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Statistics say most people spend more money when they have more money. As income goes up, the standard of living of a person also rises. The ‘wants’ stealthily transform into ‘needs’, and items that once used to be luxuries morph into necessities. This mindset poses a problem, a big problem. You might go on ‘enjoying’ your life in your own chosen fashion, but you’re also limiting your ability to build wealth concurrently. And if you’re living beyond your means, you’re inviting big financial trouble.
Rising income also alters a person’s attitude. Today, a 6-month old phone is considered outdated, and Olas and Ubers of the world have taken over the humble and economical public transport. These are just a few examples that prove that we are victims of lifestyle inflation. This is why you must save money from your salary, and this should become a habit.
The truth is, saving money from your salary requires a lot of discipline and sincerity. In this article, we’ll talk about how to save money from salary every month, how much to save from your salary and where to invest. Read on.
How Much of Your Salary Should You Save Every Month?
When it comes to how much to save from your salary every month, your income is the most important factor because, to a certain extent, you’re limited by your income. When saving money from your monthly income, your focus should not be on how much you earn but on how much you save.
The general rule of thumb that you can strive for with your monthly salary is 50% for living expenses, 30% for lifestyle expenses, and 20% for savings.
Setting up a savings plan that works to meet your short-term and long-term financial goals needs tweaking the rules. Instead of spending 50% on living expenses, consider trimming it to 40%. If reducing it to 40% seems like a drastic move, consider reducing it by 1% and increasing your savings by 1% every month. Such an approach requires discipline and careful calculations, but it will definitely take you where you want to go in terms of your financial goals.
How To Save Money From Salary Every Month?
In order to have a better life ahead, saving money from your salary is a must today. When we do not have a proper plan, saving money can be difficult. Here are 15 ideas on how to save money from salary every month which will help you in the long run.
- Make a monthly budget plan
- Cut down on your monthly expenses
- Save & invest in the right savings tool
- Say NO to debt
- Save your salary increases or bonuses
- Pay your EMIs on time to avoid penalty fees
- Automate your savings
- Cancel unnecessary subscription
- No credit cards or personal loans
- Avoid Late Fees
- Avoid making fancy purchases
- Buy in bulk
- Make access to your cash difficult
- Low-cost entertainment ideas
- Take care of yourself
Make a monthly budget plan
Saving money is all about keeping track of where your money is going and controlling your expenses. Make a monthly budget plan by dividing your expenses into major categories and stick to it. The budget will help you avoid overspending, and that means you will have more money to save from your salary every month.
Cut down on your monthly expenses
You cannot do without the following, but you can definitely find ways to
- lower the expenses.
- Mobile recharges
- Smart online shopping
- Prudent grocery shopping
- Entertainment expenses
- Electricity bill
- Outside food orders
- credit card spending
- Drinking & smoking expenses
Reducing costs in these areas will help you save money from salary every month.
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Say NO to debt
Pay your exesting debts first and avoid getting into debt trap.The idea is to save and earn interest on it. So, don’t take on new debt unless you have a good enough reason.
Save your salary increases or bonuses
Anytime you get a raise, incentive or bonus, it’s tempting to use it to reward yourself. Lifestyle creep is a real thing! Isn’t it? Just because you make more doesn’t mean you have to spend more! Fight the temptation and put the extra money straight into savings.
Pay your EMIs on time to avoid penalty fees
If you have an ongoing loan or credit card payments, make sure you don’t fail to make the monthly repayments. Missed or delayed payments mean late fees or penalties, which can take a significant amount from your salary and harm your saving potential. So, avoid late payments; consider setting up automatic payments to be taken out from your bank account every month.
Automate your savings
At least 20% of your salary should be transferred to a savings or investing account as soon as it is received. It is advised to automate this process in order to generate interest on investments and prevent missing them through a systematic investment plan.
Cancel unnecessary subscription
People frequently sign up for services they don’t actually need. For instance, regardless of whether they utilize Hotstar or not, many individuals pay a premium subscription fee solely to watch IPL. Many times, people continue to pay membership dues even if they never use the services. You should refrain from doing this as it is an extra burden on your monthly expenses.
No credit cards or personal loans
Despite the fact that credit cards and personal loans are easily available, avoid taking them. Both of these approaches lead to steadily increasing debt, and eventually you won’t have any control over your monthly expenditures. As much as you can, use UPI because there are no transaction costs associated with any payments made using it.
Avoid Late Fees
Late fees on credit cards are an unnecessary expense generally caused due to a lack of systematic planning. Get an app that can remind you or automatically make the payment if you frequently forget to make payments.
Know the ways to earn money digitally
Avoid making fancy purchases
Young people frequently desire to shop online, eat outside, see a movie, and buy new clothing. But are these expenses necessary? These are discretionary expenses and it is quite doable to live without overindulging in these pleasures. Depending on your income, set a limit on these pleasures. The standard recommended maximum for fun and pleasure spending is 15% of your income. At all costs, be sure not to exceed this limit.
Buy in bulk
It is recommended that the things you need regularly and have a long shelf life should be bought in bulk. It not only saves money because of larger quantities but also lessens the frequency of store visits. This results in less spending on impulsive purchases and travel.
Make access to your cash difficult
When your money is less open, i.e. not in liquid form, you will see that spending becomes a little difficult. The more difficult it is to access your money, the less likely you are to spend it.
Low-cost entertainment ideas
Another area where you might be able to cut costs is entertainment. With so many subscription services available, like Amazon Prime, Cable, Netflix, you might be able to slash your movie bills. Instead of spending money, think about engaging in outdoor activities like hiking or camping. Additionally, socializing should not be expensive. Instead of meeting at restaurants, consider hosting a house party or potluck dinner.
Take care of yourself
Don’t compromise on your health. It is better to take care of your health by yourself in advance than to lose all your savings by falling ill later.
Follow these ideas on how to save money from salary every month and make your life financially secure.
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Investment options to save money from salary every month
Depending on your financial goals, you must invest your money so that you are able to save and invest for better returns. Here are a few Investment options to save money from salary every month.
A mutual fund scheme is a shared fund that pools money from multiple investors and invests the collected corpus in shares of listed companies, government bonds, corporate bonds, short-term money-market instruments, or a combination of these investments. A mutual fund carries less risk when done through SIPs and managed carefully. It gives you the benefit of investing in markets without putting your money at too much risk.
Bank fixed deposit
Most people choose fixed deposit investments over mutual funds or stocks since it is one of the safest options. In a fixed deposit, you put a lump sum in your bank for a fixed period of time at an agreed rate of interest. At the end of the tenure, you receive the amount you have invested together with the interest. These schemes are offered by banks and post offices.
A Recurring Deposit is a special kind of term deposit offered by Indian banks. In this kind of investment, people with regular incomes deposit a fixed amount of money every month into their recurring deposit account and earn good returns on their investment.
Want to know about the best savings plan for yourself?
Employees’ Provident Fund, or EPF, and Public Provident Fund, or PPF, are the two forms of provident funds popular in India. EPF is automatically deducted from the salary of the salaried class individuals by their employees and deposited into each person’s individual EPF account. The EPF account is maintained with the EPF department, which is overseen by the Government of India. A salaried employee contributes roughly 12% to their EPF. The employer is also required to make an equal contribution of 12% to the EPF account. Any ordinary Indian citizen (salaried or non-salaried) can invest in PPF. A minimum amount of Rs 500 and maximum up to Rs 1.5 lakh is deposited in PPF (Public Provident Fund) per year.
Unit Linked Insurance Plan
Unit Linked Insurance Plan (ULIP) is a combination of investment and insurance. It offers money growth as well as life cover. A portion of your investment is put into life insurance and the rest of it is invested into debt, or equity, or both depending on your long-term financial goals.
Another investment option is Chit Funds. You can make small monthly contributions to a chit scheme, for a fixed tenure, of 2-3 years. At the end of the tenure you can withdraw your money and earn good returns of 10% to 12% p.a.. A chit can be used to meet any unforeseen expenditure. It can also be used to meet planned expenditure. It is the only financial product that allows you to save and borrow. The rate of return generated is much higher than what is offered by banks. Secondly, a backup fund in a chit fund scheme ensures quick liquidity, which means you can withdraw the money any time during an emergency. For safe and secure investment, use a digital chit fund app like The Money Club.
The Money Club is a digital chit fund platform founded by ex IIT, INSEAD, and UCLA alums. This AI-driven chit fund platform has revolutionized the way chit funds are managed in India with the use of cutting-edge technology. The Money Club uses technology to create trustworthy networks across India so that people may save more, borrow money at cheap interest rates, and invest money wisely. The Money Club is a useful investing tool to double your funds with an average ROI of 25% p.a. It has created more than 46,000 groups/clubs since its establishment and has more than 2.59 lakh registered users.
Save a small amount from your salary and invest in chit fund
A smart individual is one who diversifies his risk portfolio. You should not invest your entire surplus or disposable money in a single financial instrument. Investments must be dispersed among a variety of financial instruments, including bank deposits, chits, stocks, mutual funds, and insurance.
How much you save from your salary and where you put it will determine how successful you have been in keeping the inflation monster from stealing your money. So, follow our 6 tips on how to save money from salary every month and beat the impact of inflation.