Rather than waiting for the next paycheck, it is important to begin saving money now to make it easier to adjust your spending habits and save for your future.
What Portion of Your Salary Should You Save
While personal finance varies, a general rule of thumb suggests allocating 50% for living expenses, 30% for lifestyle expenses, and 20% for savings from your take-home pay. Establishing a savings plan tailored to your needs is the most important aspect of reaching your financial goals.
If you are not saving from your salary, aiming for 20% might be difficult until you adjust other spending areas. You may use Mint's calculator to help. Try reducing your expenses by 1% monthly while boosting savings by 1% for a few months.
Tips on How to Save Money Frugally
If you have been working for a while, these tips can help you save money from your salary regardless of your income:
1. Budgeting Before Paychecks
Decide which budgeting method works best for you before you even get paid-whether it is using a notebook, a budgeting app, or a spreadsheet. Make sure to include payments like Roth contributions, savings deposits, and 401k through your employer before payday. Focus on saving money and covering essential needs like housing, transportation, and food costs first.
2. Setting Up Direct Deposits
Make money-saving journeys easier by setting up automatic transfers from your checking account to your savings or investment accounts by talking to your payroll administrator about splitting your direct deposits into two bank accounts.
3. Tracking Your Spending
One reason why budgeting fails is not tracking spending accurately. We might think we spend one amount on groceries, but it's more. Tracking spending helps you understand where your salary goes so you can find areas to cut back and prioritize.
4. Reducing Costs on Three Major Expenses
Cutting housing, food, and transportation costs can free up extra cash from your salary. Consider refinancing your mortgage for a lower interest rate to save money if you own a home, plan budgeted meals to lower grocery expenses, try carpooling or purchasing monthly travel passes instead of daily or weekly ones, or downgrading your vehicle if you own one to reduce transportation costs.
5. Tweaking Utility Usages
Simple changes can help reduce utility costs, such as checking for unused appliances being plugged in even when unused. As weather changes, utility bills may fluctuate. Try reducing utility usage by limiting sunlight entering your home before using the air conditioner, consider using a fan instead of lowering the thermostat, and switch to LED bulbs, using over 75% less energy than incandescent ones.
6. Making Inconvenient Access to Your Money
When your money is less readily accessible, you are less likely to spend it immediately. Consider putting your savings in a separate bank account you can access when needed. It's even better to avoid having a debit card or checks for that account!
7. Setting Up Online Shopping Roadblocks
Online retailers have made spending money incredibly easy, especially with one-click buy options. To avoid impulse buying, refrain from saving your credit card information and create barriers to purchasing items online if it's been a problem for you.
8. Getting Creative with Low-Budget Cost Entertainment
You can save money in entertainment by looking for cheaper subscription options instead of having multiple subscriptions like Amazon Prime, cable, Netflix, Hulu, Pandora, and Spotify. Try outdoor activities like hikes or camping, and check for free museum days in your city. Socializing does not have to be costly either-consider hosting game nights or potluck dinners instead of going to restaurants.
9. Paying Yourself First
Paying yourself first is not about treating yourself to luxuries at the moment but saving for more important needs, like a health emergency, starting a family, buying a home, or retirement that your future self will thank you for.
