If you have a good-paying job, you can build a sustainable income and achieve many of your financial goals. However, you must know how to save money from your salary in order to accomplish this.
As a salaried employee, your spending power is limited since your pay is always fixed until you get a raise. You can’t possibly afford every single thing you want. But if you employ clever ways to save money from salary, your savings can be used to invest in a business or an asset that could help you make extra money passively.
This post explores the easiest and most effective methods for saving money from your paycheck while you can still cover your necessary expenses. By learning how to save money with these strategies, you will hit your money goals faster, avoid superfluous debt, and stabilize your finances.
How Can A Salary Earner Save Money?
A salary earner can save money by first making “savings” an important financial goal. Having set the goal in mind, the next step is to devise an effective strategy for executing the goal. For instance, once you decide you want to start saving money from your salary, you can tell your financial institution to automate your savings.
This way, it’s easier to save without constantly reminding yourself every month. Once your paycheck arrives in your bank account, the specific amount you intend to save will be automatically transferred to the savings account.
What Is The Best Percentage To Save From Salary?
Using the 50/30/20 rule, at least 20% of your income should be for savings. However, this method can’t be used by everyone, depending on how much a salary earner is paid. For example, someone earning up to $15,000 a month can save 10%, and that would still be a significant amount of money for savings.
How Much To Save From Salary
Many people use the 50/30/20 rule to determine how much they need to save every month. But the truth is, this strategy is not suitable for everyone since people have different income levels. You actually don’t need to use the 50/30/20 rule to budget and save your money.
To determine the right amount of money that should be saved from your paycheck, you must first understand how much you typically spend on monthly expenses.
For example, if you earn $8000 per month (after taxes) and spend about $5000 on all your expenses, you can safely deposit $1500 in your savings account and still have $500 for miscellaneous.
If you fail to grasp this simple concept, it will be pretty difficult for you to understand how to save money from salary.
10 Tips On How To Save Money From Salary
If you want to make the most of your paycheck every month, here are helpful tips on how to save money from salary:
1. Create A Budget For Your Take-Home Pay
As a salaried employee, you have a steady source of income. It’s consistent, and that’s a good thing. However, your salary won’t be spent appropriately when you fail to budget. A budget is the spending plan for your income, which guides every purchase you make and enables you to also account for every dollar you spend.
But more importantly, building a budget works well for you when using the perfect budgeting strategy that fits your income level.
Although there are several strategies for budgeting money, one of the most popular strategies is the Dave Ramsey budget. As one of America’s most competent and revered financial advisors, millions of Americans rely on the Dave Ramsey budgeting method to plan their monthly income.
If you want to see how this budgeting method works, check out this post that teaches you how to use the Dave Ramsey budget to improve your income and spend wisely. Building a budget might be unimportant to you, yet it remains one of the best tips to save money from salary.
2. Build An Emergency Fund
You are probably wondering how building an emergency fund can help you learn how to save money from salary. Before you wander in thoughts, you should first understand the essence of an emergency fund. It’s an amount of money you save to help you combat emergencies that require financial backing.
When you don’t have an emergency fund, you can’t always save money from your salary because you may have to spend on emergencies. This could even break your budget sometimes.
But in a situation where you have reserved some money in your emergency fund, you can pay for impromptu expenses without unnecessarily dipping into your budget or spending part of your salary.
To build an emergency fund, make it a goal to save a specific amount of money every month. It could be a part of your savings goal. If you save %20 of your salary, half of that %20 could be for an emergency fund, while the remaining amount could be for any other important financial goal.
3. Set Realistic Financial Goals
Setting realistic goals is key to mastering how to save money from salary on a monthly basis. This means that once you decide to start saving from your salary, don’t try to swallow more than you can chew.
For example, if saving 20% of your salary is achievable and easy for you, make sure you stick to that. Don’t try to save more than 20% because you may fail to achieve that goal, which could discourage you from saving any more money in the future.
Moreover, you can start with small goals. You don’t have to save a ton of money even if you can afford to. By starting small, you can easily build the habit of saving money without getting fed up. But if you chase bigger financial goals, you may get frustrated eventually.
4. Spend Using Only Cash
Many people complain that they don’t know how to save money from salary; meanwhile, they barely shop with cash. One of the best-known ways to avoid impulse buying and save money is by spending using only cash. When shopping for groceries, take only cash with you. This will help you drastically cut down costs and caution how you spend money while in the store.
The moment you realize that if your cash finishes, you won’t be able to buy more items, you will instinctively avoid reckless spending.
Also, spending only cash means you would barely buy anything online. In fact, you may have to stop buying things online for a long time since you can only pay with your debit card or credit card. Even if you have to buy an item online eventually, ensure it’s an essential purchase, and make sure every dollar you spend on the item is worth it.
5. Reduce Costs On Your 3 Major Expenses
The three main expenses that should always be budgeted for are housing, food, and transport. Although other bills are also important, these three stand out because you can’t literally have a normal life without them. You definitely need a house to live in, food to eat, and a means of transportation to move around, especially if you don’t work from home.
Since most of your income would be spent on these 3 expenses, you can actually save a significant amount of money by reducing how much you spend on housing, food, and transportation. If you live in an expensive apartment, try to move into a cheaper one that’s still comfortable, and that would save you some money on housing.
If you are used to eating out, try to break that habit as much as possible. Preparing your meal is quite cheaper than constantly eating in restaurants, which would help you save money on food. When it comes to transportation, be creative. Find simple yet effective ways to cut costs on that as well.
This is one of the salary saving tips you need to start trying right now if you want to save money from your paycheck every month.
6. Manage Your Utility Usage
This is one of the simple monthly salary saving tips many Americans observe. Tweaking your utility a little bit could reduce cost.
Always check for appliances that are plugged in without being used. Even your smartphones and other rechargeable devices should be unplugged from electricity when not in use. This may seem very simple or insignificant, but it reduces the electricity consumed every month.
Remember, the more electricity you use, the more money you spend on the bill. Hence, it would be reasonable to minimize your electricity usage in order to spend less cash on utility.
7. Stop Using Credit Cards
If you must learn how to save money from salary every month, forget about using credit cards. Although it’s pretty difficult to do this, it’s for the best.
Many people think it’s OK to keep using credit cards as long as they are able to pay off the debt. However, the issue is not about failing to pay the debt. It’s about being able to use your money for other useful purposes other than paying off credit card debt.
If you have to keep paying credit card debt at the end of every month, how would it be possible for you to learn how to save money from your salary? It’s impossible because the amount of money that should be budgeted for savings will be swallowed by credit card debt.
Logically, the best way to avoid credit card debt is by not using credit cards at all. Avoid debt completely. Shop with only cash or get a debit card from your financial institution.
8. Stop Shopping Online
In the United States, billions of dollars are spent every year on online shopping. Shopping online has also become one of the major causes of impulse buying.
Sometimes, you buy things online not because they are a necessity but because a flashy advert enticed you on your favorite social media app or website. This means that you might be buying items online that you don’t even need, thereby wasting money.
Knowing how to save money from salary would require a deep level of commitment, and avoiding online shopping is a part of that commitment process.
Even if you know 100 ways to save money from salary, you will still struggle to achieve your financial goals if you have a habit of shopping online.
9. Be Creative With Low-Cost Entertainment Ideas
People spend a ton of money on entertainment. From visiting the cinema to attending popular music concerts, tens of dollars are being spent unnecessarily. However, if you can creatively get entertained without losing money, that would be a great way to save extra cash each month.
If you are the type that loves outdoor activities, consider hiking or camping with close friends and family members. You can also try hosting game nights on a Friday, maybe once in two weeks or at the end of the month.
Moreover, if you are a big fan of movies, film-streaming platforms such as Netflix can be very instrumental. All you need to do is subscribe to a cheap plan and have access to thousands of exciting films whenever you feel like seeing a movie. This is just a practical example of how to save money from salary every month.
10. Pay Yourself First
You can easily learn how to save money from monthly salary by using the pay-yourself-first budgeting method. This means that as soon as you receive your paycheck, you are supposed to send a certain amount of money into your savings account and spend what’s left however you want. Although this doesn’t work for everyone, it’s a good strategy to ensure that you don’t fail to pursue your savings goal.
Paying yourself first is usually very beneficial in the future. You could lose your job, have a health crisis, or intend to start a business. However, none of these situations can pose a serious problem if you have been saving money from your paycheck using the pay-yourself-first method. Of all the tips above on how to save money from salary, you might want to take this one seriously.
Final Words On How To Save Money From Salary
The main problem many people have with saving money is that they have failed to understand the state of their finances and how to improve it.
Examine your monthly expenses to determine how much leaves your bank account. This is a very easy thing to do when you have a budget. A good budget is supposed to document all your expenses, which makes it easy to track your spending.
On the other hand, if you are struggling to save from your salary, you may need to increase your earnings. Boost your cash flow by getting an extra job, finding a side hustle, or investing in a small business. When you’re earning enough money, you won’t struggle to figure out how to save money from salary.
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