How to Save 33% of Your Net Pay

As I previously mentioned over at Million Dollar Journey I save about 33% of my net (take home) pay when our household gross income is around $75,000. I say ‘around’ since the daycare’s income tend to fluctuate up and down a bit, so it’s always a bit hard to tell where the year will end up.

I thought perhaps it would be useful for me to break it down on how we save that much. First off we spend around 33% of our net income on our mortgage and property tax. So right there I’m saving money by paying down my mortgage principle. I consider this amount as savings since it is directly improving my net worth. That gives me my first 6.8%.

Next I have my monthly amount going to my pension for another 7.2%, which my company tops up to 8.6% at once and then yearly then top it up again, but I don’t count the yearly top up in the monthly amount. We also put aside an additionally 5.4% into our RRSP accounts.

Then we have the cash savings which gets moved into a high interest savings account before we can spend it. That is the large amount at 15%. So all together this amounts to: 6.8+8.6+5.4+15 = 35.8%. Ok, that’s higher than I thought, but in reality some of that 15% comes back out when we buy things. It’s not all just invested right away, but most of it is.

So those with their calculators handy would have realized all my other expenses only take up 38% of my take home pay. Here is a break down of where that money goes:

  • Power bill 1.4%
  • Wife’s cell phone 0.3%
  • Phone, internet, cable, long distance bill 3%
  • Natural Gas bill 2.7% (annualized average amount)
  • Water bill 1.4%
  • Gas for the car 2.2%
  • Food 6.8%
  • Spending 8.6%
  • The kid 3.2%
  • Saving for Christmas and Insurance 7.1%

For a total of 36.7%. The leftover amount is my float. So if I go over slightly on something it isn’t a big deal. Additionally there is some money I don’t count in the budget. First off the money from our Child Tax Benefit gets rolled right over into RESP’s for the kid. Also the daycare sometimes exceeds what I expect from it so it gives us a little spending money boost or saving boost depending on how we want to spend it on in a month.

So how can you save this much? Well here is a few tips that should help you out.

  • Minimize your monthly bills. Your idea is to maximize your free cash flow in a month. So if you can save $4/month on banking fees, do it. If you can save $5 on your phone plan, do it. All of these add up to give you the most money available for saving. For example, saving $9/month gives you over $100/year in extra savings.
  • Prepay all your annual expenses. You know you have Christmas every year and your house insurance, car insurance and life insurance. Get off those monthly payment plans that charge fees and prepay them to yourself in a high interest savings account. That way your earning interest on the money which is further reducing your cost to save these amounts.
  • Keep an eye on your food expense because this can easily get away on you. Avoid prefabricated food, buy fruit and veggies that are in season, keep the meat and cheese intake on the small side and buy things in bulk.
  • Keep your spending money as cash. It’s near impossible to overspend this way if you don’t take out any more than your budget amount.
  • Commit yourself to a challengingly savings rate and pay yourself first. You won’t know how far you can push yourself until you try. Even if you have to dip into the saving account once in a while, it’s not the end of the world. Stuff happens that is beyond your control. Don’t take it a personal failure.

Hopefully that helps everyone out a bit. Let me know if you have any questions.

7 thoughts on “How to Save 33% of Your Net Pay”

  1. FT,

    It’s hard to say who the ‘top savers’ are in the blogging world. We all tend to use different metrics and with different incomes it’s hard to work it out to an even level.

    I feel I’m doing well so that is all that matters in the end and hopefully I can encourage other people to improve their saving rate.


  2. Hello 45,

    You must be a hell of saver! Have you read Fraser Smith’s book “Is your mortgage tax deductible?” For most people cash flow is a big problem and there is no way they can do what you can do! You are one of a kind…have have dealt with over one hundred clients over 13 years and if there was a gold medal for saving you would win!


    Brian Poncelet,CFP

  3. Moneygardener,

    What do you mean “full mortgage payments”? I hope you’re only including payments against the principal.

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