How to Save One-Third of Your Income

Tips that make living below your means easier and even enjoyable.

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One of the main arguments in my book, Generation Earn, is that we need to drastically increase the amount of money we’re saving. On average, we should save about one-third of our income in our twenties, thirties, and forties for retirement, emergency funds, and big goals such as purchasing a home. I've gotten a lot of questions about that—how is it even possible? What did you give up to do that? Are you doing that right now? I wanted to share some of the ways I saved that much and explain why I think it's necessary.

[In Pictures: 12 Money Mistakes Almost Everyone Makes]

First, a confession: I am not currently saving one-third of my income. That's because I've experienced two major financial shocks in the last year, having a baby and buying a house. Between mortgage payments and daycare expenses, I've fallen way behind, but I plan to return to my previous saving levels as soon as those costs become more manageable.

For most of my twenties, though, I was saving one-third of my income. About twenty percent went directly into my retirement accounts, so I never even saw the money. I put an additional 15 percent into after-tax savings accounts, which was mostly invested in money market funds.

Here are some of my strategies that made it possible:

Live like a college student long after graduation: My husband and I continued living in a small apartment with our old futon as a sofa for five years after graduation. At first, we didn't use cable and stuck with an old tube television. For awhile, we even figured out a way to make room for our baby in that small space.

Become a frugal chef. I didn’t know much about cooking before I got married, but I quickly learned how to make vegetable-focused meals from the Food Network. Using small amounts of meat saved us money, as did limiting our restaurant meals.

Stick with one car. We've always chosen to live near public transportation so we can limit ourselves to one car, which saves us thousands of dollars a year. Between gas, upkeep, and insurance, cars are expensive, so sticking to one can make a big difference. (These first three items—housing, food, and transportation—take up about two-thirds of most people’s incomes, so focusing on that pricey trifecta can have a big impact.)

[For more money-saving tips, visit the U.S. News Alpha Consumer blog.]

Use old cell phones. We never joined the smartphone craze, so while we might not look as cool with our bulky old-style phones, we're saving a lot by avoiding pricey data plans and high-tech gadgets.

Splurge on small but meaningful indulgences. When I bought my husband a LCD television for his birthday one year (to replace the old tube set we had), I knew it was a huge splurge, and certainly not a necessary one. But given all of our other sacrifices, I figured it was worth it, and given how much he likes it, I think it was. We also buy high-quality beer to drink at home. Even though a $9 six-pack is no deal, it's much cheaper than drinking at a bar.

Everyone's strategies will be different, since they're based on your own preferences. You might bring a bagged lunch every day but go on an international vacation every year, or indulge in restaurant meals while collecting coupons for the grocery store. As long as you’re cutting back on the areas that aren't that important to you, you won't feel like you're making an impossible sacrifice.

Almost everyone can save a significant chunk of income, regardless of income level or where you live. You just have to live a lifestyle that's a lot more frugal than the one you could actually afford. Sure, you might occasionally wish you had a fancier television, or furniture, but purchasing those items give such short-term bursts of pleasure that the cost is hardly worth it. Instead, invest in your relationships, hobbies, and career, all of which can outlast even the most expensive television.

What are your savings techniques? How much of your income do you try to save?

Kimberly Palmer is the author of the new book Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back.