How to save money from salary
Updated: Sep 9, 2023
If you are a salaried employee in India or abroad, you might have experienced that a large portion of your salary is spent on the first day for paying utility bills, grocery bills, and other payments. Does this make you wonder "How to save money from your salary?". If yes, this blog might be a helpful article for you. In this blog, we have discussed some budgeting strategies and a simple 4-step action plan to help you organize and save money for the future along with some resources such as books on personal finance and budgeting apps. In the end, we have also discussed some investment opportunities to grow your savings.
Table of Contents
How to save money from salary? A 4-step action plan
Importance of learning how to save money from salary
4 apps that will help you during your journey to save money from salary
Investment opportunities to grow your savings.
How to save money from salary? A 4-step action plan
1. Define your savings goals
Before you start with your journey of saving money for your future it is important to set a goal for yourself. You might want to save money for a new house, New car, Kids' education or for any personal reasons but, you must first define the amount of money you would need and set a goal accordingly. This step is an important part of design thinking and will help you to build a concrete strategy to save money.
2. Create a practical budget
Many individuals create a tight budget wherein they pledge to assign a huge chunk of their earnings toward their savings goal but this approach is not sustainable. Many individuals end up losing momentum after 2-3 months. Remember savings is a long-term game. Once you have decided the amount of savings required and the tenure try to calculate the amount of money that you would want to save and get a rough estimate of the sum of money that you must save each month.
Now, with the rough estimate you can create a budget. There are many methods to create a budget. Since your goal is to save money you should use the 50-30-20 rule. The 50-30-20 rule says, 50% percent of your income must be allocated to your necessities that is utility bills, rent, tuition fees, etc. 30% towards your wants like vacation, fancy watch, clothes etc and 20% towards your savings and paying down Debts. Although the rule gives a ideal split you can vary the percentage for each part Needs, wants, and savings as per your requirement. If you are in massive debt you can reduce the amount allocated to wants from 30% to 15% and increase Savings from 20% to 35% for some period of time.
3. Track your income and expenses
Another necessary activity is to measure your income and expenses. You must be aware of the money you are earning each month and your spending. This activity creates awareness among individuals about their money and spending habits. The track record of your expenses gives you insight into your spending amount and helps to identify avenues where you unknowingly spend a lot of money.
We know that tracking every expense can be a tedious job and then calculating every part of it is a much more frustrating job. Hence, we have prepared an Excel file that automatically calculates your income expenses. It has the ability to automatically derive important insights for you and highlight your top spending activities.
Also, we have created a list of 4 apps that will help you to record your income and expenses on the go.
4. Let your savings do the work
The idea of saving money is great but do you know, the money sitting in your account is actually depleting? You are losing money due to inflation. And that money lying in your bank account is not serving you in any sense. Hence it is necessary to invest your savings in a suitable instrument. You do not have to risk it all by investing in Stock market or other similar investment options. A simple Fixed deposit in your bank or Mutual fund can help you to earn extra money using your savings.
5. Be informed about your decisions
Saving money need not be a complex or stressful exercise, if you are aware of your spending and make some sensible decisions it would help you to increase your savings potential. For example, Booking air tickets through Sky scanner helps you to avail cheapest flight tickets. Using your credit card in a smart way to avoid paying heavy interest and build a strong Cibil score that will help you to avail loans at a lower interest rate in the future.
If you are not aware of the right way to use credit cards read this article.
Importance of learning how to save money from salary
Saving money is universally recognized as crucial. Having funds in your bank account not only provides a safety net during emergencies but also contributes to a stress-free life. However, mastering the art of saving money involves more than just accumulating wealth. It empowers you to utilize your finances to your advantage. There are several key topics worth exploring in this regard:
1. Calculating the required savings:
It is vital to determine the precise amount of money you need to save. This entails setting financial goals, both short-term and long-term, such as creating an emergency fund, purchasing a home, or preparing for retirement.
2. Growing wealth through savings:
Once you begin saving money, you can explore avenues to make your savings work for you. Investing in stocks, bonds, ETFs, mutual funds, or real estate can potentially yield returns on your savings.
3. Making wise financial decisions:
Cultivating sound financial habits and making prudent choices with your money is paramount. This involves distinguishing between needs and wants, prioritizing your spending, and resisting impulsive purchases.
4. Avoiding overspending:
Effectively saving money requires avoiding unnecessary expenses.
5. Saving through tax strategies and ethical means:
Understanding the tax system enables you to save money through legal and ethical methods. Researching tax deductions, credits, and exemptions can potentially minimize your tax obligations.
4 apps that will help you during your journey to save money from salary
1. Money Manager Expense & Budget
Money Manager is an expense tracker app available for Android phones. It allows to track expenses and personal asset management.
Ratings: 4.6⭐
Downloads:10M+
2. Wallet: Budget Expense Tracker
With Wallet, users can track daily expenses through automatic bank synchronization, gain insights from comprehensive weekly spending reports, effectively manage debts etc.
Ratings: 4.5 ⭐
Downloads: 5M+
3. Day-to-day Expenses
Day-to-day expenses is a similar expense tracker app. This user-friendly app is not only free but also provides a simple and secure way to track your daily expenses.
Ratings: 4.5 ⭐
Downloads:1M+
4. Budget planner—Expense tracker
With its robust features, iSaveMoney is not only a budget maker but also an efficient expense tracker suitable for everyone. Its user-friendly interface makes money management a breeze.
Ratings: 4.4 ⭐
Downloads:1M+
Investment alternatives to grow your savings
While Share market investing, ETFs, Fixed deposit are the most known investment alternatives that could help you to grow your saving many new alternatives are now available for investments some of which are:
Sustainable energy: Investing in sustainable energy has become more accessible and profitable than ever before. Platforms like Susvest now offer the opportunity to invest in green assets, such as rooftop solar projects. These projects have shown an average annual yield of 10-11%, making them an attractive investment option.
Agriculture: For those interested in agriculture, Growpital provides a platform to buy units in a diversified farm project portfolio. What's even better is that the interest earned through these assets is tax-free. With an average return ranging from 10-15%, investing in agriculture projects can be both financially rewarding and environmentally friendly.
Startups: Gone are the days when only big investors could participate in startup equity. Thanks to platforms like Lets Venture and Tyke Etc, anyone can now buy equity in startups. These platforms have made startup investing accessible to common people, giving them a chance to be part of innovative ventures and potentially earn significant returns on their investments.
Commercial property: Commercial property investment was once restricted to those with substantial capital. However, platforms like Grip Invest have changed the game by allowing investors to start with as low as 50,000/-. Investing in commercial properties through such platforms can provide a return of 11%, offering an attractive opportunity for individuals seeking diversification in their investment portfolio.
We hope this blog helps you to create an actionable plan for saving money from your salary and provides the necessary tools to track expenses on the go. Also, the last section where e discuss alternative investment opportunities will help you to find the right instrument for investing your salary.
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