Saving money can be a challenge, especially if you don’t have a lot of income to work with. However, it is definitely possible to save money from salary if you are willing to make some small changes in your spending habits.
In this blog post, we will discuss 8 tips on how to save money from salary to help improve your financial situation.
1. Know What You’re Saving For
Knowing what you’re saving for is more important than you might think. Why? Because saving for saving’s sake doesn’t give you any sense of urgency or accomplishment.
So if you want to successfully save money from salary, the very first step is to pick at least one savings goal.
At the very least, save for emergencies. Everyone needs an emergency fund. (And while you’re at it, don’t forget to define what you’ll consider an emergency.)
You might also want to save for things like holidays, car repairs, a big trip, etc.
2. Set Up a Savings Account
Before you can save money from salary, you need somewhere to put it! (Under the mattress is not the best choice.)
So set up at least one savings account. You can do that at your current bank or credit union, or open one somewhere else. Online banks like Capital One and Ally allow you to have more than one, which can be very helpful.
3. Name Your Savings Accounts
If you have more than one savings goal, it’s a good idea to name your savings accounts. Doing so can help you to better keep track of your finances and make it more likely that you will reach your savings goals.
For example, you could name your accounts based on the type of expenses they will be used for, such as “emergency fund” or “trip to Hawaii”.
Naming your savings accounts can help keep you on track, because you’ll know exactly what the money is for. That way it won’t get spent for other things instead.
4. Decide How Much Money to Save
If course this will depend on your goals and your budget, but if you can swing it, try to save at least 20%. (If you’re using the 50/30/20 rule of thumb for budgeting, that’s the 20% for savings.
If that feels like a laughably large amount, try using the 1% rule instead. That is a GREAT place to start for most anyone.
Of course, if you’re trying to figure out how to save money from salary for a goal with a deadline (like a trip coming up in 4 months), go for math instead.
Find out how many paychecks there until you need the money and then divide the total you need by the number of checks. That will give you the amount to save from each one.
Once you have an amount in mind, go on to the next tip.
5. Set Up Direct Deposit or Automatic Transfers to Save Money From Salary
One of the best ways to save money from salary is to have part of your salary deposited directly into a savings account. (You can normally split your direct deposit so that part goes to checking and part goes to savings.)
This way, you never even see the money and are less likely to spend it. You can deposit a certain percent of your salary into your savings account each month, or you can have a set amount transferred.
If you don’t want to involve payroll to go the direct deposit route, you can set up automatic transfers instead. Pick a day of the month that’s right after your check gets deposited, and have a set amount automatically transferred into savings. (You’ll just login to your savings account to set that up.)
These are the easiest ways to start building up your savings without feeling like you’re making sacrifices. With this simple tip, you can start saving for your future without making any major changes to your budget.
6. Make Savings a Part of Your Budget
Just like with debt repayment, you should make savings a part of your budget.
And by making it part of your budget, I mean paying yourself first, not last if there’s something left over. The previous tips will help with that, because the money will come out first!
But savings does need to be put into your budget as well. Otherwise you’ll end up dipping into savings to cover regular (or unexpected) expenses instead.
Keep in mind that every month is an unusual month, so expecting the unexpected will serve you well. To help you think of things that should be in the budget, here’s a budget categories list that’s easy to use.
7. Cut Back on Unnecessary Expenses to Save Money From Salary
Want to go further with saving money from salary? Once you’ve gotten used to doing it as a matter of course, you can cut back on unnecessary expenses if you want to save even more.
Here are a whole bunch of money saving tips for ideas of where to cut.
8. Get a Side Hustle to Bring in Extra Income
Of course, you can go the other route too, by getting a side hustle to bring in extra income. That can add to the money you’re able to save from salary.
Just remember to keep some time and money for fun as well! Because just like when you’re getting out of debt, you want to have some balance in your life.
So there you have it: Eight tips for how to save money from salary.
If you follow these, you’ll be well on your way to having a cushion in case of unexpected expenses and building up your savings account over time.
Just remember that it takes time and dedication to save money, so be patient and keep at it. Enjoy the journey and the fruits of your labor!