How to save 50% of a $120K income in 2022

Kelsey and I reviewed our financial goals for 2022 earlier this week  and it made me think about how ineffective traditional financial advice is. You may have heard of the 50/30/20 rule for budgeting...  

• Spend 50% on fixed expenses (mortgage/rent, vehicles, insurance, groceries, etc.) 

• 30% on discretionary purchases (entertainment, travel, subscriptions) 

• Save the remaining 20% 

If building wealth is a priority for your family, flip the 50/30/20 rule on its head.

This is what it means to pay yourself first.  

Here’s one way a family can do it on a $120K income in 2022: 

1. Get your organization’s 401k/457b/403b match: ~$6K (this number will vary based on your specific employer match) 

2. Max out your HSA: $7300 

3. Contribute $6K to your Roth IRA and your spouse’s Roth IRA: $12K 

4. Save $1,000/mo in a brokerage account: $12K 

5. Buy a rental property, invest in a small business, pay down debt, however you want to put the remaining $22,700 to work... 

THEN build your lifestyle around the other $60K. 

The important thing is that you start somewhere. A lot of people will scoff at the idea of investing 50% of their income, but plenty of middle-income families are doing it.  It’s about creating an artificial environment of economic scarcity, so you can put your dollars to work and achieve the lifestyle you want for your family.