One of the fundamental aspects of financial management is learning how to save money from salary. In this guide, we’ll explore 9 best ways on how to save money from salary and build a foundation for a more secure financial future.
From budgeting techniques to identifying areas for cost-cutting, and from setting clear financial goals to understanding various saving and investment options, we will delve into the actionable steps you can take to optimise your savings and work towards achieving your desired financial outcomes.
9 Methods To Save Money From Your Salary
1. Understand Your Finances
The first step towards effective money management is to assess your current financial situation. Sketch out your income, expenses, and debt. Make sure to include bonuses and any additional revenue.
2. Set Clear Financial Objectives
Divide your goals into three major categories first: short, medium, and long-term. Then decide how you want to quantify them. Goals can vary widely, such as buying a house, saving for retirement, paying off debt, going on a vacation, or starting a business.
Having specific goals gives you a clear direction for your financial planning. Consider setting deadlines for each objective to help you stay motivated to perform better over time.
How much of your salary you save will depend on your goals. Practise by setting some funds aside for your short-term goals first. Then, when you feel confident enough, you can move on to putting more money towards your medium and long-term goals.
Also read about: How to Save Money Fast on a Low Income
3. Minimise Unnecessary Expenses
If you want to save money fast, this is the top for you! This could mean preparing coffee in the morning instead of going out for one, cancelling subscription services, reviewing your mobile phone contract, or opting for cost-effective alternatives.
When you next do a food shop, it might help to curate a shopping list to avoid unnecessary buys. Using loyalty cards and rewards if you have any, like Tesco Clubcard, Nectar card, Co-op Membership, or Boots Advantage Card, can also help you save money on food prices.
4. Save on Housing and Utilities
- Affordable accommodation: Living slightly further from the city centre might mean lower rent. Balance the cost of commuting with potential rent savings.
- Go for a long-term rental agreement. Landlords are often willing to relax rent and term clauses if they know you’ll be a resident for a long time.
- Saving on energy bills: Being mindful of your energy consumption can decrease the strain on your wallet and benefit the environment. Solar panels and LED lighting are a great way to reduce electricity bills from your local grid.
- Install smart home devices: Installing smart home devices can give you an insight into how much gas, water, and energy you’re consuming on an hourly or weekly basis. Furthermore, smart thermostats can assist you in controlling heating and, thereby, help in saving money each month.
5. Choose the Right Savings Accounts
To understand how much money you can save from your monthly salary, try filtering out the banks with less or no monthly fees and a reasonable rate of interest.
You could open a high-interest savings account like an ISA (Individual Savings Account) to benefit from tax-free savings. Plus, utilise any incentives provided by the bank for opening an account, such as cashback and reward points.
6. Build an Emergency Fund
There are many different ways to budget money. If you’re looking to build your emergency fund, use the 50/30/20 rule to help you save money from your salary.
The 50/30/20 rule states that you spend 50% of your salary on needs (rent, utilities, car maintenance, living expenses.), 30% on wants (clothing, electronics, and entertainment), and 20% on your savings.
If you’re finding it hard to manage, you can also use a budgeting app to keep you on track.
7. Consolidate and Manage Debt
Managing existing debt can be difficult, but it’s possible to manage and save money from your salary. Here’s how:
Debt Restructuring
- Clearing loans and credit card debt: Make a note of all of your debts, including credit card and student loan bills. Strive to pay off the loan with a higher interest rate. It is the one that might throw a wrench in your finances later on.
- Revising your debt terms: Come to mutual terms with your lender in case you’re facing difficulties in paying the debt. They might help you with a lower monthly instalment, lower rate of interest or grant you a grace period for a limited time.
- Seeking professional advice: If you’re struggling to manage, it could be wise to seek help from a financial advisor or a debt counsellor. It can largely help you in making better decisions. Several city councils within the UK offer the service free of charge.
Exploring Additional Income Methods
Increasing your income can significantly boost your savings pot. For example, taking on a side job can help you make a little more to cover monthly expenses and help you start saving money.
Not sure what you can do? You can always take on freelancing projects if you want to work independently. This way, you are not bound by a particular organisation/individual and can continue doing other things you like.
Investing in personal and professional development
Your earning potential increases as you develop your skills. The landscape is constantly changing. Therefore, you need to stay updated. Whether you want to pursue technical skills (like data sciences and AI) or something more creative (such as script writing and animation), watch for industries with increasing demand.
You can also acquire assistance from free or pocket-friendly resources offered by a university or any organisation to upscale your skills further.
8. Considering Various Financial Portfolios
Experts often recommend investing early for long-term financial success. The more your principal investment amount, the more options you have for investments. That principle can generate substantial returns within a few years, especially when the portfolio involves compound interest.
Examine the yields of different investing opportunities (e.g., stocks, bonds, mutual funds, ISAs). You can also go for options with a less hands-on approach, like mutual funds or a direct deposit, if you want to spend your time elsewhere.
But, keep in mind that, these investing opportunities are risky, and you should be careful before investing.
9. Psychological Tips To Save Money From Salary
- Celebrate Milestones: When you reach a savings goal, reward yourself with a meal out, or treat yourself to something you’ve been wanting for a while, all within budget of course. This can help spur you to put more effort into your savings goals.
- Continue with recreational activities: From time to time, keep rejuvenating yourself with some recreational activities that are cost-effective or free.
- Step away from impulse buying: The next time you have to urge to impulse buy, wait for 24 hours before making a decision. This tip can help you determine if you really need the product or are just going through an impulsive phase.
- Automate savings: Set up automatic transfers from your salary to a separate bank account as soon as you receive your paycheck. This way, you’re less likely to spend the money before saving it.
Conclusion
Making small but significant changes to your routine can help you save money from your salary. Simple steps like saving on utilities, modifying your savings account, and consolidating debt let you stress less about your monthly paycheck.
With a steady discipline and respect for spending money and accepting resources that are economical, saving money from your salary will be even simpler.
Frequently Asked Questions
What Is the 50/30/20 Rule?
The 50/30/20 rule facilitates spending 50% of your monthly income on needs, 30% of monthly budget on wants and 20% towards savings.
Is Saving 70% of Your Salary Good?
Saving 70% of your salary can be a commendable goal for achieving financial milestones quickly, but its suitability depends on your individual circumstances, goals, and willingness to balance present enjoyment with future security.
How to Save 10K in 1 Year in the UK?
You can save 10K in 1 year in the UK by tracking your expenses, cutting down on unnecessary services, reducing travel costs by car-pooling, etc.
What Is the 50/40/10 Rule?
This rule says that you spend 50% of your after-tax income on needs, 40% on wants and 10% towards savings.
Is Saving £200 a Month Good for a UK Citizen?
Yes, saving £200 in a month is a good amount. It amounts to saving £2,400 in a year, which can contribute to various financial goals such as building an emergency fund, saving for a major purchase, or investing for the future.
Disclaimer: The information given above is provided for reference only. This is not financial advice. Also, we are not affiliated to any of the external parties named, they are provided for reference only.
Related guides:
Effective Ways on How To Save Money In London
