Most people who secure a new job or promotion or get a raise; think about upgrading their lifestyle, not their savings or investment! They hurriedly plan for a new car, better apartment, new dress or suit, stylish watches, the latest phones, etc.
But even those who desire to save allow are often distracted from this noble goal by looking down upon their salaries.
How can you avoid distractions and save money even with less salary? This article presents some exciting ways to start the journey.
These are tips that I used to increase my savings and investment from less salary and get out of debt. Without wasting time and money, let’s dig into it.
If you are looking for ways to get out of debt and build wealth, I wrote a whole article that I encourage you to read.
What Proportion Of Your Salary Can You Save Every Month?
This question has elicited various responses from all quarters. However, most experts agree on the 50/30/20 rule, where you use 50% of your salary on expenses (rent, food, and clothing), 30% on fun (vacation, travel, entertainment, etc.), and 20% on savings.
While this rule is ideal on paper, it sometimes fails to recognize that personal finances are personal.
What do I mean? The rule does not consider important personal goals like attending special events and spending a once-in-a-lifetime holiday. Sometimes, you could have aggressive saving goals that take more than 20%.
One of my friends, a financial analyst, argues that if you pay the government 30% of your salary in taxes, you should pay yourself the same amount, if not more. Savings and investments are what you pay yourself; unfortunately, most people don’t pay themselves from their salaries.
So, if you want to know how much you should save every month, I would say go with what works best for you. Your saving plan should also help you reach your financial goals.
Some people also ask how they can save money from less salary. Not everybody has a fat paycheck; others are barely managing their salaries.
Savings are important; with proper planning, everybody can develop this culture. If you earn less salary, you could consider supplementing it with various side hustles to keep your family afloat and save.
After establishing a workable saving plan, it is essential to stick with the plan; otherwise, you may continue to struggle day-in-day-out financially.
If you can see how to save money from your current salary, consider these tips to help you squeeze money on a tight budget.
How To Save Money From Your Monthly Salary?
Savings and expenses compete for your salary, meaning if you find it challenging to save more, you can increase your income or spend less.
You may need to turn some of your hobbies into a money-making machine if you want to save effectively. Let’s consider some practical ways to save money from your salary.
1- Set And Write Down Your Saving Goal
I cannot overemphasize the value of setting saving goals. While some people carry their goals in their minds, writing your saving goals in a journal is important.
The subconscious mind works well with written goals. Writing your goal down also reinforces your commitment to achieving it even if you face challenges.
So, begin by writing a specific amount of money you want to save every month.
Read this figure aloud every morning before you go to work. Why? You want your brain to register it and work towards accomplishing it. Personal finance (saving) is 80% behavioral and 20% math, so aim at changing your behavior. Obsess over savings, and you will find a different way to achieve the amount you wrote on your goal.
2- Pay Yourself First
It is possible to save from your salary if you adopt the philosophy of paying yourself first.
- When you pay rent, who do you pay this money to? The landlord.
- When you pay for groceries, who are you paying? The grocery store owner
- If you buy fuel for your car, who do you pay? The owner of the gas station.
Why not begin with yourself first because you are the one who worked for the money? Saving from your salary allows you to pay yourself. You can then sort out the remaining expenses after sorting yourself.
If your lifestyle is expensive, I recommend living simply as you build wealth or increasing your salary. But you cannot leave savings to chance, hoping to pay yourself for the leftovers! Begin saving, even if it is a little amount.
3- Break Down Your Payslip
You have a payslip if your employer pays at the end of the month. But before you think about savings, determine how much money is left after deductions have been made.
But if you are a freelancer, determine what you earn monthly (the average of the previous six months) and set the amount you can save from this figure.
Of course, you can always increase this amount if you earn more and reduce it if the pay is less. But ensure you have saved something every month.
4- Automate Your Savings
The problem with money is that when it lands in your bank account, the expenses seem to be more than the pay. You may rationalize why these expenses need to be sorted out first, leaving you with nothing to save for the future.
How do you overcome this challenge? Enter an automated saving plan where a certain percentage of your money goes to your savings plan without passing through your hands.
But ensure the money goes to an account you cannot easily access; otherwise, your brain will talk you out of this discipline when the going gets tough.
A better plan would be to invest this money in a fixed deposit account, share capital, government bonds, or stocks. This way, you will not access the money before the maturity date, allowing you to plan with the remaining amount.
5- Create a Budget And Track Your Spending
Do you know how much you spend monthly on food, snacks, rent, travel, and entertainment? Many people don’t know what their monthly expenses are!
Why not? Because they don’t have a well-written budget. Creating and sticking to a budget requires discipline, but it is that discipline that will help you create wealth.
If you want to save money from your salary, ensure you have a budget. And if you wonder what your expense is, spend the first month tracking everything you buy, including parking tickets and charity.
Once you know your expenses, you can eliminate unnecessary expenses that chew into your income. You may save as high as 20% or even more of your salary and channel it to savings.
I know that tracking expenses can be tedious, but you can download tracking apps to help you. These apps allow you to enter the expenditure immediately after it is incurred so you do not forget. The app will then compute your total expenditure for different categories, enabling identify what you can do without.
6- Chop Off Your Credit Cards
You heard me correctly, destroy your credit cards. Many people with credit cards live beyond their means and plunge into debt. With credit cards, it will take you years to get out of debt and build wealth.
You are likely to overspend or engage in impulse buying when you are using credit cards.
Part of your salary that goes to paying credit card interest rates and debts can be saved. Plus, spending hard-earned paper money is more painful than swiping a card. You will likely think harder before emptying your wallet than when using credit cards.
So, you know the enemy of progress- the credit card! Destroy them and instead use cash.
But how will I survive without credit cards? You will survive because many people are making the switch and are doing well. Seal the holes your money is slipping through, and you will be surprised by how much you can save.
7- Tweak Your Utility Usage
This is another area where you can stop wastage and save money from your salary. Rent is not the only thing taking up all your money; you could also be paying for utilities you wasted.
Are there appliances plugged into your sockets that you do not frequently use? This appliance could be compounding your electricity bill and chewing into your income.
How much water do you waste when washing dishes, clothes, and in showers? Could you adjust and reduce your water bill? Instead of keeping the lights on during the day, use natural light from the windows. Ensure your light bulbs are LED because they consume 75% less energy than incandescent lighting.
You could also minimize the amount of sun in your house and turn off the air conditioner. Switch off the fridge or reduce its energy consumption if it has little or no food.
What to read next:
- Here’s How To Get Your Finances In Order Before Quitting Your Job.
- Virtual Assistant: What They Do and How to Become One.
- How To Consistently Blog With a Draining Job? (With 9 helpful tips)
Final Thoughts
Saving money from salary does not need to begin with a bang. You can start small but be consistent. I have found automatic saving to work well for most people, but it must be intentional.
Setting saving goals, creating a budget, and tracking expenses are essential. So, prioritize saving by eliminating non-essential expenditures. If you maintain this discipline, you can succeed in saving even with less salary. The feeling of seeing your investment grow is second to none!
What other saving tips have you found useful for people with less salary?