Saving money is the first step to creating a better financial future and better retirement.
Saving money from your salary should start from your first paycheck, the earlier you start to save, the faster you can become financially independent.
How to Save More Money From Your Salary Fast!
Learning how to save money is important for everyone, whether you are rich, poor, or in the middle class. Knowing how to save money from your salary every month, or week is important.
Here are 10 tips on how to save money from your salary.
1. Plan and Decide on Your Priorities
The best way to start saving your salary is to plan and decide on your priorities. Know and understand what is the reason why you want to save money, and be fully devoted to sticking with your plan.
Understand why you want to save money
One of the main reasons why most people fail at saving is thinking they need to do what others do to succeed, but it is not always true.
Everyone is different and you should create your own saving plan according to your list of priorities.
Learn to personalize your home budget, so that you can create the plan required to help you work towards your priorities.
Understand what you’ll need to do to save money
Knowing what is required to accomplish in helping you move closer to your saving goals is important.
To save money from your salary, you’ll need a plan, a roadmap, and a list of actions you’ll need to take.
Similar to saving $10,000 in a year, you’ll need to stay organized and know what you’ll need to do to achieve your goal.
2. Budget Before Each Paycheck
Create your own personal budget and do this before you receive your paycheck.
Often we find budgeting troublesome, but budgeting before getting your paycheck is important if you want to succeed in saving your salary.
As salaried employees, we will likely have consistent income, where we will know how much exactly we will have available to spend each month.
Create a budget that includes:
- Roth contributions
- 401K contributions
- Tax to be paid to IRAS
- Need and wants that you will spend each month.
- Saving to be placed into your savings account.
3. Set up an Automatic Saving Plan
Start saving your salary by setting up an automatic saving plan with your bank or employer.
By making a regular contribution to your savings automatically, you can passively save for your future.
Automatic Saving Plan with Employer
Link your saving and checking accounts and request direct deposit of your salary from your employer to your saving account, and the rest to your checking account.
Automatic Saving Plan with Bank
Set up standing instructions with your bank provider to automatically transfer a specific amount on a regular basis from your checking account directly into your Saving account.
To set up a plan, link your savings and checking accounts, request a direct deposit from your employer, and ask that part of your paycheck be deposited into savings, with the rest going to checking.
4. Know Your Spending
The main reason why many people fail to save is that they did not track their spending effectively.
Often we rely on our memories on how much we’ve spent, which proves to be inaccurate and troublesome.
Tracking your expenses will allow you to understand how your salary is being used.
- Did you spend more on food?
- Did you spend more on your transport?
- Are you spending too much eating out?
Simply review your spending for the last few months, and you will know which are the areas you are spending the most.
5. Change Service Providers
Paying service providers for services such as internet connection, and utilities (electricity and water), are essential spending. But there are ways for you to reduce your expenses without causing too much inconvenience in your daily life.
Changing the service provider is probably one of the best ways to save more money from your salary.
Access to a good internet connection can be pretty expensive, but often we sign up for a plan that is much more than what we needed. If you only use 10GB of data per month and have signed up with an unlimited data plan, you may want to change your plan or service provider.
Utility providers for access to electricity and water usually come with fewer options, but sometimes we have more than 1 service provider to choose from. Changing the service provider can sometimes help you save 20-50% of your utility bills.
6. Refinance Your Home
Home refinancing is probably the fastest and easiest way for you to save a huge portion of your salary.
Simply call your banker and check if you are eligible for a refinancing of your mortgage loan.
The interest rates for your home mortgage range from 1% to 17% depending on where you stay and which time period do you start your mortgage loan.
Refinancing your home mortgage during a low-interest-rate environment will help you save hundreds of thousands of dollars long term, and a few hundred dollars of your salary per month.
7. Avoid Impulse Purchase
Making access to your money hard can help you avoid any impulse purchases. Decisions made in a rush or on an impulse are often bad decisions that you will regret later.
8. Say No to Bad Debt
Bad debt is where people borrow money to buy non-essential items such as a new iPhone, Smart Watch, TV through the use of credit cards or payday loans.
Unless you have very good reason to take on new debt, say no to bad debt.
9. Use Cashback Sites and Apps
Using cashback sites and apps to purchase your daily essentials can sometimes help you save your salary by giving you a cashback on the things you spend every month.
Cashback helps you to automate your everyday savings and help you in growing your wealth, a small percentage at a time.
How do cashback sites or apps works?
Cashback sites or apps let you earn a small percentage on qualifying purchases made using their platform.
Accumulatively, you will earn a small amount of cashback in the form of points or cash by using the platform.
After you’ve reach a certain threshold, you will be able to withdraw your money into your bank or through financial services such as WISE or PayPal.
10. Pay Yourself First
Pay yourself first is the concept where you should set aside a portion of your income automatically before you perform any other spending. Meaning you are prioritizing your long-term financial well-being over short-term gratification.
Set aside a set percentage of your salary for saving and investment.
You can allocate these money into your retirement account, investing account, 401K, or Roth IRA. This money can even be used to buy insurance or long-term disability care, where you can protect yourself from any uncertainty.
Money used to “pay yourself first” will not be used for spending and thus will not be used to “pay others”.
How much salary should you save from your salary?
20% is the minimum amount you should save from your salary each month. According to the 50-30-20 budgeting rule, experts suggest you can spend 50% of your income on needs, 30% on wants, and save the remaining 20%.
- Needs are things you need to spend to sustain your life.
- Wants are things that are good to have in your life.
- Savings is the financial muscle you’ll have when you need the money during an emergency, or cash to invest.
Saving 20% is just a general guideline and you should save more than 20% when possible.
How much money should you save?
Financial experts suggest you’ll need to save enough cash equal to at least 6 months of your monthly expenses. While it is advisable to have at least 2 months of the emergency fund so that you will be well protected from any unpredicted events.
An average American needs to save at least 8 months of their monthly expenses in the form of cash or cash equivalent investment, to be free from financial worries.
If you have an expense of $5000 every month, you’ll need to save $30,000 in cash or cash equivalent investment as your saving and $10,000 in cash as your emergency fund.
In total, you’ll need to save $40,000, which is 8 times your monthly spending of $5000.