Raises: Spend Half, Save Half

One of the tactics Louise and I used when we started out was to "Save half and Spend half of every raise". No matter how small or large, no matter if it's a "bonus", or a straight salary increase. We found this to be very, very, successful.

It's particularly effective If you are just starting out in your career, but applicable for any time or if you are at a loss of where to start saving.

The question of course, is "is this worth it?".

For that, see the table below. Or download the spreadsheet yourself here.


First let's assume that you have a 2% yearly raise and an initial savings rate of 1%.
Even with this absolutely most meager start, you would reach your 10% target in 12 years.

(Read the Chart below as, "At the end of year one, you got an $800 raise. You are going to save half of this which will be $400 more in savings per year. You were saving $400 and now you are saving $800 in total for a new savings rate of 2.0%.")
AgeYearCurrent salaryRaiseNew salary Existing SavingsExisting Savings Additional SavingsNew SavingsNew Savings
241 $40,000 $800 $40,800   $400 1.0%  $400 $800 2.0%
252 $40,800 $816 $41,616   $800 2.0%  $408 $1,208 3.0%
263 $41,616 $832 $42,448   $1,208 2.9%  $416 $1,624 3.9%
274 $42,448 $849 $43,297   $1,624 3.8%  $424 $2,049 4.8%
285 $43,297 $866 $44,163   $2,049 4.7%  $433 $2,482 5.7%
296 $44,163 $883 $45,046   $2,482 5.6%  $442 $2,923 6.6%
307 $45,046 $901 $45,947   $2,923 6.5%  $450 $3,374 7.5%
318 $45,947 $919 $46,866   $3,374 7.3%  $459 $3,833 8.3%
329 $46,866 $937 $47,804   $3,833 8.2%  $469 $4,302 9.2%
3310 $47,804 $956 $48,760   $4,302 9.0%  $478 $4,780 10.0%
3411 $48,760 $975 $49,735   $4,780 9.8%  $488 $5,267 10.8%
3512 $49,735 $995 $50,730   $5,267 10.6%  $497 $5,765 11.6%

Next, assume a 3% yearly raise and an initial savings rate of 5%.
Still modest, but now you would reach your 10% target in only 4 years.

AgeYearCurrent salaryRaiseNew salary Existing SavingsExisting Savings Additional SavingsNew SavingsNew Savings
241 $40,000 $1,200 $41,200   $2,000 5.0%  $600 $2,600 6.5%
252 $41,200 $1,236 $42,436   $2,600 6.3%  $618 $3,218 7.8%
263 $42,436 $1,273 $43,709   $3,218 7.6%  $637 $3,855 9.1%
274 $43,709 $1,311 $45,020   $3,855 8.8%  $656 $4,510 10.3%
285 $45,020 $1,351 $46,371   $4,510 10.0%  $675 $5,185 11.5%
296 $46,371 $1,391 $47,762   $5,185 11.2%  $696 $5,881 12.7%

And finally, while I've arbitrary chosen a starting age of 24, these figures apply to anyone at any age. The thing is, if you really start this from your first job, you can do fantastic because most people get a pretty substantial raise sometime in the first few years of their careers. Maybe it's a promotion from Jr. to Sr., or maybe a switch to management. Heck, maybe you just get fed up and go someplace else.

So this time, let's assume that you start out by saving 10%, and that over 20 years of working you double the salary of your very first job. This works out to be about a 4% annual raise. This also means that in 20 years, that means you are saving 33% of your income and are very likely going to retire soon.

AgeYearCurrent salaryRaiseNew salary Existing SavingsExisting Savings Additional SavingsNew SavingsNew Savings
241 $40,000 $1,600 $41,600   $4,000 10.0%  $800 $4,800 12.0%
252 $41,600 $1,664 $43,264   $4,800 11.5%  $832 $5,632 13.5%
263 $43,264 $1,731 $44,995   $5,632 13.0%  $865 $6,497 15.0%
274 $44,995 $1,800 $46,794   $6,497 14.4%  $900 $7,397 16.4%
285 $46,794 $1,872 $48,666   $7,397 15.8%  $936 $8,333 17.8%
296 $48,666 $1,947 $50,613   $8,333 17.1%  $973 $9,306 19.1%
307 $50,613 $2,025 $52,637   $9,306 18.4%  $1,012 $10,319 20.4%
318 $52,637 $2,105 $54,743   $10,319 19.6%  $1,053 $11,371 21.6%
329 $54,743 $2,190 $56,932   $11,371 20.8%  $1,095 $12,466 22.8%
3310 $56,932 $2,277 $59,210   $12,466 21.9%  $1,139 $13,605 23.9%
3411 $59,210 $2,368 $61,578   $13,605 23.0%  $1,184 $14,789 25.0%
3512 $61,578 $2,463 $64,041   $14,789 24.0%  $1,232 $16,021 26.0%
3613 $64,041 $2,562 $66,603   $16,021 25.0%  $1,281 $17,301 27.0%
3714 $66,603 $2,664 $69,267   $17,301 26.0%  $1,332 $18,634 28.0%
3815 $69,267 $2,771 $72,038   $18,634 26.9%  $1,385 $20,019 28.9%
3916 $72,038 $2,882 $74,919   $20,019 27.8%  $1,441 $21,460 29.8%
4017 $74,919 $2,997 $77,916   $21,460 28.6%  $1,498 $22,958 30.6%
4118 $77,916 $3,117 $81,033   $22,958 29.5%  $1,558 $24,516 31.5%
4219 $81,033 $3,241 $84,274   $24,516 30.3%  $1,621 $26,137 32.3%
4320 $84,274 $3,371 $87,645   $26,137 31.0%  $1,685 $27,822 33.0%