Personal Finance

How to Save $50,000 in 2 Years on a Modest Salary

Expertise: Landlording & Rental Properties, Real Estate News & Commentary, Personal Finance, Real Estate Investing Basics
133 Articles Written

So, you’re ready to get serious about this whole “investing” thing. Except you keep bumping up against one nagging detail: it takes money to invest in, well, anything.

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This raises a whole new set of questions about how to save money, in addition to all the questions about how to invest it once you have it.

I get it, you’re not rich. For the purposes of this article, I’m going to use the most boringly average person in America as our case study: Median Melissa. She represents, you guessed it, the median earner, taxpayer, and spender.

All data below is sourced from the Bureau of Labor Statistics except where otherwise noted. Anyone at any income level can cut the spending categories outlined to save similar percentages of their income.

But like everything else in life, the more you earn, the easier it is. I focus on cutting spending here, but you should also look for ways to boost your income. Consider asking for a raise, pursuing a higher-paying job, earning additional certifications or degrees, switching career paths, or starting a side hustle.

Finally, keep in mind that if you have high-interest debt, such as credit card debt, you should start by tackling your debt and funneling your savings there first.

Without further ado, here’s a list of expenses and how to cut them, in order of the income percentage they devour. Keep in mind you don’t need to cut all your expenses simultaneously – but the more you cut, the faster you’ll save money.

Close up of unstable stack of coins on world map.

Housing (27% of Income)

Median Melissa’s household earns $73,573 in gross (pre-tax) income. Of that, she spends $19,884 on housing, or 27% of gross income.

If Melissa wants to save $50,000 in two years, that means that if she can eliminate her housing payment, she’ll save nearly $40,000 and be roughly 80% of the way there already.

There are many ways to house hack and reduce or eliminate your housing payment. The classic model involves buying a multifamily, moving into one unit, and renting out the other(s). But it's not the only option; here's how my business partner Deni used three different house hacking tactics over the years to reduce her housing costs on suburban single-family homes.

My wife and I take a different tack: we live overseas, where her employer (a school) provides us with free furnished housing. It’s a common perk for international teachers and other educators.

Potential Annual Savings for Average American: $19,884

Transportation (13%)

Median Melissa pays $9,576/year for transportation. Nearly all of that comes from owning, maintaining, fueling, cleaning, and parking a car.

Which, by the way, is in line with the average annual cost of car ownership calculated by AAA, at $8,849.

The long and short of it? Cars are expensive to own, operate, and maintain.

So while you’re looking into a new home to house hack, look for homes located in convenient places for getting around by foot, bike, public transportation, carpooling, scooter, or some other mode of transport that doesn’t require you to own a car.

I know, no one wants to hear it, and almost no readers will even consider getting rid of one or more of their cars. So here are three other options:

  1. Rent out your car on Turo when you don’t absolutely need it.
  2. Keep your car forever instead of upgrading every few years to the latest, shiniest car.
  3. Sell your expensive car and buy an inexpensive-but-reliable car.

My wife and I shared one car for the last four years, and live without a car currently. We’re laughing all the way to the bank.

Potential Annual Savings for Average American: $9,576


Federal Income Taxes (8-13%)

With an average gross income of $73,573, Melissa’s tax bill looks different depending on whether she’s single or married.

If she’s married and they take the standard deduction, her annual household income tax bill is $5,513 barring any special tax credits or above-the-line deductions. She and her husband’s first $19,400 is taxed at the 10% rate ($1,940), and their next $29,773 is taxed at the 12% rate ($3,573). The standard deduction removed $24,400 from their taxable income.

If Melissa is single, her annual household income tax bill is higher, at $9,361. She pays 10% on her first $9,700 of income ($970), 12% on the next $29,775 ($3,573), and 22% on the next $21,898 ($4,818). Her standard deduction is $12,200.

For ease of computation, we’ll assume Melissa lives in Texas, where there’s no state income tax. If she lives in Baltimore instead, she can expect to pay another 8% in state and city income taxes.

Melissa could reduce her tax bill by maxing out her 401(k) account, chopping $19,000 off her taxable income. That would cut her income tax bill to $3,233 if she were married, or an impressively low $1,117 if her husband also maxed out his 401(k). Single Median Melissa could only cut her tax bill to $5,181, though.

Potential Annual Savings for Average American: $4,395

Restaurants, Delivery, Takeout (5%)

Median Melissa spent $3,365 last year on restaurants and other meals she paid a premium for someone else to make for her.

Besides being less healthy, the food was marked up far higher than the cost of the ingredients. Food that someone else makes for you is effectively an entertainment expense, not a necessity.

You could save nearly $7,000 by putting a two-year moratorium on food made by businesses. Willing to give it a try?

Potential Annual Savings for Average American: $3,365

Smoking (3-6%)

According to, the average pack of cigarettes in the U.S. costs $6.28. That’s thousands of dollars a year that literally disappears in a puff of smoke, with nothing to show for it but a (much) shorter life expectancy.

No really – a one-pack-a-day habit comes to $2,292 a year. Two packs a day sets you back $4,584 a year.

Don’t cry about how hard it is to save money if you smoke.

Potential Annual Savings for Average American: $1,000-$5,000

Clothes & Apparel (2%)

Stop buying clothes new. The same goes for furniture and electronics.

Median Melissa pays $1,833 a year for apparel. Sure, a few bucks of that are bare necessities like new socks and underwear, but most of it is elective. Especially in the context of taking a two-year shopping hiatus while you squirrel money away.

I did it myself, while starting my business. For more than two years, I didn’t buy a single new piece of clothing (although in the spirit of transparency, I received a few shirts as gifts, and I did buy a new pair of running shoes).

One troubling study in the Daily Mail found that the average piece of clothing is only worn seven times before it’s discarded. I can guarantee you your clothes will last many times longer than that, so let’s not talk about needing to constantly buy new clothes. In most cases, new clothes are a want, not a need. And when you do need to buy clothes, buy them used for 20 cents on the dollar.

Potential Annual Savings for Average American: $1,833

Cable TV (2%)

The average monthly cost of cable TV is $106.20, per Bloomberg. That’s $1,274 a year, just to sit and veg out on the couch while losing IQ points.

Find a hobby instead, preferably one that can generate a little income as a side hustle. If that’s too much to ask, switch to a streaming service for $10/month.

Median Melissa spends nearly three hours watching TV every single day, per the BLS. Funny how everyone seems to complain that they don’t have enough hours in the day though, isn’t it?

Potential Annual Savings for Average American: $1,274

taxes, rental property, real estate investor, rental income

From $50,000 to Financial Independence

Unlike Median Melissa, who’s a lost cause, you can shape up your life. You cut out many of the expenses above, and in two short years, you’ll have $50,000 saved.

But then what do you do with it?

Yes, stocks are great, I love stock index funds and stocks have performed well over the last 145 years. But do you know what's performed even better? Real estate—and more specifically rental properties.

Rental properties come with several advantages for reaching financial independence and retiring early (FIRE). First, they create ongoing income without having to sell off any underlying assets. Second, they come with tax advantages. Third, their returns adjust for inflation (unlike bonds and stocks).

But best of all, you can recycle the same funds over and over again to keep buying more properties and building more passive income. It's called the BRRRR strategy, and involves buying a property in need of repairs, renovating it, renting it out, then refinancing to pull out your initial down payment.

Because you get your original down payment back, you can rinse and repeat the process, using the same money over and over for new properties.

You don’t need a million dollars to retire. You need $50,000, reinvested repeatedly until you have enough rental properties to cover your living expenses.

Final Thoughts

I’ve heard it said that personal finance isn’t a math problem, it’s a behavior problem. And while there is some knowledge and a little math involved, the hard part isn’t investing or running calculations.

The hard part is cutting your spending in the first place.

As you read the list above, at some point you probably shook your head and said “That’s impossible, there’s no way I could cut that expense out.” That’s a common, average, Median Melissa way of looking at your expenses.

Most people shuffle through life spending nearly as much as they earn, and working for 40-50 years before they can even think about retiring. If you don’t want to be average, break that cycle and start supercharging your savings rate. Within a year or two, you can have enough money to start building a real estate empire. And with each new investment you buy, whether real estate or equities, your wealth and income start compounding.

That’s the secret to building wealth – not lottery tickets or inheriting millions, but discipline, patience, and the willingness to defer gratification even as you watch your friends spend every penny they earn on sexy cars and huge houses.

What are your financial goals? How do you plan to reach them?

Share in a comment below!


G. Brian Davis is a landlord, personal finance expert, and financial independence/retire early (FIRE) enthusiast whose mission is to help everyday people create enough rental income to cover their ...
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    Javier Wallace
    Replied about 1 year ago
    I am just starting out on my real estate investment path and struggle to understand how 50k is enough to get started in investing. I have saved up almost 20k. But feel that 50k may not even be enough for a down payment let alone rehab costs or any other expenses that come with buying.
    Account Closed Financial Advisor from CA
    Replied about 1 year ago
    Number one: hang on to your cash. Study financing. You sound like you are looking for an aesthetic perfect rental. That's one reason why people never get started. I've met so many people who never buy their first house because they won't start at the bottom. They complain forever. Blah blah.
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    It depends on where you're investing Javier. It sounds like you live an extremely expensive market. Have you considered investing in a more affordable market?
    David Sisson Architect from Providence, Rhode Island
    Replied about 1 year ago
    Hey Javier, keep at it. $20K is enough to buy an small single family. You might want to save a bit longer to get a multi, but you could consider using that $20K to buy yourself a home, and house hack it. The great thing about living in your own home is you can DIY some basic rehab, and do it slowly when you have the $ for paint, etc. If you want to go bigger, you'll need more $, so keep working at it. You can do it!
    David Pere Rental Property Investor from Oceanside, CA
    Replied about 1 year ago
    Well written Brian, Some solid advice in this article, and I really like the way you broke it down. Thank you!
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    Thanks David, much appreciated!
    Jeffrey Bower
    Replied about 1 year ago
    Wow. As someone who is saving $20k (at ~$10+k), this gives me a list of areas to evaluate and scale back to save more. Thank you!
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    Glad to hear it helped give you some ideas Jeffrey!
    David R. Rental Property Investor from Merrimack Valley, MA
    Replied about 1 year ago
    Brian, a valuable article for those looking to increase their savings. Just to nit-pick a little, in the article you’re using ‘median’ and ‘average’ interchangeably; they are, in fact, generally not the same measure.
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    Haha, well if we're nitpicking, median is one of the three types of averages: mean, median, and mode :-)
    David R. Rental Property Investor from Merrimack Valley, MA
    Replied about 1 year ago
    Brian, Three?? You left off geometric, harmonic, and quadratic mean, and several others :)
    Jay Kaulitzke from Colorado Spgs, Colorado
    Replied about 1 year ago
    I strongly recommend that everyone that wants to save money so that they can start investing reads, "Set For Life," by Bigger Pockets alum Scott Trench. You can find it in the bookstore on this website. He has a fantastic section on living frugally that is very eye opening for the new investor. Overall the book is one of the most valuable that I have read to date.
    Yettekov Wilson Jr
    Replied about 1 year ago
    Very good advice!!! I saw a couple of places I could cut back!
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    Glad to hear it Yettekov!
    Mischael Metelus from New Jersey/NYC
    Replied about 1 year ago
    I had crippling anxiety towards money for awhile (one would argue that I was a hoarder), but I actually started using an app that did the saving for me, and I set it to aggressive. While it would have been great to do the math myself, having an app that (for a small monthly fee), saved for me was actually a god send, it sends me weekly updates on the status of my checking account, and my savings and last year alone I was able to save 22K, which I've invested this year and will be on track for 50K and potentially another 22K saved by the end of the year, I have an opportunity to end this year with $72K and if wholesaling keeps up, $100K. Long story short: any little edge you can use to help you save is important, be it an app, reading a book, or doing it by hand.
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    Automation is definitely one of the keys to saving money. Thanks for sharing that tip Mischael!
    Eric Pesek Property Manager from Austin, TX
    Replied about 1 year ago
    Hello Mischael...Congrats!! That's a cool story. What app are you using?
    Brandon Moore from Central Arkanas
    Replied about 1 year ago
    I noticed a difference in my taxes this year because of my marriage. It was the first in recent years that I have not had to pay more in taxes.
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    Glad to hear it Brandon, and congratulations on getting hitched!
    Barb F. from Northern Virginia
    Replied about 1 year ago
    A note about the vocabulary of math: Mean, median, and mode are all measures of *central tendency*, not measures of average. "Mean" and "average" are the only two that are interchangeable. Mode and median are different and are not synonymous with "average". Ya know, if we're going to be super technical about it :) As for the content, I'm currently trying to figure out a way to do a house hack. I was considering getting my start with out-of-state investing (since my area is expensive), but if I stretch a bit I can get enough house that 1) I can have a roomie and not feel like I'm dying for lack of privacy and 2) that it'll make a good rental once I eventually leave the property. Wish me luck :)
    G. Brian Davis from Baltimore, MD
    Replied about 1 year ago
    I would wish you luck if you weren't such a smarta$$ Barb ;-) But I hope the house hack goes well, and keep in mind there are other ways to house hack beyond multifamily properties. For example, I get free housing through my wife's employer, and my business partner Deni gets nearly free housing through a foreign exchange student stipend.
    Jeffrey Bower
    Replied about 1 year ago
    "Rent out your car on Turo when you don’t absolutely need it. Keep your car forever instead of upgrading every few years to the latest, shiniest car. Sell your expensive car and buy an inexpensive-but-reliable car. My wife and I shared one car for the last four years, and live without a car currently. We’re laughing all the way to the bank." This is exactly what my fiance and I are doing.
    Chris Michael
    Replied about 1 year ago
    It's all cool and neat advice but maxing out your 401k requires MOVING money from "having it" to "not having it" so doing so won't really save you any cash. It will reduce your tax liability but at the cost of losing liquid cash. There is no net gain. I agree with what you are trying to do but I don't think it's generally reasonable advice. Sure, you could cut out a lot of costs by house hacking, but that's not an option if you don't already have enough for a down payment and not everyone has free housing via a job. Much of the advice here is based on completely "average" situations which should include children. Given that, I think this advice is not as reasonable as "get a second job.". Honestly, people want to be comfortable and although buying used cars and cutting cable is great advice, most families would be miserable if they cut out most of their luxuries for two years just to put a down payment on a house that would cash flow a few hundred each month. Plus, since half of all households are below the median, the article might be discouraging to so many people because they don't have enough fat to cut off from their budget as it is. Improving income should be on this list as it guarantees most people to be able (willingly or not) to save money. The median household income is skewed anyway.
    Dave Rav from Summerville, SC
    Replied about 1 year ago
    @Javier Wallace that is a great start! You can do SO much with 20k. Here are just a few options: 1) Use as a 15% DP on a $105k asset (try small, local community banks for an investor/rental prop loan. They're out there - I'm living proof). 2) Use the $20k as a healthy downpay on a seller-financed home. Present it to the seller like this: "This $20k represents maybe 20 mortgage payments to you. It will cover your next 20 mortgage payments. That may get some sellers to a "yes" for the deal) 3) Buy a mobile home (or two, if you're savvy). MHs are cash cows! All mine surpass and dwarf cashflows on any homes I have owned. Hands down.
    Minerva Thomas from Boston, MA
    Replied about 1 year ago
    @ Chris Michael, It is totally posible to achieve that goal. I saved $15,000 last year and also pay-off two credit cards, one of them with high outstanding balance. I moved on my month house for a year y to save money. Now I am paying rent , but I don’t have cable tv and share Netflix with my daughter. Also I always prepare my own food and everyday bring my lunch to work. I am debt free and getting ready for my first deal. You gotta do what you gotta do.
    Minerva Thomas from Boston, MA
    Replied about 1 year ago
    @Chris Michael, it is totally posible to achieve that goal. I saved $ 15,000 last year and paid - off two credit cards , one of them with a high outstanding balance.I moved in to my mom house for a year to be able to save money. Now I moved to an apartment 4 month ago, so now paying rent, but I don’t have cable tv and I sharing Netflix with my daughter. Also I prepare all my food and everyday take my lunch to work. I am debt free and have my little saving. Getting ready for my first deal. You gotta do what you gotta do.
    Chuck Walker from Ofallon, Mo
    Replied about 1 year ago
    I agree with Chris Michael. It seems more often than not, articles such as this one account for ideal situations across the board. This isnt reality. Sure, a person cann cut back on entertainment expenses, food expenses by way of reduction in dining out, clothing expenses...but suggesting that a person sell their home and get a less expensive home is not an easy or doable task. Consider the millions of people who own their home , pay the mortgage as scheduled, but who would not qualify for a new loan due to poor debt to income ratio or recent career change. Remember, this article looks at housing costs to account for 40% of the savings! That alone makes it a less than stellar article. I'm not declaring any of it is impossible. I am stating component of it are less than realistic, and doesn't fit the mold of where most people are currently positioned in life. Yes, many people have extraneous spending habits that, if brought into check, would amount to more money in there pockets. But how many people can simply wipe away their housing expense?
    Don Taylor New to Real Estate from Raleigh, NC
    Replied about 1 year ago
    A lot of great tips that I will use from this article.
    Eddy Ogbekhilu
    Replied almost 1 year ago
    Not able to save is not a math problem,rather behaviour modification..100% true . If we want it bad enough we would find a way to be creative. Life has so many people with so many option...get here if you can of if u want to via Uber, Lyft car,boat,chariot etc Olita Adam's .just get here.