How to Save Money from Salary
“Save money, live better” is a popular mantra among all generations. However, many people find saying it is significantly easier than implementing this strategy into their financial plans.
Whether you’re trying to save but find there isn’t much left over every month, or you find it difficult to change your spending habits, there are methods you can use to save money from your salary.
You don’t have to significantly tighten your budget to save more money. Instead, there are some easy strategies to implement to help you save money from your paycheck each month.
Break Your Paychecks Down
Before you can calculate how much you can save from your paycheck, you must conduct an audit of your income and expenses. It is best to break your spending into two categories: fixed and variable expenses. Fixed expenses are regular payments that are the same amount. Variable expenses change in amount and occurrence rate. Typically, fixed expenses include rent and insurance, whereas variable costs are influenced by your spending habits, such as groceries and entertainment.
First, it is important to determine how much you receive from your monthly check. This could be a fixed amount, or it can vary. Then, you will need to calculate your monthly fixed costs as these are expenses that are likely necessary. Finally, determine how much you spend on variable expenses. You will have relatively more leeway to cut back on unnecessary spending in this category.
Creating a budget for the first time can seem daunting. That’s why many newbies opt to implement the 50/30/20 rule. With this strategy, you spend 50% of your income on necessary fixed expenses, 30% for variable costs, and 20% goes into a savings account.
Budget Before Each Paycheck
After you’ve broken down your expenses and created a budget, you can utilize the help of spreadsheets or apps to help keep you on track. Either method will help you track all your expenses and the amount of your income you will allocate towards them.
Apps are especially helpful because they automatically break down your expenses into categories. This can help you recognize which areas you can cut back from. Additionally, you can set digital reminders to ensure you never miss a payment deadline.
How Much Should You Save Each Month?
First and foremost, there is no golden number when it comes to savings. There is no one-size-fits-all structure, which is great for those who have a limited amount leftover. Having a savings account is a great safety net in case of emergencies, but it shouldn’t cost you a comfortable lifestyle.
Typically, saving between 10% to 25% of your monthly salary can help you create a great nest egg.
Paying Yourself First
If you feel like you have a good handle on your spending habits, you may choose to adopt the pay yourself first strategy over the strict 50/30/20 rule. The pay yourself first tactic is straightforward – you invest in your savings first. Before paying any expenses, you will dedicate a percentage of your income to your savings account. The rest can be spent on necessities or to splurge.
Set up an Automatic Deposits
However, consider setting up automatic deposits if you can’t willingly deposit a portion of your paycheck to your savings account. You can set an auto-pay option to transfer funds from your checking account to your savings. This can be set to automatically take place on your paydays. This can remove the temptation to spend the money rather than put it into savings.
This method can also be utilized for multiple savings accounts. For example, some people may choose to open different accounts for different savings purposes or new account perks. Whatever the case, you can set up automatic transfers to multiple accounts to ensure you stay on track.
Make Your Debt Payments Less Expensive
If you have debt, then chances are your repayments are expensive, and you will be paying interest every month. Clearing this debt makes more sense than saving money and continuing to pay the interest. Therefore, clearing yourself of debt should be a priority before saving.
Rather than allocating your extra income to a savings account, consider increasing the minimum payments on your debts. Once you have repaid your loans, the money can be redirected towards a savings account.
Reduce Your Costs on Your Three Expenses
If you don’t have any outstanding debts and are looking to cut back on your current spending, you start by reviewing your three biggest expenses: housing, food, and transportation.
- Housing
Finding a more affordable place can be a challenge, especially if it means uprooting your life. However, if it is possible to do so without inconvenience, consider downsizing or moving to a cheaper area. This can help cut back on your fixed monthly expenses while increasing the extra income you can dedicate to savings. However, this is best done if you can maintain your standard of living and not at the expense of your comfort.
- Food
Two major factors contribute to overspending on food: throwing out unused items and eating out. Luckily, these can both be remedied with a few simple changes. First, consider going grocery shopping with a list and set menu of what you’ll be prepping for the week. This can help you avoid impulse purchases that will later end up in the trash. Moreover, cooking pre-made meals for the week can encourage you to change your takeout habits. Secondly, utilize coupons and shop for seasonal items. Menu planning might take a little more creativity, but you can save a good chunk of change on variable food expenses.
- Transportation
Depending on where you live, you can make use of public transportation services. Whether it’s taking the subway, train, or bus, you can significantly save on monthly car ownership fees. If public transit isn’t an option for you, consider biking. You can get a great workout in addition to minimizing your spending.
Be Creative with a Low-Cost Entertainment
One of the biggest luxury expenses could be the money you spend on entertainment. Instead of completely cutting out all the fun, consider coming up with low-cost alternatives to your entertainment expenses.
For example, if you go to see a sports team in person, it can cost 10 times more than watching it on television.
Even a trip to the movies can be expensive compared to staying at home and streaming the movie on your television.
You can still enjoy plenty of entertainment in your life without spending a fortune. Just think about whether there are ways in which you can cut down on your spending and still have just as much fun.
Set up Roadblocks to Online Shopping
Similarly, if you are the sort of person who is prone to online impulse purchases, you can set up some roadblocks to make it more difficult to shop online.
If you have several online shopping accounts, consider updating your account information by deleting your pre-saved card information. The hassle of inputting your credit card data during each purchase may deter you from wanting to shop.
The use of multiple savings accounts may also be a great way to prevent you from spending. Transferring money from a savings account to a checking account can sometimes take a few days to clear. This can give you some time to mull over the purchase. You may even find that you change your mind during this waiting period.
If more effective measures need to be taken, consider decreasing the limits on your credit cards, requesting new cards, or outright canceling them.
In Conclusion
Knowing how to save money from salary is crucial. It is a way to protect yourself in the future and take the pressure of living month to month out of your daily life.
Implementing money-saving strategies begins with reviewing your finances, setting a plan, and creating a budget. Staying on track may be difficult, but it can be worth it when you achieve financial security.
