How to save money from your salary each month

According to statistical data, most individuals spend more when they have more. As a person's income rises, so does his or her standard of living. Wants become needs, and items that were once considered luxuries become necessities. However, this mindset is problematic. It isn’t wrong to enjoy life, but it should never come at the expense of your wealth. If you live beyond your means, you could stare at a financial problem in the future.

How to save money from your salary each month
 

50% for living expenditures, 30% for lifestyle expenses, and 20% for savings is a good rule of thumb to aim for with your monthly salary. However, this rule doesn’t always work. If you save only 20% of your salary to save for a deposit for a house, it will take a long time to save enough money for a deposit. Meanwhile, the other short-term objectives, such as holidays, are completed excluded. Instead, here are some proven ways to save money from your salary.

1. Set a budget

The foundation of any effective savings plan is setting a budget. Start by categorising your income and expenses. List out your fixed costs such as rent, EMIs, and utility bills, and variable costs like groceries, dining out, and entertainment. Once you have a clear picture, allocate a specific amount to each category. Adhering to a budget ensures that you live within your means and helps you identify areas where you can cut back. This disciplined approach will make it easier for you to manage your finances and save consistently.

2. Borrow wisely

In today’s world, credit is easily accessible. However, borrowing beyond your capacity can lead to financial stress. It’s crucial to borrow wisely and only for essential needs, such as education, housing, or emergencies. Ensure that the EMIs on loans or credit card payments do not exceed a manageable percentage of your monthly income. Prioritise repaying high-interest debts first and avoid taking on new debt unless absolutely necessary. By keeping your borrowing in check, you can prevent unnecessary financial strain and maintain a healthy savings habit.

3. Analyse spending

Regularly analysing your spending habits is key to effective money management. At the end of each month, review your expenses to see where your money is going. This practice can help you identify unnecessary expenditures or areas where you might be overspending. For instance, you might realise that frequent dining out or impulsive online shopping is eating into your savings. Once you have this information, you can make more informed decisions about where to cut back and redirect those funds towards your savings goals.

4. Save first and spend later

One of the most effective strategies for building your savings is to pay yourself first. As soon as you receive your salary, set aside a predetermined amount for savings before you start spending on anything else. This could be through automatic transfers to a savings account, a recurring deposit, or investments in a systematic investment plan (SIP). By making savings a priority, you reduce the temptation to spend on non-essential items and ensure that you are consistently building a financial cushion for the future.

5. Cut down on energy bills

Reducing your energy consumption is a simple yet effective way to save money. Small changes, such as turning off lights when not in use, using energy-efficient appliances, and minimising the use of air conditioning, can significantly lower your electricity bills. Additionally, consider adopting practices like using public transport or carpooling to reduce fuel costs. By cutting down on energy bills, you not only save money but also contribute to environmental sustainability.

How much of my salary should I save each month?
 

A common rule of thumb is to save at least 20% of your monthly income. This percentage is part of the widely recommended 50/30/20 budgeting rule, where 50% of your income is allocated to necessities, 30% to discretionary spending, and 20% to savings. However, the exact amount you should save depends on your financial goals, lifestyle, and current obligations. If you have significant debts, you may need to adjust this percentage accordingly. Conversely, if you are working towards a specific goal, such as buying a house or retiring early, you might want to save more aggressively. The key is to start saving consistently, no matter how small the amount, and gradually increase it as your financial situation improves.

10 expert tips to save money from your salary
 

• Saving money should not be difficult. You can set up automatic deposits and withdrawals from your salary account to your investment and savings account. Consult your payroll administrator about splitting your direct deposits between two bank savings accounts. You can set up a specified percentage or cash amount in a separate high interest savings account, making it much easier to save money from your salary.
  
  
• We often fail to monitor our expenditures. Keeping a track of your spending can help you figure how your salary is spent. Examine your spending for the past months and see where you can save more. You can further track all your expenses with the Metra Trusting App.
  
  
• Lodging, food, and commuting are the three budget categories that account for most of our living costs. Reduced spending in these categories will leave you with more money to save from your salary.
  
  
• Online businesses have made it easier than ever to spend money. Compulsive buying has never been more difficult to resist. If online spending has been a problem for you, start by ignoring your credit card.
  
  
• Do not get pulled into the ‘trends of the time.’ Ignoring peer pressure is the best way to save money from your salary. It is advisable to not spend money on expensive weekend outings. Instead, you can plan a home get together and enjoy quality time with friends and family while saving on trips etc. 
  
  
• Having a long-term goal in mind is also beneficial, as it ensures you are not spending frivolously. If you feel you are not good at saving money, invest in tools such as senior citizen savings account. Also, protect your money with banks such as Metra Trust, who offer a savings account with one of the highest interest rates in the industry . This way, your deposit will get deducted from your account, allowing you to save money while at home each month.
  
  
• Set up a 'change jar'. Keep a jar at home and deposit your spare change at the end of each day. Coins and notes that aren’t used can quickly pile up. Once the jar fills up, deposit it into your savings account. Based on your daily spending, this can add up to a few thousand rupees annually.
  
  
• Limit eating out. Eating out frequently can burn a major hole in your wallet. Try limiting eating out or getting takeout to only once or twice a month. Cook your own meals and bring food to work so you're not tempted to eat out as often. Preparing meals at home lets you control portions and ingredients, often saving you money compared to restaurant meals. The savings from reduced eating out will quickly add up.
  
  
• Avoid shopping as recreation. Shopping for non-essential items as a leisure activity can lead to overspending. The thrill of finding deals and the social aspects of shopping trips make it easy to buy things you don't really need. Keep recreational shopping limited to just a few times a year for specific needs. Avoid 'just looking around' shopping sprees. Shopping mindfully and only when you have an actual requirement will reduce impulse purchases.
  
  
• Use credit card rewards strategically. Credit cards often offer cashback or rewards points on spending. But chasing rewards can sometimes encourage people to overspend. Opt for cards that offer the highest cashback rates on essential spending categories like groceries, gas, bills etc. This allows you to earn rewards on regular monthly expenses.

Conclusion

Being mindful of where your salary is going, monitoring spending, reducing monthly bills, avoiding unnecessary purchases and impulse buys, and having clear savings goals are key to optimizing your savings every month. Small tweaks in your spending and money management habits can make a big difference in how much you can save from your salary. Consistency is key - make savings a priority every month.