It sometimes seems a far-fetched dream with an average salary to accomplish simple things in life like a decent car, home, and access to good quality education for your kids. But do not get overwhelmed! All this is possible by systematically saving from your salary. So how do you know how much money to save from your salary?
The general thumb rule of financial planning suggests saving 10% of salary for beginners. You can gradually increase the percentage of savings to 15% and later to 35% as your income and experience increase.
Now the question arises of how to save money from monthly salary. Check out these seven smart ways to save money to meet your life goals.
- Set Your Short-term & Long-term Goals
It does not matter how much you save if you realise after some years that the amount will not match what you had in mind. So, whether you have a short-term goal like renovating your house or a long-term goal such as higher education for your kids abroad, be clear of how much you need to save. Keep inflation in mind while planning for long-term goals.
- Plan a Budget Based on Your Goals
Once you have clarity about your goals, it is easy to plan a monthly budget to accommodate the required savings. List down your expenses and see to it if you can cut down on anything. A monthly budget will make a robust system so that you don’t have to sit and figure out how to save money from salary every month.
- Invest First
It would be best if you started spending from your salary after you deposit money in your monthly savings. Put your monthly contribution to your savings on an automated mode. The amount should get deducted from your salary account within a few days of your salary credit. In this way, your savings will not get affected by any unplanned expenses.
- Choose the Right Saving & Investment Plan
It is crucial to make a family investment plan according to your income and goal. So do not fall for recommendations and do your research for suitable savings plans and schemes. Start slow with RDs and fixed deposits. You can gradually move towards investments such as mutual funds and the stock market at a later stage. You can be innovative with investments in the chit fund platform as well. Online chit funds are extremely user-friendly and give high returns.
- Maintain an Emergency Savings Fund
It is possible that suddenly someone in the family gets sick, some home repair needs come up, or you lose your job. An emergency savings fund will save you from disturbing your savings due to such unforeseen circumstances. Also, you will be less anxious if you have an emergency savings fund in difficult times. It is ideal for maintaining an emergency fund worth your few months of living expenses.
- Avoid Accumulating Debt
You will keep wondering how to save money from your monthly salary if you keep taking every credit card and loan offered to you. Accumulating debt is harmful to your financial planning. So, take only those debts which are necessary. Also, plan the instalment in a way that they don’t affect your monthly savings. Try to earn more interest on savings and not giving away interest money on debts.
- Eliminate Needless Expenses
Take a close look at your monthly expenses. Most probably you will find certain things which you do not need. For instance, your entertainment subscriptions, top-up mobile plans, impulsive online shopping, energy bills, extra items in grocery shopping, bad habits like drinking and smoking, etc. You can either eliminate or bring down all these expenses to increase savings.
There is no workable ‘one size fits all’ approach when it comes to saving money from salary. However, the seven tricks of savings described in this post are like thumb rules. You will see improvement in your savings by adapting them. Remember, the money will save your future if you save money at present.
Aatish Khanna works with the Content Marketing team at Money Club – a digital chit fund platform that makes saving, borrowing, and investing your money more efficiently. He writes on topics to help his readers understand processes so they can make better financial decisions. He is the go-to person that his family, friends, and colleagues turn to for all their money matters. He loves to play board games and aspires to one day build his one finance-related board game and app.