Whether you earn ₹20,000 or ₹2 lakh per month, knowing how to save money from your salary is necessary. It requires a solid action plan.
Saving money from your income not only helps you cater to any emergencies but also helps you live a comfortable lifestyle as you grow old.
That’s why we will help you figure out how to save money from salary, starting with the importance of cultivating good financial habits, saving more, and spending less.
Importance of Saving Money from Salary
While it’s easy to get addicted to the stability of a salary, you must plan for a future where you are either partially unemployed (lay-off) or fully (retired).
Putting aside an amount from your salary can help you avoid many obstacles in life. It can support you and your family during rainy days when there’s no active income to turn to.
There are many reasons why saving money from salary is a good idea. Let’s discuss some of them:
- Peace of Mind: Knowing that you have an emergency fund for tough times can give you peace of mind.
- Better Future: You’re essentially paying your future self by saving money from your salary, especially for long-term goals like retirement.
- Cover Liabilities: The money you save now can help your children in the future with their education or other liabilities, in general.
- Short-Term Goals: Savings are not just meant for long-term goals, but also for short-term goals ranging from emergencies to important purchases.
- Become Rich: In order to become rich in India, you must have a healthy habit of saving regularly.
Above all, saving money is one of the best ways to generate wealth. In fact, saving is one of the basic prerequisites to achieve financial freedom in India. More on that later. Let’s discuss the ways in which you can save more money from your salary.
Tips to Save Money from Salary
There are many ways to save money from your income but the first answer to how to save money from salary starts with positivity. Read on to know more.
1. Develop a Positive Relationship with Money
Whether it’s your balance sheet or outlook toward money, being positive is a must. Start by developing a positive attitude towards money.
Learn about how money works, right from what it means to you to how it can make your life better.
Dispel any negative notions or misconceptions that you may have about money by consuming the right kind of knowledge about all things finance.
That said, saving money and understanding personal finance is a continuous process.
You will learn, un-learn, and re-learn as and when you earn more, save more, and obtain more knowledge.
2. Track Expenses
You never know how much you have spent unless you track it. Tracking your expenses is very important as it helps you control it.
Some people don’t have control over their money. They spend recklessly without saving anything for the future.
This is not the right way when it comes to future financial planning. You should be sensible about your monthly expenses and track them to control unnecessary expenditures.
It is one of the best ways to save money each month. You should have an account of even ₹1 that goes out of your account.
What does this remind you of? Building a positive relationship with your money.
3. Create a Budget
A budget is a method of allocating money to various aspects of your life. Your typical budget
You know, creating a budget is the first rule of learning how to save money. To do so, you must record your income and note your expenses.
This will give you clarity on how much you can save each month. You can budget for how much to spend and save every month.
By the way, there are various rules for creating a budget. Take for example the 50-30-20 rule shown in the video below.
4. Set Financial Goals
Setting financial goals will give direction and purpose to your savings efforts. It is one of the best ways to save money monthly.
When you have financial goals, you will be focused and motivated to save money to fulfill those goals.
It also helps to distinguish between your needs and wants. It also lets you plan long-term and make informed decisions to increase your savings.
Here’s a snapshot of goals from age 20-25 and progressing up to 55+.
|Age Group||Financial Goals|
|20-25||Build an emergency fund|
|Pay off education loan|
|Start investing in a retirement fund|
|Save for a down payment on a home|
|Age Group||Financial Goals|
|51-55||Draw a retirement savings withdrawal plan|
|Get healthcare and insurance for retirement|
|Pay off remaining debts|
|Downsize living expenses|
These are just some of the examples of financial goals that people tend to set as and when they age.
5. Live a Frugal Life
You can commit yourself to not spending unnecessarily and live below your means. This outlook towards life involves curbing “wants” such as a new expensive car or phone.
Doing so will allow you to gain perspective and watch your bank account grow.
While frugal living does involve sacrifices, it does not mean you compromise on quality of life.
Spend on needs and essentials to the best of your ability. Curtail wants. This is the central motivation behind Financial Independence, Retire Early (F.I.R.E).
6. Invest, Invest, Invest
To build a strong financial foundation, it’s essential to understand how to save money from your salary in a bank, where your funds can grow and remain secure.
Investing helps in saving money and achieving financial goals. It helps to increase your savings over time.
You can earn gains by investing your money in stocks, bonds, or mutual funds. You can also indulge in compounding. It is an effective tool for long-term savings and wealth building.
7. Stay Clear of Debt
Staying clear of debt is one of the best ways to save money monthly. When you take on debt, you have to pay monthly interest.
This will lower the money available for saving. It can restrict your financial freedom. Taking on too much debt can make it difficult to save and achieve your financial goals.
By staying clear of debt, you can get peace of mind and focus on saving more. By avoiding debt, you can plan for long-term financial security.
How to Become Better at Saving Money from Salary?
Saving money from your salary can help you achieve your financial goals and build a safe future. Here are effective tips to get better at saving money from salary:
1. Automate Savings
Automating your savings is one of the effective ways to save money each month effortlessly.
You can set up a savings account and request your employer to deposit a portion of your salary directly into that account.
Furthermore, you can also schedule the transfer of money by choosing automatic transfer. This way, you don’t have to put much effort into saving yourself.
Manually transferring money to your savings account won’t by automating your savings.
2. Reduce Variable Expenses
Reducing variable expenses helps you save more money. These expenses fluctuate every month and are within your control.
The best way to reduce variable expenses is by tracking monthly expenses and cutting unnecessary costs.
You can also save on utilities. You can also indulge in shopping smart by comparing prices across different vendors and platforms.
3. Increase Passive Income Sources
Increasing passive income sources helps accelerate your savings. Investing in real estate and getting monthly rent comes under passive income.
You can rent your property and add the rent amount to your savings account.
You can also invest in high dividend-paying stocks to generate income and save it. Starting an online business also helps in generating passive income.
Another popular way is affiliate marketing, which means promoting products or services through your website, blog, or social media platforms.
All these passive income streams help in generating recurring income and accelerating savings.
Saving money is hard, especially for those who don’t have the habit of saving and who often spend unnecessarily.
However, saving money is very important as it helps safeguard your future. Follow these tips and learn how to save money from salary.