid but also saved. It was all worth it! Great job on your savings rate. Love the Arches photo.

    • That is true that the more you make they more they take, but making more does allow you to save more, so I wouldn’t trade my income to pay less in taxes.

  19. I definitely think percentages are the way to go. This was my first year tracking my spending so I’m looking forward to doing the year-end numbers at the end of the month. Although I know a lot of my income goes to debt repayment, I’m glad to have stopped adding to my debt! 😛

  20. Fantastic job Kim-and you live in a gorgeous area. Nice!

  21. Hope you get out of the rat race sooner Kim. I actually haven tried living on 50% of my income. But, I can’t imagine myself doing that or what situation I would have, really. That being said, good luck and congrats in advance Kim.

  22. A good chunk of our expenses got to mortgage plus extra to principal. After that is daycare… It’s a huge expense with two kiddos. We definitely take advantage of the $5,000 to an FSA. But that tax advantages maximum most certainly doesnt cover all of it.

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