Comedian Jay Leno
Comedian Jay Leno has openly shared that while collecting two salaries — one from his “Tonight Show” hosting gig and one from his 150 annual comedy shows — he never spent any of his NBC salary and instead spent only what he made doing standup. “I’d bank one, and I’d spend one,” the TV star told CNBC in 2016. “I’ve never touched a dime of my ‘Tonight Show’ money. Ever.”
OK, but Leno’s rich, you might be tempted to say. Still, pros say that this “spend one, save one” philosophy might just be able to work for other families, too. “This idea is a really smart behavioral finance approach to handling income for a two-income family. By living off one income and saving or investing the other income, a two-income family simultaneously automates their investing and keeps lifestyle creep or lifestyle inflation to a minimum without having to fight over how much of each separate income to set aside or spend each month,” says certified financial planner Kaleb Paddock of Ten Talents Financial Planning.
Indeed, pros say that in addition to saving 10% to 15% of your income for retirement — even in this high-inflation period, families should have somewhere between three and 12 months of savings in an emergency fund, preferably somewhere very accessible that pays interest. Luckily, high-yield savings accounts are paying far more than they used to (you can see the best rates you can get on savings accounts here).
“With the family living on one partner’s income and then saving the other partner’s income, they should be able to hit major financial goals more quickly. These goals might include saving for a down payment on a house, saving for retirement, saving for a family vacation or even just saving for a rainy-day fund,” says Chanelle Bessette, banking specialist at NerdWallet.
Of course, this is far easier said than done. Many two-income families are struggling to get by even with both partners bringing in money. And even if you can’t save the entire second income, trying to save more of it is a worthy goal, pros say. (You can see the best savings account rate you might get here.)
How might families make the “spend one, save one” rule work? Paddock says couples should create separate checking accounts for the two incomes. “In one checking account, all bill pay and credit cards would be automatically paid from the one income, while the other checking account can have an automated transfer to a brokerage or retirement account on each pay day or once per month to effectively sweep the income over to …….