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THIS IS THE ‘JAY LENO RULE’ OF SAVING MONEY — AND YOU DON’T HAVE TO BE RICH TO
MAKE IT WORK FOR YOU

Updated: Aug. 9, 2022 at 6:40 a.m. ET
By

ALISA WOLFSON

  comments


IT’S NOT POSSIBLE FOR EVERY FAMILY, BUT PROS SAY IT’S WORTH A SHOT IF YOU CAN
SWING IT

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COMEDIAN JAY LENO

Getty Images/iStock

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 an investing or savings account. Keeping
the accounts separate can help with tracking how much is being invested over
time and there’s no confusion of mixing expenses with investing transfers,” says
Paddock.

Certified financial planner Don Grant advises reviewing your spending and
netting it against your income. “Take the time to clearly define wants and
needs. Cover the needs first, and if there’s a surplus those assets can go
toward more discretionary spending,” says Grant. From there, he recommends
setting up two accounts that are specifically dedicated to each goal. “Some may
be short-term, [and] other goals, like retirement, will generally have a much
longer time horizon. Develop a plan for how much will be invested into each
account and invest it according to your specific needs and risk profile. Monitor
the account and make adjustments as you reach your goals,” says Grant.

Because this process assumes that one partner’s salary is enough for a household
to live on while the other salary is saved, you might want to adjust the numbers
to whatever makes you feel comfortable, like saving 50% of one partner’s salary.
“Any progress toward savings is good progress. It’s also a good idea to make
sure that both partners have access to all household joint checking and savings
accounts and that money decisions are made together,” says Bessette. (You can
see the best savings accounts rate you may get here.)



The advice, recommendations or rankings expressed in this article are those of
MarketWatch Picks, and have not been reviewed or endorsed by our commercial
partners.


READ NEXT


READ NEXT


5 AWESOME CITIES IN AMERICA WHERE YOU CAN STILL BUY A HOME FOR LESS THAN
$225,000

The housing market has proved to be quite the challenge for buyers this year.
But in some spots affordable homes can be had.


MORE ON MARKETWATCH

 * 8 very cool homes in America that you can currently buy for under $100,000
 * After my mother-in-law died, we learned that her adviser had picked
   investments that ‘paid less interest than the adviser charged.’ Is this even
   ethical and can we do anything about it?
 * ‘They’re not required to tell you that, but you should know.’ 4 questionable,
   but legal, things some financial advisers do with your money


ABOUT THE AUTHOR

Alisa Wolfson


Alisa Wolfson is a reporter for MarketWatch Picks.



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