Despite Earning Below Average Income, We Saved 30% Last Year. Here’s How

2020 was a good year for us savings-wise. We managed to save 30% of our income, which is significantly better than the national average for 2020 of 16%. This is even more impressive considering our income is rather mediocre. According to the 2019 Consumer Expenditure Survey by the U.S. Bureau of Labor Statistics, the average household income is about $83,000. Our income last year (excluding investments) was closer to the median: about $50,000. This is because I currently work as a graduate student (which is technically a part-time job even though you’re required to work full time) and my wife is a stay-at-home mom/freelance editor and translator. For households with our income, the average savings rate is about 3% (and that’s including forced retirement savings with the Social Security tax). So how did we manage to save 30%? I compared our expenditures to those of households in the same income decile (10 percentile group) to find out.

The Consumer Expenditure Survey breaks down expenditures into the following categories:

  • Housing
  • Transportation
  • Food
  • Personal insurance and pensions
  • Healthcare
  • Entertainment
  • Apparel and services
  • Cash contributions
  • Education
  • Miscellaneous
  • Personal care products and services
  • Alcohol
  • Tobacco products and smoking supplies
  • Reading

You can read about the average spending of consumers in these categories by income levels here, where I also describe what kinds of purchases are included in each category to give a better sense of what these category names mean.

How do our expenditures compare to those of households with a similar income?


Our housing expenses were only slightly below the average. It’s difficult to save on housing when rent prices are consistently high in our area. We do make an effort to keep our electricity bill lower by carefully controlling our thermostat, but we could certainly do more if we wanted to.


This was a big area where we saved relative to the average. Almost half of our savings came from this category alone. While transportation is generally the 2nd largest household expense, for us, it was only the 5th largest. This is because we purchased lower cost vehicles years ago and quickly paid them off. We also live relatively close to my work and to local stores, so we don’t need to get gas that frequently. Our biggest expense in this category is car insurance, followed by occasional maintenance costs.

Food and Alcohol

I combined these two categories because we purchase both at the grocery store. Our expenditures on food and alcohol were pretty close to the average. This is mostly due to our food purchases, though, since we are not big alcohol drinkers. We would likely be over the average on food alone. While we do make an effort to reduce our grocery bills (you can find tips here), we are buying for three. This is larger than the average number of people in a household for our income level (2.4), so it makes sense that we would generally need to spend more on food.


Healthcare is another category where we had big savings. Thankfully, my family has been quite healthy over the past year, so most of our expenses in this category were for health insurance. The university where I work pays for about 77% of our health insurance, which is slightly higher than the 2020 average employer contribution percentage of 74% for a family, so we managed to save some money there.

Personal insurance and pensions

Personal insurance and pensions includes the Social Security tax and contributions to retirement accounts. We decided to use most of our savings for the year to max out our Roth IRA contributions, so our allocations to this category were much higher than the average.


Our entertainment expenses were about the same as the average. Most of this is due to our cable bill, plus I got a new phone as my previous one was becoming quite outdated. While cutting cable would be an easy way to save money, paying for internet alone costs almost as much as basic cable + internet in my area, so we didn’t think it would be worthwhile.

Apparel and services

Apparel and services is the one category where we actually spent significantly more than the average. This is because many childcare expenses (such as diapers) are included in this category. Since we know this category is one where we spend a good deal of our money, we have made an effort to cut our costs by buying secondhand clothes for our toddler. He outgrows them too quickly to make it worth buying new clothes.

Cash contributions

We spent quite a bit less on cash contributions than the average, although we did donate money to a healthcare foundation and a local thrift store that we often get children’s clothes from. Other payments that would typically be included in this category (alimony and money sent to students) did not apply to us.


For us, this category was mostly gifts we had purchased for family members and friends. Our miscellaneous expenses were a bit below the average.

Personal care products and services

We did not spend much on personal care products and services. Some of this was due to the pandemic, as it kept me from getting a haircut as frequently as I used to. Another reason is that most personal care products (soap, lotion, etc.) were lumped in with food and alcohol since we purchased them from the grocery store.


We did not spend anything on education this year. Contrary to popular belief, most PhD programs pay you to be a graduate student since you work as a teacher and researcher. (On the other hand, Master’s programs often do cost.) No one else in our family is currently attending any type of school, so we had no expenses in this category.

Tobacco products and smoking supplies

We don’t smoke, so there were no expenses for us.


This is one category that I was upset we did not spend more on. As a fiction author myself (Amazon link here), I feel like I should be buying more books on a regular basis. However, we mostly read nonfiction material online now aside from a few magazine subscriptions. My wife did buy me a physical book for our wedding anniversary, though, so I have been reading that recently. (I should note that essentially none of our income comes from selling books. It’s very hard to make money as a self-published author if you aren’t good at marketing.)


I didn’t write this article solely to gloat about how good we are at saving. I wanted to make the point that it is possible to save money and invest for retirement even with just a modest income. Many people who do not have large incomes assume that it is impossible for them to save, and put off this goal until some future time when they believe they will be earning more. Unfortunately, putting off your saving and investing goals can be quite harmful to your financial well-being. Even if you can’t save much right now, investing what you can will still pay off in the long run. Remember that time in the market is very important to reaching your retirement goal. You can read here about the benefits of starting to invest in your twenties, but even if you are older than that now, it is never too late to start.

How much were you able to save this past year? Do you have any tips to increase savings even more? I’d love to hear about it.


4 thoughts on “Despite Earning Below Average Income, We Saved 30% Last Year. Here’s How

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