An Ultimate Guide: Tips on How to Save Money from Salary

Saving money from your salary is an important financial habit that can help you achieve your financial goals, build a safety net for emergencies, and prepare for early retirement. However, saving money could be daunting for many due to uncontrolled expenditure and a lack of ideas to save money.

So, if you are a salaried person looking for ways to save money from your monthly salary, we will discuss important tips to save money from your monthly salaried income. The strategies will also guide you to save money in daily life.

Why is saving important?

Saving money is an essential step in building financial security. While earning money is important, saving is more important. Even if you earn in crores, it is worth nothing if you spend everything. You will not have anything at the time of emergency.

So, saving not only insures you from any emergency but also helps you achieve bigger life goals such as purchasing a home, buying a car, or funding your retirement.

Incomes are often insufficient to cover expenses for the middle class; having a budget and a savings plan can help you meet your financial goals even with a low Income. Since you have understood the importance of saving, let’s discuss the next question.

How much money should you save every month? (Out of total Income)

The answer to this question depends on various factors, such as age, current income, financial goals, and lifestyle. If you are in your 20s or 30s, you may have different savings goals than someone in their 40s or 50s.

However, I am going to discuss two important rules of saving, one is a basic thumb rule of saving, and another is my own rule of saving.

While discussing the rule, I have made two assumptions here:

  1. First, you have enough emergency funds to face any uncertainty.
  2. Second, you have enough life and health insurance for yourself and your family.

#50/30/20 rule of saving

A common rule of thumb for saving money is the 50/30/20 rule. This rule suggests that you should allocate your in-hand income as follows:

  • 50% of your income is for necessities such as rent, utilities, groceries, transportation, and other essential bills.
  • 30% of your income is for discretionary spendings such as entertainment, dining out, shopping, and hobbies.
  • 20% of your income for savings and debt repayment.

While 20% savings may seem very little, the rule is best for those who want to be financially disciplined. The 20% amount is divided into various savings goals, such as an emergency fund, retirement savings, and long-term investments.

While this rule can serve as a useful guideline, it’s important to note that everyone’s financial situation is unique and may not work for everyone. However, you should save at least 20 % of your income.

#Financial Freedom Strategy

While the thumb rule of 50/30/20 is good for the initial start, it doesn’t answer one important question. What is the ideal amount of savings to become financially independent?

Considering the above fact, I have tweaked the rule. The fundamental approach to becoming financially independent is that you either have enough savings or a passive income stream to cover your expenses after retirement.

Here I will talk about becoming financially free with regular savings from your monthly salary, considering you have no other income stream.

So, the amount of monthly savings = Your current expenses + current Inflation

Let’s understand it with an example,

Suppose, Your Income (monthly) = Rs.50000, Monthly Expense = Rs.20000, Inflation = 6%

So, your savings should be (20000+ 20000 X 6%) = Rs.21200 per month.

Let’s take another example,

Your income (monthly) = Rs.50000, Monthly Expense = Rs.30000, Inflation = 6%

So, your savings should be (30000+ 30000 X 6%) = Rs.31800 per month.

Now, if you have left with only Rs.20000 after your expenses, how can you save Rs.31800?So, in that case, you will either have to lower your expenses or enhance your income.

So, the above method not only helps you to achieve financial freedom, but it will also control your expenses.

Now that you have understood the amount of money required to save, let’s discuss how to save more money from your salary.

Top 10 tips/strategies to save money from your salary

Most salaried people find it difficult to save money every month because they don’t know how to save more from their monthly salary.

So, for those people, I have curated a list of 10 practical tips that I have personally used to save extra money at the end of each month. I will keep updating the list whenever I learn new savings ideas.

Strategy 1: Make a budget for income and expenses.

Making a budget for income and expenses is very important; however, most ignore it. Imagine if our government had no budget for the country; the country would become bankrupt.

Similarly, a budget is crucial for saving money for every family. The strategy especially helps to save money when you have a low income. Having a budget will help you identify which expenses you can cut down on and how much money you can put into monthly savings.

Strategy 2: Track your spending

Once you budget for income and expenses, it’s time to track and analyze your spending. Tracking is the most crucial step to optimize your savings. Tracking helps to keep expenses in check.

Most of us make the mistake of not tracking our expenditures, leading to higher expenses than our income and very little or no saving at the end of the month.

So, monitor your spending habits for a few months to see where you spend most of your money. Monitoring will help you make better decisions regarding saving money from your salary.

Strategy 3: Cut back on unnecessary spending

Since you have made the budget and tracked your expenditure, you now know the essential and non-essential expenses from your income. So, the third vital tip to save money is to cut down on unnecessary spending.

Try to reduce or eliminate the non-essential expenditure from your budget.

Also, avoid spending money on luxury items like watching movies, visiting bars or nightclubs, and drinking alcohol frequently.

Strategy 4: Set aside a specific amount each month

Keeping a certain percentage of your income is one of the important ways to save a fixed amount of money after your monthly expenses. Keep the amount in a different bank account for efficient management.

If you are confused about how much money you should keep aside, follow the thumb rule 50/30/20, as discussed. If you are finding it difficult, you can link the savings with some personal goals like- real estate buying, insurance schemes, etc.

This will help you stay consistent and disciplined with saving money and ensure you reach your goals.

Strategy 5: Choose an automated savings plan

Automated savings is best for people who can’t control their desire, and no manual savings method works. Automating your savings is one of the best ways to ensure that you consistently set aside money monthly.

There are many financial instruments with some lock-in period where you can set up your monthly investment. Once you set up an automated transfer at a particular date, the amount will be debited from your salary account and credited to your investment account every month.

Some of the best-automated investment plans are Public Provident Fund (PPF), ELSS, Sovereign Gold bond Scheme, SIPs in Mutual Funds, etc. By implementing the above plan, you can save a certain fixed percentage each month without much effort.

Strategy 6: Avoid using credit cards more frequently

Try using cash for purchases instead of credit cards. Paying with cash helps you track how much money you are spending and can help you save more each month.

If you do not know how to use a credit card effectively, you should avoid using credit cards or purchases on EMIs. Most people fall into the trap of different offers on credit cards and get trapped in debt. They keep paying monthly EMI bills without realizing that all their salary income is spent on paying the bills.

Strategy 7: Have an emergency fund

While having an emergency fund is crucial for financial security, it also helps save some extra money towards the emergency corpus. So, build an emergency fund of at least 6-8 months of monthly expenses.

If something unexpected happens, you will have the funds to cover the cost without dipping into your savings or taking out loans. This will help you save more money in the long run.

Strategy 8: Take advantage of company benefits

Many companies offer free perks and benefits such as free lunch, free transportation, discount coupons, club membership, etc., to their employees, which was also shown as part of the CTC. You can save money from monthly income by using the benefits offered by your employer.

However, most employees didn’t take the real benefit of those perks resulting in the wastage of a certain percentage of CTC offered. So, take those benefits to save some extra money.

Strategy 9: Take advantage of deals and discounts.

The ninth tip to save money is to take advantage of deals and discounts offered at multiple offline and online stores.

Did you know that during festive seasons such as Black Friday, Christmas, or Durga Puja, you can get most items at a discount of 30 % or more? So, you can easily save at least 30% on your bills if you plan your yearly shopping intelligently during the festive season.

Look for online deals, discounts, or coupons that can help you save money on everyday household items and big purchases. This could include taking advantage of online deals or loyalty programs that offer discounts on products or services.

Strategy 10: Start a side hustle to boost your income

All the above tips are in vain if your income is very low and doesn’t get an increment of at least equal to or more than the inflation. Because if your income is very low, which is not enough to cover your monthly expenses, no strategy will help you to become financially independent.

So, my last tip would be to aim for multiple income streams. You can find different ways to earn additional income to add to your monthly savings.

Learn new money-making skills, such as content writing, copywriting, video editing, etc., in your free time to earn more income through a side hustle.

Frequently Asked Questions (FAQs)

How can I save money from salary?

You can save money from your salary by creating a budget, tracking your expenses, identifying areas where you can cut back, and prioritizing saving. Set specific savings goals, automate transfers to a savings account, and avoid unnecessary spending. Additionally, consider increasing your income through side hustles or investments to boost your savings.

How much of my salary should I aim to save each month?

Financial experts often recommend saving at least 20% of your monthly salary. However, the ideal amount may vary depending on your individual financial goals, expenses, and lifestyle. Start by creating a budget to determine how much you can comfortably allocate towards savings each month, and aim to gradually increase this amount over time.

What are some practical strategies for saving money from my salary?

Some practical strategies for saving money from your salary include setting up automatic transfers to a dedicated savings account, tracking your expenses to identify areas where you can cut back, meal planning and cooking at home to reduce dining out expenses, and negotiating bills or subscriptions to lower monthly costs.

How can I resist the temptation to spend impulsively and stick to my savings goals?

One effective way to resist impulsive spending is to create a detailed budget and set specific savings goals. Prioritize your spending based on your financial goals and avoid unnecessary purchases that don’t align with your priorities. Consider implementing a waiting period for non-essential purchases to give yourself time to evaluate whether it’s something you truly need or want.

Are there any apps or tools that can help me save money from my salary?

Yes, there are several apps and tools available to help you save money and manage your finances more effectively. Popular options include budgeting apps like Mint or YNAB (You Need a Budget), which can help you track your spending and set savings goals. Additionally, there are apps that round up your purchases and save the spare change automatically, such as Acorns or Qapital.

What are some long-term benefits of saving money from my salary?

Saving money from your salary offers numerous long-term benefits, including financial security, the ability to weather unexpected expenses or emergencies, and the opportunity to achieve your long-term financial goals, such as buying a home, starting a business, or retiring comfortably. Further, saving money allows you to build wealth over time through investments and compound interest, providing a source of passive income in the future.

What is the 50-30-20 rule?

The 50-30-20 rule is a budgeting guideline that suggests allocating 50% of your income to needs (such as housing and utilities), 30% to wants (such as dining out and entertainment), and 20% to savings and debt repayment. It provides a simple framework for managing your finances and prioritizing savings.

What is the 40-30-20-10 rule?

The 40-30-20-10 rule is another budgeting guideline that suggests allocating 40% of your income to needs, 30% to wants, 20% to savings, and 10% to charitable giving or additional debt repayment. Like the 50-30-20 rule, it provides a structured approach to budgeting and saving.

Can you save 70% of your salary?

Saving 70% of your salary may be possible for some individuals, especially those with high incomes or minimal expenses. However, it may require significant lifestyle adjustments, such as minimizing housing costs, cutting back on discretionary spending, and prioritizing saving over immediate consumption.

What is the 4% rule in FIRE?

The 4% rule in FIRE (Financial Independence, Retire Early) states that you can safely withdraw 4% of your retirement savings each year, adjusted for inflation, without running out of money during a 30-year retirement period. It serves as a guideline for determining how much you need to save to achieve financial independence and retire early.

How to retire by age 35?

Retiring by age 35 typically requires aggressive saving and investing, along with minimizing expenses and increasing income. Focus on maximizing your savings rate, investing in income-generating assets, and reducing or eliminating debt. Consider pursuing side hustles or entrepreneurship to accelerate your path to financial independence.

What is a 90% savings rate?

A 90% savings rate means that you are saving 90% of your income and living on only 10%. Achieving such a high savings rate usually involves extreme frugality, minimalism, and prioritizing saving over spending. It can significantly accelerate your path to financial independence but may require substantial lifestyle sacrifices.

Is 35 too old to start saving?

No, 35 is not too old to start saving. It’s never too late to begin building your financial future. While starting earlier allows for more time to grow your savings and investments, starting at 35 still provides ample opportunity to improve your financial situation and work towards your goals.

How much savings should I have at 40?

The amount of savings you should have at 40 depends on various factors, including your income, expenses, lifestyle, and financial goals. However, a commonly cited guideline is to aim for saving at least three times your annual salary by age 40, although this can vary widely based on individual circumstances.

How do I start financially at 40?

To start financially at 40, begin by assessing your current financial situation, setting specific goals, and creating a budget. Focus on building an emergency fund, paying off debt, and increasing your savings rate. Invest for the long term, diversify your portfolio, and seek professional financial advice if needed.

Can I start saving at 40?

Yes, you can start saving at 40. While starting earlier offers more time to accumulate wealth and benefit from compound interest, it’s never too late to begin saving and improving your financial future. Focus on setting realistic goals, controlling expenses, and maximizing your savings rate to make the most of your efforts.

Final Thoughts

Saving money is one of the best investments you can make in yourself. By following the above-mentioned tips and strategies to save money with a low income, you can create a healthier financial future for yourself.

Saving money from your salary is a long-term process that requires discipline and commitment. Start small, set realistic goals, and be consistent in your efforts to save.

I will keep adding new ideas whenever I find ideas beneficial for you. So what do you think, guys? Do you have any unique ideas to help our readers? Please share in the comment.

Best of luck.

Disclaimer: The above ideas/strategies are for educational purposes only. We don’t guarantee that the above methods will work for everybody as it is based on my personal experience. So, please do your own due diligence and take advice from your financial advisor. Some links on this page may contain affiliate links and we may receive a commission if you click and purchase from the links. For more detail, please read our disclaimer.
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