Saving money can be a challenge, especially when you’re working with a fixed monthly income. However, it’s important to put some money aside for the future, whether that’s for emergencies, retirement, or just to have a little extra cushion. Here are five tips for saving money from your monthly income:
Monitor your Financial Activity
Once you get your very first salary, it is a good idea to monitor your financial activity so that you know what you have coming in and going out. You could feel enticed to overspend, especially if you just love to spend.
Essentially, you need to be aware of how much is going into your bank on a monthly basis. Then, be aware of your monthly expenditures and classify them as the changeable amount and set amount.
For the changeable amount, you can have purchases listed that will not be the same on a monthly basis, like going out to eat. For your set amount, this will be used for essential items such as monthly bills, groceries, or rent/mortgage.
Develop a Monthly Budget
Once you have figured your monthly expenditures, you should put emphasis on those you can avoid in the future so that the money can be saved. An example of this can be seen if you move to a new home and it needs to be furnished. You will have extra money each month if you rent the furnishings over time rather than paying a huge lump sum all at once.
You should now be able to figure out your monthly amount that gets saved.
Usually, you should be able to save around 30% or 35% of your monthly salary. By saving over 30% you can have even more saved. If you are unable to reach a minimum of 30%, then you need to adjust your expenses and cut out what you can live without.
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Get Your Debts Paid Off
With a budget establishing your expenses, you can set aside a certain percent to go towards any debt you may have. You can add extra to the monthly payments by adding a higher percent until they are paid off.
Establish a Fund for Emergencies
Now that you have a certain amount of savings going towards your debt, it is important that you have a fund for emergencies. You should contribute at least 5% – 6% to the emergency fund. This amount needs to be untouched unless you have an emergency situation come up. It will also come in handy if you experience financial hardship.
Establish a Savings Plan
Now that you have expenditures deducted, debt paid, and an ample amount in your fund for emergencies, any amount that is left over should be kept in your savings account. Do not feel tempted to utilize your savings for emergencies due to it being a higher percentage of your monthly income. Instead, use your emergency funds.
Make Smart Investments
You should start investing now so that by the time you retire, you´ll have a nice amount to live on. This is also an easy option if you feel like the other methods listed are too difficult to maintain. You can find many investment websites online where you can create an investment account.
Saving money from your monthly income takes a little bit of effort and discipline, but it’s worth it in the long run. By following these tips, you can make small changes that will add up to significant savings over time.