If you have ever tried saving money from your salary before, you’d know that it isn’t something that is done easily. You may have heard a talk or gotten into a conversation with someone who talked about the importance of saving from your earnings, and you thought to yourself ‘hey, I can try this. Trying it, however, showed how complex it can be. Perhaps you have tried severally and have even given up on it. Relax. Don’t give up. Saving from your salary can be difficult when there’s no adequate knowledge on how it is done. For anything you want to do, you need to learn about it to be effective in it.
This is why this post was written. To help you.
The steps that are being written here are not magical (you may have even heard them before) but if you put your heart to learning and doing them, you’ll be able to save.
How Can You Save From Your Salary?
Step 1: Let Your Income Be the Determining Factor. If you want to save from your salary, then you should know that you are limited by that salary. Be realistic on how much you can save from your salary by considering the amount that you earn monthly. Say you earn 50k monthly, saving 30k is not exactly realistic.
The general rule of thumb for savings is to save 20% from your salary while you use 50% for living expenses and 30% for lifestyle expenses. However, I’ll suggest at least 10%. It isn’t that bad to save 10% and it is realistic. If, on the other hand, you are saving to meet your personal goals like buying a car or short-term goals like starting a side business, you may need to increase the percentage that you save monthly. Then, of course, you’d need to cut down on the percentage you spend on living and lifestyle expenses.
Step 2: Pay Yourself First. You may or may have not heard or thought of this before but when you spend money or purchase items, you are actually paying others. If at the end of the month you have no savings from your salary, then you succeeded in paying other people except yourself. But why would you labor tirelessly monthly and still pay other people without considering yourself?
You worked for the money, so you deserve to be paid just like every other person you are paying by purchasing what they sell. Do yourself a favor by paying yourself first. That 10 or 20% you want to save is your payment to yourself. Take it out first and save it.
STEP 3: Make a Monthly Budget Plan and Stick to it! This step requires some level of planning, organization, and discipline but it’s definitely worth it. You need to keep a track of where your money is going and control your expenses. To achieve having a monthly budget, you may need to be financially aware of the current prices of things. A budget can be made by dividing your expenses into major categories and sticking to them.
Categories include fixed expenses and flexible expenses. You can also categorize them as living expenses and lifestyle expenses. For fixed/living expenses, there are fixed needs that are required monthly: food, rent, utilities, transportation, etc.; and fixed wants cable TV bills, subscription, phone services, etc. Flexible expenses include things clothing, like some kinds of food, things spent on entertaining yourself. Have a plan for how much is going into these expenses.
Remember to make your budget after paying yourself. If your remaining 80 or 90% cannot cover your expenses, you may need to cut down on your expenses. This takes us to the next step.
Step 4: Reduce Monthly Expenses. This step is really not easy but if you’re trying to save (which you should), then the advantage of taking this step outweighs the cost. Indeed, you cannot live without your living expenses or lifestyle expenses, but you can actually cut down on them by finding some good alternative. This is not to say that you should go for substandard things. You can still stick to quality and reduce spending. You can curb your spending by being smarter about food. If you’re the type to eat out often, you may consider eating out less and making homemade meals more instead. If you eat a particular type of food often which costs more, you can substitute this kind or reduce food portion. Be prudent with groceries, transportation. If you take uber often, you can consider other forms of public transport. Spend less on entertainment, evaluate subscription services. You will know what will work best for you when you make efforts to reduce your expenses. It’s not impossible. What it takes is your willingness and discipline. By all means, avoid impulsive buying, except you have extra change. Impulsive buying makes your monthly income get exhausted faster than you think. Also, avoid the temptation of buying in bulk if you don’t need all the items at once and you know that it will affect your budget. Reducing your monthly expenses will really help you save and avoid debt.
Step 5: Save and Invest in the Right Saving Tools. This step is important because it makes saving more attainable. Putting your money away in a saving tool that works will help avoid the temptation to take out of your savings. At the same time, the right saving tool brings in better returns. What this means is that you have an interest in the money that you save. So, it’s a win for you. Don’t just put the money away, save smartly by putting it in the right place.
Saving from your salary, no matter how small, is not impossible. These steps given are realistic steps that can be taken; however, they will remain ‘just steps’ if they are not acted upon. Yes, they require planning, discipline, and consistency, but they offer great rewards. You just need to live on your means, or even below them. Really, saving is about paying yourself and you deserve to be paid. Remember also to give yourself a treat from time to time (not always) if you can reach your savings goal (the treat shouldn’t be from your savings though).