How do I save? How much money do I save? Where do I save?
These are some few questions asked by people when they think of saving.
Well, saving money from your salary should start from that very first paycheck. Don’t fall into the trap of putting it off until the next paycheck. It’s easier to start now and adapt your spending after you have saved from your first check. You can start saving no matter your salary.
10 Tips on How To Save Money From Your Salary
1. Budget before each paycheck
Once you are employed, it is likely that your salary consistently get in to your account every month. Having that in mind, it is important to have a spending plan before the month end.
Clearly define how you are going to spend your money starting with the basics. Consider being specific on the amount you would want to save. Include payments to yourself, for example, Roth contributions deposits to your savings accounts, or you can even set up contributions to your 401k through your employer before you get your paycheck. Plus, you can learn more about the differences between IRAs and 401ks.
2. Automate your savings
Saving money should be part of your monthly activity. Set up automatic transfers and withdrawals from your checking account to your saving or investment accounts.
Check with your payroll administrator about having two bank accounts for your direct deposits. You may be able to allot a certain percentage or dollar amount into a second bank account making your ability to save money from your salary even easier.
3. Track your spending
Mostly we are not able to stick to our budget because we fail to track our expenses. We assume we spend X amount of dollars on groceries when in reality it’s double that amount.
Tracking your spending will allow you to know how your salary is being used. Before giving up on saving money from your salary, review your spending for the last few months. Often, we find that there are areas that we can cut in order to prioritize saving.
4. Make access to your money difficult
When your money is less accessible, you’ll find that it’s not as convenient to spend it. This is simply because it’s just not there for you to spend right away. A good idea is to put your savings money in a separate bank account, that you can access when you need to.
5. Set realistic financial goals
Decide how much you would want to save by the end of the year. Take the amount and divide it by 12 months. You will get the amount you are supposed to save every month. So, start setting that money aside at the start of the month. You are always focused with your goals put in place. Read how to set financial goals
6. Pay your debts
The ultimate killer of all saving dreams is debt. If you owe money to the bank for a loan or simply tend to max out your credit card – you’re in trouble. You must pay off your debt first and if you have credit cards try not to overuse them – in fact for many it’s best to not use credit cards at all.
7. Create an emergency fund
Putting money away is difficult but it’s a good idea to set aside a part of your savings for an emergency fund. It is likely that you are not going to use your savings incase anything unplanned happens. Emergency fund will cater for that.
It is easier to do so when things are going well than selling off your assets when you’re in dire need of liquid cash.
8. Reduce your costs on your 3 expenses
The three budget areas that make up the bulk of our transaction costs are housing, food, and transportation. Reducing costs in these areas will leave you with extra cash from your salary to save.
If you own a home, you could look into refinancing your mortgage to a lower interest rate.
Grocery expenses can be reduced by meal planning. Transportation costs can be curbed by car-pooling, buying monthly travel passes vs daily or weekly ones. And even downgrading your vehicle if you own one.
9. Use real cash
It is easy to swipe a card and make payments. Sometimes, we find ourselves spending more than we had planned.
These methods detach us from the physical act of spending money, thus making it easier for us to spend money. Try using actual currency notes for day to day payments – it will really help you avoid unnecessary expenses.
10. Pay yourself first
What that means is you must ensure you invest money before you start spending on things that are avoidable. The money you work so hard to earn should work just as hard for you. So, invest in a Systematic Investment Plan that will set aside a small part of your income each month and invest in mutual funds. This is one of the best ways to invest money.
In the future you may have a health crisis, may want to leave the workforce to raise a family, start a business, buy a house, or simply have a comfortable retirement.
With the above tips, it is possible to save money from your savings however small it could be. Only that you need to prioritize your saving and cut out those thing that do not matter. Look for ways you can spend less.
Saving 20% of your money from your compensation is a respectable goal, yet you needn’t bother with being a definitive goal. You don’t have to deny yourself any necessities to save cash. If anything, saving money would actually allow you to do stuff that seems impossible without savings, such as travelling. Saving financially is a lifestyle and a mindset. Zero in on your venture assets and cut out the things that precisely have no effect. Have a few great times and get innovative with finding consumption methods.