1. Your monthly budget must be based on four weeks’ pay, not your annual pay divided by 12.

Budgets don’t live on paper. They live or die in the real world, based on actual dollars coming in and going out.

In the real world, you get paid four weeks’ worth of paychecks in most months, and occasionally you receive six weeks’ worth of pay in a month (assuming you’re paid biweekly). Your budget needs to be based on what you can consistently expect to earn, not based on a theoretical fraction that exists only on paper.

On months when you do receive that third paycheck, congratulations! You can shunt that entire paycheck into your savings account. (What, you thought I’d tell you to go buy another trendy gadget or a 15^th pair of shoes to almost-never wear?)

2. Start with your after-tax, after-savings income.

Most people start their budget by looking at their current monthly income and writing out their expenses. Don’t do that.

Practically speaking, investing half your income means living on one biweekly paycheck per month—two weeks’ worth of pay.

I can see you sitting there shaking your head and thinking, “There’s no way.” But if you got fired tomorrow, spent the next nine months unemployed, and eventually took a job making half the income you are now, would you figure out how to survive? You would, of course, but probably not without making some serious spending adjustments.

Now that you have an income to start from, list out your fixed monthly expenses: mortgage/rent, car payment, etc. Then list out your recurring but variable monthly expenses: utilities, groceries, gas for your car, etc. Finally, list out all annual or semi-annual expenses, both fixed and variable: insurance, accounting, gifts bought for others (Christmas gifts, birthday gifts, wedding gifts), and so on.

You’re undoubtedly deep, deep in the red by now, and you probably haven’t even accounted for discretionary spending yet. That’s OK. We’ll help you trim the fat.

3. Slash your housing cost with a roommate.

Housing is most people’s biggest expense, so start by looking to cut there first.

Earlier this month, SmartAsset released a study showing that on average, a person splitting a two-bedroom apartment rather than leasing a one-bedroom apartment saves $420.70/month on average. In some cities, like San Francisco and New York, that number is well over $1,000/month in savings.

Married? Have a family? That doesn’t mean you can’t rent out a spare bedroom.

The benefits don’t stop at cheaper housing payments. Utility bills suddenly divide into smaller pieces, and roommates can help out around the house with cleaning, cooking, upkeep, and errands.

If you’re lucky, you’ll even end up with a lifelong friend. I lived with several roommates in my 20s and 30s (before my wife kicked out the last one), and they remain some of my closest friends to this day.

4. Buying used should be your first impulse.

Sure, some things you shouldn’t buy used. Sheets, towels, toilet paper—you get the idea. But most “things” in life you can—and should—buy used.

On average, new cars depreciate 20% in their first year of ownership—and another 15-25% in their second year. Is a two-year-old car 40% lower quality than a new car? In most cases, not even close, but you’re getting a 40% discount nonetheless.

Furniture loses value even faster, but doesn’t lose functionality, and in many cases, it doesn’t even lose aesthetic value. None of your guests will be able to tell the difference between a two-year-old used piece of furniture you bought yesterday and a new piece of furniture you bought two months ago. But the difference in cost? It’s routine to see furniture that retails for $1,000 selling on Craigslist for $100.

The list goes on: clothes, electronics, appliances. I’m not saying you should never buy new, but your first impulse should be to check available used items first. If you can’t find a used, quality version of what you want, then look into buying it new. But train your brain to think “used” first.

5. Shift your social life away from businesses.

The average markup on food and beverages at restaurants and bars is 3-4 times the retail price. Why pay that markup all the time when you can eat and drink the same quality stuff at your friend’s dinner party instead of a restaurant?

Start shifting away from always going out and toward organizing events at people’s homes or nearby public areas. From backyard decks to pools to parks and beyond, there are plenty of places you can congregate without needing to pay the steep markup charged by businesses.

We and two other families spent last Friday evening having a bonfire on the beach underneath a nearly full moon. I enjoyed some high-end Dogfish Head beers (the Immort Ale, for enthusiasts) while roasting s’mores and occasionally venturing knee-deep into the water. The total cost? A whopping $15. Another group of friends went out to local bars and spent around $100 apiece. When we ran into each other the next day, they were surprised to hear about my Friday night and said, “That sounds really fun. I never thought of that!”

Get more creative and stop just defaulting to the same old patterns of going to businesses for your social life.

6. Get a raise!

Sick of playing defense and slashing your spending? No problem—go get a raise. Whether that means talking to your boss about a raise or going and finding a higher-paying job, don’t be shy.

Explain in detail to your boss or a hiring manager why you do/can provide them with incredible value. Demonstrate in as many creative ways as you can that you will help them reach the next level and why you’re an invaluable addition to their team.

Remember, you aren’t limited to your current field, either. Think bigger about what other career paths that intrigue you and may pay better.

But here’s the thing: When you get the raise, you’ll be tempted to spend more. Remember that the goal here is to invest more of your income in real estate or other investments, not to show off to your friends and family how well you’re doing.

You don’t need a bigger house; you need a bigger real estate portfolio. You don’t need a flashier car; you need a way to get around town to your properties. Love a bleu-cheese-encrusted ribeye? Don’t go to that pricey French restaurant. Instead, learn to cook (and then pair that ribeye with a delicious Haut-Médoc that you bought for a quarter of the price at the wine shop instead of snooty Chez Pierre).

Reining in your spending is scary and painful at first. But as you watch the Benjamins start stacking up at an astonishing rate, you’ll suddenly find yourself OK with a gently-used couch instead of the same couch bought at a store. As your investments (real estate and otherwise) mount, you’ll start seeing extra income from them. Reinvest these returns as long as you can rather than spending them, and one day in the not-too-distant future, you’ll find that your investments are actually bringing in enough to cover your modest expenses.

We’re republishing this article to help out our newer readers.

How much of your after-tax income are you saving right now? What’s worked for you in setting aside more of your income for real estate investments?

Don’t be shy—spill the beans!