Want to know the secret of how to save money from salary each month? It’s time to stop living paycheck to paycheck. Read on to know about the ways to save money on a tight budget.
Living from paycheck to paycheck is never a good idea. Saving money for retirement, for unexpected expenses, for investments, or even enjoying a special treat, like an exotic summer holiday in America, is something millions of people struggle to achieve.
However, if you do not take a precise and systematic approach to save money from salary, you will never achieve your goal. So, how to save money each month?
Many people put money aside in cash or a separate bank account now and then. However, they splurge on a new smartphone, a new dress, or a new large screen TV at the first whim.
Also, many people rely on whatever extra money they have left at the end of the month to save. Most of the time, nothing is left at the end of the month. So they move on, saying that they will save some money next month from their salary.
This is a vicious cycle that leads people towards the retirement age without a safe nesting fund they can rely on. Public pension systems are generally not enough to support the expenses for the elderly – who also require special care and medication.
What Is the Secret to Saving Money from Salary?
If you are wondering how to stop living paycheck to paycheck, we have a solution for you. Alignthoughts.com brings you some of the best ways to save money on a tight budget for each month.
First of all, it is a matter of discipline. You have to create a blueprint for saving money and stick to it. Every month, you need to go through all the steps you wrote down there, without exceptions.
Of course, in case of a real emergency, you will have to use some of the funds you’ve saved so far or skipped some steps in your savings plan.
But this is exactly why you are saving: so you can get over an unexpected expense without going into debt (taking a payday loan or maxing out a credit card).
Unfortunately, according to the most recent report on the Economic Well-Being of U.S. Households released by the Board of Governors of the Federal Reserve System:
- 40% of adults would not be able to cover a $400 unexpected expense with cash;
- 25% of adults do not have a retirement saving account or pension plan at all;
- 27% of adults skipped medical treatment due to cost;
- 27% of adults with a credit card only afford to pay the minimum on their bill.
These findings show that many people are either unable or unaware of how to save money from salary. Instead, they rely on loans, make no plans for the future, and even neglect their health.
So, what are some smart and effective ways to save money from salary? Here is a simple and easily applicable blueprint:
Tips To Save More Money From Your Salary
According to a new survey from CareerBuilder, nearly eight out of 10 workers (78%) live paycheck to paycheck. If you are one of them, read on to know how to save money.
1. Identify and Analyze Your Expenses
The first step in the process is to know exactly how much you spend every month. It is important to put down everything on this list. A regular person’s expenses usually fall within three categories:
- Fixed expenses: rent, insurances, pension plan, various subscription services (Netflix, TV, mobile phone, internet), car payments, fixed-interest loans, etc.;
- Variable expenses: credit card bill, groceries, clothes, entertainment;
- Occasional expenses: vacations, new gadgets, taxes, etc.
Once you know how much you spend every month, it is time to evaluate these expenses and see whether you can give up some of them. For example, take a look at all the subscription services you have. Some of them may not be necessary anymore. For others, you may negotiate better deals by choosing a single provider for all of them.
It is also a good idea to look at your insurance policies and see whether you can get all of them from the same insurer and enjoy discounts on your monthly premium. Even if it is not a large amount, it matters.
2. Calculate Your Monthly Budget
For most people, the salary is the only source of income. But many people make a little side money from occasionally investing small amounts at the stock exchange, on the Forex market, or in cryptocurrencies (like Bitcoin).
Their spouse and children may also make some money from a small side business on eBay or Etsy. However, it is important to make sure that you only add up the money you are sure of collecting every month. Occasional revenues, such as from a garage sale, should be treated as such and, as far as possible, transferred into a savings account.
3. Rethink Your Spending Habits
People who fail to save money from salaries do not have unusually high fixed expenses. In most cases, they fall victim to impulse buying. They see a cool gadget at a discounted price. They see a “buy 1 get 3” type of deal for a certain product and get it although they do not necessarily need that product.
This does not mean that you should not treat yourself every once in a while to a new dress, pair of shoes, etc. But when it comes to significant expenses (in the range of + $500), take a break and sleep on it.
They say that night is a good counselor. In the morning, you will realize that you don’t want or need that product. And thus, you’ve saved some money from your salary.
4. Find Ways to Reduce Your Recurring Expenses
You may not negotiate your rent or the monthly car payment, but you can find ways to pay less for basic utilities. For instance, consider ways to make your house more energy efficient to cut electricity bills for heating and cooling.
One way to do this is to fix cracks in your windows’ sealing and the flashing of the roof. You have no idea how much heating is lost through these seemingly tiny cracks. Consider installing a green roof (a layer of vegetation atop the roof) to keep your house cooler for those living in a hot climate.
Get rid of old appliances that use a lot of electricity. Do not keep the TV set running all the time to give you some background sound.
Also, consider whether you need to drive everywhere, or you can reach a specific destination by walking, cycling, or using car-sharing services like Uber or Lyft.
Final Thoughts On Ways To Save Money On A Tight Budget
Living paycheck to paycheck can be a problem during emergencies. Proper budgeting can surely help you improve your life. Therefore, make sure you track your payments and expenses regularly.
Extra Advice To Save More Money: Find Ways to Generate a Little Side Income
Starting a side business from home is easier than ever. You can turn your hobby into a lucrative activity and earn money while doing what you love. You don’t even have to create your website to sell your products or services.
Moreover, you can use websites for freelancers to find clients or open an online shop on large platforms such as Amazon or Etsy.
Besides these tips, do you have other specific ways in which you manage to save money from salary? How do you save money on a tight budget? Do you save money each month, or are you living paycheck to paycheck? Please share your ideas with us in the comments section!
Key Takeaways,
- Living from paycheck to paycheck is never a good idea. Saving money for retirement, for unexpected expenses, for investments are some of the things Americans and several others are struggling with.
- With not-so-good pension schemes, it is getting more than necessary to save for a rainy day.
- So how do you do that? How to save money from salary?
- Start by calculating your monthly expenses and make a budget.
- Identify and analyze your expenses.
- Find smart ways to reduce your expenses. Cut down unnecessary spendings that consume large chunks of your salary.
- Meanwhile, also focus on increasing your income. For starters, consider negotiating your salary.
- Learn the financial secrets of the rich and follow them religiously.
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