save money each month

10 Steps to Save Money From your Salary Every Month

If you work a job with a salary, you should be saving money from your income each month. Because you’re on a fixed income, learning how to save money from your salary each month can give you peace of mind and become mindless once you get into the right habits.

Here’s how to save salary money each month to achieve your financial goals.

How to save money from salary every month

It can feel impossible to save money from your salary each month if you live paycheck-to-paycheck or don’t budget. Below you’ll find ten simple steps anyone can follow to save money from their earnings each month.

1. Create a monthly budget with savings included

The best way to make sure you save every month is to create a budget. Treat savings like a bill including it in your budget as a non-negotiable expense. 

You can follow a specific budget or create your own. The budget that you will follow is the right one for you, no matter what anyone else uses. The key is to know how much you can afford to save each month and treat it like a bill that’s due on each payday.

2. Monitor your spending

Monitoring your spending is a great way to make sure you have enough money to save. You can set a budget and say you’ll only spend a certain amount of money on groceries, shopping, or eating out each month, but if you don’t track it, you won’t know where you stand.

If monitoring your spending feels like too much, sign up for a free budgeting app that connects to your checking account. Apps like Mint can automatically track your spending. To see how you’re doing, all you have to do is check your spending in each category.

If you find you go over in certain categories, find ways to cut back. You can cut back in the categories you overspend or move your budget around. Cutting back in other categories you might not spend as much money in gives you more freedom in other categories.

3. Set sinking funds to be prepared

Sinking funds is an account you contribute to monthly to pay for large expenses down the road. For example, you know your car needs new tires in a few months. Rather than spending all the money from one paycheck when you need them, you contribute a small amount of the cost monthly to the account.

Sinking funds don’t have to be for a specific purpose either. You can regularly put money aside in the account to cover unexpected expenses (car repairs), pay for gifts (Christmas and birthdays), or cover unexpected medical bills, as a few examples. 

Like saving, make the savings for your sinking fund a part of your budget and treat it like any other bill.

4. Evaluate & reduce your expenses

When you monitor your expenses, you’ll see where you overspend. This is a great opportunity to reduce them as much as possible.

There are many ways you can reduce expenses, such as cutting back on things entirely, or you can get creative and find ways to save money but still do what you love.

For example:

  • Use coupons and shop sales for groceries
  • Shop online sales or look for coupons when shopping for clothes or household goods
  • Take advantage of Happy Hour deals at restaurants or even coffee shops for a treat
  • Cut back on the frequency of getting your nails or hair done or go to a beauty school versus a fancy salon while maintaining the same frequency 

6. Choose the proper saving/investing tool

Only you know which investments or investing platforms will work for you. Don’t choose investments just because everyone else is investing in them. Choose what you’re most comfortable with, and that will allow you to sleep at night.

For example, if you’re most comfortable with mutual funds or savings bonds, then that’s what you choose. You don’t have to invest in stocks just because everyone around you is doing it. For example, some people are only comfortable with online high-yield savings accounts, and that’s okay.

Assess your risk tolerance and what you’re most comfortable using, and choose that option for your saving and investing.

7. Automate your savings

Take saving off your to-list by setting up automatic savings. When you don’t have to think about saving, and it’s already done for you, it’s easier to reach your financial goals without the worry of forgetting about it. 

8. Avoid lifestyle creep

It’s easy to inflate your lifestyle when you make more money. Whether you got a raise or started a side gig, making more money doesn’t mean you should spend more money. Instead, use the extra money you have to save for important financial milestones.

It’s normal to inflate your lifestyle slightly to reward yourself, but do it too much, and you’ll find yourself in the same position you are now. Instead of increasing your expenses, make sure you save as much salary money as possible for retirement, emergencies, or other financial goals.

9. Don’t take on any further debt

High-interest debt robs you of the ability to save. If you pay 20%+ on your credit cards, that’s money you could have put away for a rainy day or retirement. Live by the principle that if you can’t pay for the purchase in cash, don’t buy it. 

Using credit cards to cover bills, pay for everyday expenses, or as an extension of your income works the exact opposite of saving money from your salary. If you can’t use credit cards responsibly, it’s best not to use them at all.

10. Make access to your money inconvenient

Once you learn how to save money from your salary every month, make it hard to access the funds. Just throwing the money in a savings account attached to your checking account isn’t safe. You’ll have easy access to the funds and quickly transfer them over to your spending account.

Instead, make it hard to access the money. Whether you lock it up in a long-term CD, open a savings account at a bank without an ATM card, or tie it up in another investment, make it hard to get the funds.

11. Pay yourself first and stay consistent

If you’re like most people, you pay your bills, spend money and then pay yourself only to find out that there’s nothing left to save.

Instead, flip it the other way. Pay yourself (put money in savings) first, and then pay your bills and spend money according to your budget. This ensures you don’t skip the saving part and learn how to save salary money more easily.

How much of your salary should you save?

Once you know how to save money from your salary each month, you must know how much of your salary to save. There is no right or wrong way to save money each month. If you’re saving, you’re winning. It’s that simple. But if you want some guides, here are great ways to decide how much of your salary you should save.

50/20/30 rule

We like the 50/20/30 rule because it’s straightforward and self-explanatory. With this plan, 50% of your income covers your fixed expenses (housing, utilities, insurance, and basic food/clothing needs), 20% covers your savings or debt-payoff each month, and 30% goes toward anything else you want to spend money on that doesn’t fall in the ‘needs’ category.

50/30/20 budget rule

Dave Ramsey’s recommendation

Dave Ramsey has a slightly different idea about how much of your salary you should save. Initially, Ramsey says everyone must save $1,000. No questions about it. After you have a $1,000 emergency fund, Ramsey says to focus on paying your debts off before saving anymore. The money you would put toward savings, he wants you to put toward your credit cards and other debts.

Once you are debt-free, Ramsey suggests taking any money you could afford to put toward your debt and saving it. For example, if you paid $750 a month to your credit cards or other debts, you should take that $750 and save it each month.

budget percentages dave ramsey

Financial Independence/Retire Early (FIRE) plan

If your goal is to be financially independent and retire early, the FIRE plan states that you should be as frugal as possible, saving every penny you can. For example, you should live off one spouse’s income and save the other spouse’s entire income if you’re married. If you’re single, make sure you have no debts and live as frugally as you can so you can save as much as possible each month. 

The definition of a frugal life may differ by person, though. Overall, don’t buy luxury or unnecessary items. Get the basics, make sure you and your family have what you need, but focus most of your funds on saving for the future and your financial independence. 

How to automate your savings

Setting up automatic savings is easy. If you have direct deposit with your employer, you can likely set it up, so a portion of your check goes straight to your savings account versus the entire check going to your checking account.

If you don’t have direct deposit, you can set up automatic transfers within your bank account. You choose the date and amount, and the bank does the rest for you!

How to save money if your salary is small

Saving money if you have a small salary may feel impossible, but small, consistent changes can make it a lot easier to save money. 

1. Meal plan

Plan your meals around the current sales or coupons you have. Try to have a meatless day or two throughout the week, and make your meals last for a couple of days, including lunches. The more meals you have planned, the less likely you will run through the drive-thru on busy days, saving you even more money.

2. Find cheap or free entertainment

Follow blogs or influencers in your area on social media to find the best cheap or free entertainment ideas. There are plenty of options for adults and kids, making it easy to keep the family happy without spending money.

3. Cancel unnecessary subscriptions

Don’t pay for subscriptions or memberships you don’t use. Gym memberships, unnecessary streaming services, or VIP subscriptions to online stores all add up. Instead, cancel what you don’t need and save the money instead.

4. Set attainable goals

You know your salary and capabilities to save. Don’t set lofty goals you can’t achieve. They may look good on paper, but they put more stress on you and make you feel less than when you don’t reach them. 

Final thoughts on saving money each month

Learning how to save money from your salary every month is essential. It’s not as hard as it seems, and once you get into the habit, you’ll see that you don’t even have to think about it anymore. 

The earlier and more often you can save, the more money you will have. As you create your plans to save money, give yourself grace, expect mistakes, and be willing to make changes to ensure the process goes as planned.

Samantha Hawrylack

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