![How To Save Money From Salary? [12 Great Ways]](https://cdn.blogarama.com/images/posts_thumbs_site_id/1444/144441-3972138809.jpg "How To Save Money From Salary? [12 Great Ways]")
Did you know that almost a quarter of Brits don’t put any of their monthly wage into savings? Living paycheck to paycheck can make it difficult to reach your financial goals. But if you want to handle your personal finances better, putting Money away from your salary is crucial.
The below breaks down the top tips on how to save and budget money from your salary.
How much of your salary should you save? – The 50/30/20 rule
The general rule that you can strive for with your monthly income is the 50/30/20 rule. Here’s how it works:
50% for living expenses
You can divide 50% of your monthly salary after tax to cover your needs. Make a list of expenses that are essential and can’t be avoided. This might include your rent costs, car payments, high-interest debts, electricity bills, insurance, food, and groceries.
30% for wants
Allocate 30% of your salary to yourself. Use this portion to pay for lifestyle expenses like subscriptions, eating at restaurants, travel, etc.
20% for your savings goals
Save 20% of your salary to build a financial cushion for the future. This can include saving for retirement contributions, pension funds, or other long-term goals. Or you can use it as an emergency fund.
As you get better at financial planning, you can change the proportions as you want.
How to save money from salary: 12 steps
1. Track your monthly expenses and review them
When you track your monthly expenses, you gain a clear idea about the flow of your money. As the first step, jot down your expenses in a notebook or record them in a spreadsheet. You can even use a budgeting app to track your money.
Use your monthly salary to categorize your expenses into ‘needs’ and ‘wants’. Analyse the ‘wants’ section and put a question mark on the expenses that you could cut out. The goal is to identify unnecessary expenses and avoid them in the upcoming months.
2. Review your income
There are two ways of saving money – reducing your expenses and increasing your income. If you’ve made cuts to your expenses but it isn’t enough, you can start looking for ways to make more money.
If you have a hobby that you’re good at, you can turn it into a side business. It could be anything, from baking, blogging, dog walking, or selling your art or skillset on the side.
Also read: Best Ways to Save Money This Winter
3. Delete online shopping apps
Notifications from online shopping apps can lead to spending money that you didn’t account for. If you want to save money, deleting the apps might be a good idea for a while. If you need to buy something, you can go to a shop to physically buy it.
If you have a habit of overspending, this trick will help you save money fast.
4. Find cheaper ways of entertainment
We live in a digital age of so many subscription services. Sure, it might not be part of your essential expenses, but relaxation is also important to your wellbeing. If you want to save money, you could share TV, magazine and app subscriptions between households and friends. It’s a win-win for everyone.
Additionally, seek our inexpensive yet fun ways of spending your free time. Like inviting your friends for a home-cooked dinner instead of going to a restaurant every time. Or you can go for hikes or a walk in a nearby park.
Also read: Best Ways to Save Money in Your 20s
5. Use debt smartly
The word debt can be scary. But debt isn’t necessarily bad for you. Instead of running away from loans, learn how to use them. When you’re faced with sudden large expenses, you could take out a short term loan or an alternative to payday loan to cover the unexpected.
These loans usually have small instalments that you can pay over the next few months. They can reduce the burden of sudden large expenses.
6. Explore frugal living
Frugal living is a lifestyle that may help you save money. Frugal people do not overspend and find cheaper ways to live.
A Bloomberg survey shows that more than 40% of high-income earners in the UK are looking for more discounts and deals to embrace frugal living.
Examples of frugal living include:
- Meal planning and cooking at home
- Second-hand shopping
- DIY projects to save money on repairs, home improvements, or even crafting
- Energy and water conservation
- Using public transportation or carpooling
You can consider living frugally for a while until you’re happy with your savings accounts.
7. Reduce your electricity consumption
Reducing electricity consumption is good for you and the environment. It will reduce your monthly electricity bill, which will help you save money. A simple tip to start saving money is to turn off the appliances when you’re not using them.
You can also reduce the number of hot showers that you take. These small actions can help you reduce your energy consumption and your electricity bill.
8. Automate your savings
If you can’t trust your spending habits, it may be worth automating your savings. By setting up a standing order from your bank account, you can transfer part of your salary into savings accounts every month. By timing it to go out when your wages go in, you’ll hardly miss it.
9. Avoid impulse buying
Whenever you’re tempted to make an impulse purchase, wait for a cooling-off period, usually 24 hours. This gives you time to consider if you truly want to spend money or if the desire will pass. Often, you’ll find that you can live without it and save money in the process.
10. Save your salary increases or bonuses
Anytime you get a raise, incentive, or bonus, it’s tempting to use it to reward yourself. But just because you have more money doesn’t mean you have to spend more! Fight the temptation and put the extra money straight into your savings plan.
11. Avoid late repayment fees
Late fees on credit cards are an avoidable cost. Make sure you factor your credit card payments into your salary budget. It’s easy to forget, but use an app or set a monthly reminder. This way you can stay on top of your credit card bills and prevent yourself from dipping into your salary further.
12. Take advantage of loyalty programs and rewards
Why pay full price when you can reduce spending by signing up for loyalty programs offered by your favourite stores or brands? With living costs on the rise, it could be a quick win. Accumulate points or rewards that can be redeemed for discounts, cashback, or freebies. This way, you can maximize your savings on regular purchases.
Where should I save the money from my salary?
When considering where to save money from your salary, there are several options you can consider:
- Individual Savings Account (ISA): ISAs are available to all UK residents. They come in different types, such as Cash ISAs and Stocks and Shares ISAs. Cash ISAs offer tax-free interest, while Stocks and Shares ISAs allow you to invest in the stock market with potential tax-free returns, but it should be kept in mind that these investments are subjected to market risk and you can lose your money too. So, invest carefully.
- Regular saving account: Many banks and building societies in the UK offer regular savings accounts. These accounts often require you to deposit a fixed amount each month and may have limits on withdrawals. You can set up a direct deposit and the money from your salary will be automatically transferred to the saving account.
- Workplace pensions: If you’re employed, your employer may offer a workplace pension scheme. These schemes provide tax advantages and often include employer contributions, making them an attractive option for saving money long-term.
- Fixed-term savings bonds: Fixed-term savings bonds, also known as fixed-rate bonds, offer a fixed interest rate for a specified period. These accounts generally provide higher interest rates than standard savings accounts, but your money is locked in for the duration of the term.
- Investment platforms: You can consider using investment platforms or online brokers to invest in a wide range of assets, such as stocks, bonds, and funds.
Consider your financial goals, and risk tolerance when choosing where to save your money.
It’s often beneficial to have a diversified approach, spreading your savings across different accounts and investment vehicles to maximize returns while balancing risk and accessibility.
Conclusion
Living from paycheck to paycheck is rarely a good idea. It makes you rely on your job and can be dangerous in situations like layoffs. Saving money from your salary can help you build a safety net to handle emergencies and rainy days. You can invest the money from your salary to create a passive source of income.
If you have recently found a new job or have been working for a few years now, it’s always a good idea to save money from your salary.
FAQs
What is the 50/40/10 savings rule?
As a general rule, the 50/40/10 rule method suggests splitting your salary into three areas: needs, wants, and savings. 50% of your salary should be for essentials, 40% to spend on your financial goals and 10% for your wants.
Can I invest the money from my salary?
Yes, you can invest your saved money in stocks, mutual funds, fixed-rate bonds, or other investments but it should be kept in mind that these investments are subjected to market risk, and you can lose your money too. So, evaluate your options and choose ones that align with your financial goals, risk tolerance and personal preference.
How to save money from salary if my salary is low?
You can start small by saving as much as you can. Review your expenses and cut down unnecessary spending. Try to find an additional income stream or a second job to increase your income.
Disclaimer: We are not providing financial advice, these are just tips for informational purposes.
