You Can Only Save So Much.

One of the most common bits of money advice is to save more. The idea is that you create a budget and cut all the fun stuff out. Then you save what you have left over. That all sounds great. Especially if you make $100,000 a year and have no kids. Yup, then you could cut your spending from $100,000 to $50,000 and save $50,000 per year. That’s a lot of money, but it’s still limited to what you make minus what you spend. It can never be higher than what you make.


Now, what about those of us who only make $50,000 a year and have a family to support. Turns out that that’s most of us. The average pay in the US is about $50,000 a year for a couple. And the couple has kids. You still need to eat. You still need to buy clothes for you kids. Even if you cut that down to the bare bone and spend nothing on luxuries you only have a few thousand per year to save. According to the Department of Labor the average household spends about $3000 on things like entertainment and gifts. The other roughly $47,000 is spent on essentials like food, shelter and medical expenses. Everybody’s situation is different, but this will definitely make it harder to save.


So what do we do? This is why rule number 2 of my Three Money Rules is so important. Maybe more important than the first rule. We need to start making more money. That’s easier said than done, though. Start small. Put a little bit of money is a savings account. That will earn a little bit of interest. I would recommend an online savings account since they pay much more interest than a regular bank. You can check a website like to see what different banks are paying.


That will help build a foundation, but it won’t make you rich. For that you’ll need to bring in more money. Get a second job, create a product to sell, volunteer for a service, or start your own business. The next thing is to put that savings to work. Since you can only save so much money you need to make sure that what you save is helping you generate more money. Again start with a savings account. After that start looking at other places to put your money. For example, buy things at a thrift shop to resell on eBay for more money. You can find valuable things there that are sold for pennies. Bonds can give you a better return than a savings account. Another option is to buy stocks. Dividend paying stocks of big companies like Coca-Cola and Johnson & Johnson can be a good option. Check out my growing post “Way too Many Ways to Make More Money” for ideas on how to increase your income.