Do you have a hard time figuring out how to save money from your salary?
It is painful, especially if you’ve been living paycheck to paycheck.
But it doesn’t have to be that way. With the methods below, you can learn how to improve the way you manage your finances and increase the amount of money you save from your salary.
Regardless of how much money you make, it is possible to save money from a low salary too. You may need to change your mindset about your personal finances, but it can be done.
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Table of Contents
15 Ways to Save Money From Your Salary
Keep in mind that everyone’s financial situation is different, so some of these methods may not apply to your situation. But by using a combination of these methods, you’ll find ways to save more money from your salary.
1. Track Your Expenses
Without understanding where your money is going, you can’t find opportunities to save money. And just by merely tracking all of your spending, you may find you are spending much more than you realize in specific categories.
You can either start tracking your expenditures going forward or use your bank and credit card statements to evaluate past transactions. If you use cash regularly, it may be challenging to track past spending.
To track your expenses, use a notebook, Excel or Google Sheets spreadsheet, or a budget planner. You can also use a free tool like Personal Capital to see all of your accounts in one place and track your net worth.
Write down every expense you have. It also helps to categorize each transaction. If you are writing your expenses down, group the items under each category. If you use a spreadsheet, you can have separate lists for each category or use a single list that you can sort or filter to accomplish this.
This exercise alone can be an eye-opening experience. But using it along with some of the strategies below will help guide you to save more money from your salary.
2. Eliminate Unnecessary Expenses
Now that you have all of your expenses listed out, you need to evaluate each category and determine which costs are required.
Are you paying for a gym membership you no longer use? Do you have subscriptions to several streaming services? Do you have a habit of eating out more than you should? Are you getting subscription boxes delivered every other day?
Without realizing it, it is easy for these expenses to multiply and cause a significant drain on your finances.
You can also use a tool like Trim to help you with identifying forgotten or unwanted subscriptions. Trim will analyze your transactions and identify recurring charges. If you see a recurring expense that you no longer use or want, you can ask Trim to cancel it for you.
Diverting the cost of these unnecessary expenses to savings can make a significant impact on meeting your financial goals.
3. Reduce Living Expenses
After you’ve reduced unnecessary expenses, it is time to find savings opportunities in your living expenses. I’m going to break down living expenses into four categories: housing, food, transportation, and everything else.
Housing is likely your most significant living expense. Whether you rent or own, there are opportunities for savings.
First of all, if you’re living in a house that is beyond your means, you should consider downsizing or moving to an area with a lower cost of living.
What do I mean by beyond your means?
Your housing expenses typically shouldn’t exceed 30% of your gross income. These expenses include rent or mortgage payments, utilities, renters or homeowner’s insurance, maintenance, and property taxes.
Refinancing your mortgage also provides an opportunity to save more money from your salary. Interest rates are at historic lows, and if you haven’t refinanced lately, you can likely save some money each month.
Insurance costs can also vary quite a bit with different providers, so it pays to shop around.
When you listed your expenses out, did it shock you how much you were spending on food?
If you have a habit of eating out a lot, it probably did.
In addition to preparing your own food, the way you grocery shop can help you save more money too.
Buying in bulk and using generic brands can result in significant savings. Just be careful when buying in bulk. Only purchase items in bulk that you’ll use before they expire. Don’t buy things for a good deal that you’ll end up throwing away later.
Using an app like Ibotta can help you save additional money at the grocery store. You can even earn cash back by just scanning your receipt. And while some of the savings may appear small, they can add up over time.
While transportation is an essential item for most people, there are several savings opportunities around it.
The highest transportation cost is obviously owning a vehicle. And just like a house, you shouldn’t be driving a car that is beyond your means.
Buying a slightly used car vs. a new car can save you thousands of dollars upfront. And keeping a car for several years instead of trading it in every few years can result in substantial savings.
According to Consumer Reports, the average age of cars on the road is over 11 years old. With proper maintenance, they can last even longer. However, if you find yourself spending a lot on car maintenance, you may want to consider finding a new (slightly used) car. Additionally, buying a fuel-efficient model can also save you hundreds of dollars each year in fuel expenses.
And just like homeowner’s insurance, shopping around for car insurance every few years can result in finding lower premiums.
Yes, everything else is a broad category. But it is hard to define because everyone has their own unique living expenses.
And, while some people may consider one thing an unnecessary expense, others may not.
This category includes things like cable, internet, cell phone, streaming services, and more.
A lot of times, when you signup for a new service, you’ll pay an introductory rate. But after a year or so, that rate ends and can go up significantly. Most of the time, if you call your provider, you can negotiate lower prices for your services, especially if you’ve been a long-term customer.
And remember the Trim app I discussed above?
Not only can Trim help you cancel unused subscriptions, but it can also help negotiate your cable, internet, phone, and even medical bills to save you money.
Additional Savings when Shopping
Dosh is excellent because it is set and forget. You link your cards, and when you shop with participating retailers, you automatically receive cash back.
Rakuten, formerly known as Ebates, requires you to either shop through the app or link specific offers to your card. There is also a browser extension that notifies you of available offers. However, even though it takes a little more effort, more participating retailers work with Rakuten.
Anywhere you can cut costs from your living expenses can help you save money from your salary.
4. Create Financial Goals
After you’ve tracked and reduced your expenses, it is time to create some financial goals.
These should be both short-term and long-term goals.
Example goals include: paying off student loans, planning for a vacation, saving for a downpayment for a house, and planning for retirement.
Your goals should be SMART goals. That means they are specific, measurable, attainable, relevant, and time-based.
For example, if you’re saving for a $30,000 downpayment, you’ll want to include the following in your goal:
- Specific – I need to save $30,000
- Measurable – I need to save X amount each month to reach $30,000 by my target date
- Attainable – Saving X amount per month is possible based on my other expenses
- Relevant – Saving this money will help me achieve the goal of buying a house
- Time-bound – I need to save it by a specific date
Having your goals structured this way helps you stay accountable. And having financial goals, in general, helps you set your financial priorities. This can help reduce financial stress, as well.
5. Create a Budget to Save From Your Salary
The first four steps outlined above prepare you for creating a budget.
Having a budget will help ensure you know where your money is going and will help prevent you from overspending.
There are several budgeting methods, including zero-based, envelope budgeting, 50/30/20 budget, and more traditional budgeting, where you simply track income and expenses and create goals for each category of spending.
There isn’t a single budgeting method that is right for everyone because everyone’s finances are different, and so are people’s attitudes towards money.
Additionally, there are several different budgeting apps to help you with the different types of budgeting.
For simplification, since we are talking about how to save money from your salary, the 50/30/20 budget is an ideal example.
Your take-home pay is divided into three buckets:
- 50% for your needs
- 30% for your wants
- 20% for your savings
If you have pre-tax retirement savings, you can also include that in your savings percentage.
And these percentages aren’t set in stone. They are an ideal starting point that you can adjust from as necessary.
But the 20% savings target is an ideal starting point that you should target to meet or exceed when you save money from your salary.
6. Utilize Tax-Advantaged Savings
Everyone’s tax situation is different, and whether you should use pre-tax or after-tax savings for retirement depends on several factors that are beyond the scope of this article.
However, if you are trying to save more money from your salary, using pre-tax savings in a Traditional IRA, 401(k), or Health Savings Account, allows you to save more money with less impact on your paycheck. By saving pre-tax dollars, you lower your effective tax rate.
You can use this calculator to estimate your tax savings.
7. Eliminate High-Interest Debt
If you have significant credit card debt, it is essential to eliminate it as soon as possible.
Working to establish an emergency fund and meeting minimum contributions to employer plans that have matching contributions is vital, but eliminating high-interest debt should be your next highest priority.
While this article is about saving money, understand that if you are saving money instead of eliminating that high-interest debt, you are likely losing money even if your money is earning interest.
A high-yield savings account will only earn 1-2% interest while the average credit card interest rate is around 18.5%. So paying off that debt gives you a higher return on your money than putting it in savings.
8. Use Separate Savings Accounts
Having separate savings accounts for your different savings goals helps you stick to your budget and achieve those goals. It also adds a barrier to minimize your use of the money in those accounts.
If you keep all of your money in one account, it is difficult to track your progress towards your individual goals. It also makes it more challenging to keep from dipping into money that is devoted to other goals.
It is a good idea to have savings accounts for each financial goal you may have, as well as savings accounts for less frequent bills. These bills include insurance payments, property tax bills, and setting aside money for home and auto maintenance.
9. Automate Your Savings
To help you save money from your salary, an effective method is to use direct deposit or automated transfers to move money into your savings accounts automatically.
Companies have different policies on how many accounts you can split the direct deposit of your paycheck into. If you can break your direct deposit into 5 or 10 accounts, this is an option to consider. Having to change your direct deposit can take a little more work than adjusting transfers set up at your bank, which may help you stick to your plan.
However, you also want the flexibility to make adjustments along the way as expenses and priorities change. Using automatic transfers set up to move money to your savings accounts as soon as your direct deposit arrives is an excellent option to automate your savings.
Not having to worry about remembering to transfer your money or spending the money before moving it makes managing your finances a lot easier.
10. Create an Emergency Fund
You may wonder why having an emergency fund is essential if you have all of this other savings going on.
Well, remember when we set those goals and established a budget? The goal is to keep those on track. Without an emergency fund, your plan can be knocked off course.
If you have an appliance die or have a costly medical emergency, you don’t want to have to dip into your other savings accounts and throw off meeting your other financial goals. You also don’t want to create additional debt to cover the unexpected expense.
Having three to six months’ worth of expenses saved in an emergency fund can help you make it through tough times and keep your financial plan and goals on track.
11. Save Raises and Bonuses to Save Money From Your Salary
If you’re like most people, you probably already know what you’re going to do with that next raise or bonus. And it probably has nothing to do with saving more.
If you live within your means, have reduced your expenses, are on track for your financial goals, have eliminated your high-interest debt, and have a budget that you are sticking to, you shouldn’t need any more money each month.
Now, I’m not saying you can’t treat yourself to a little something or give your fun money fund a little boost, but diverting a majority of your raise or bonus to your savings is an excellent way to save more money from your salary.
12. Try a Spend-Free Month
An excellent exercise to accelerate your savings efforts is to implement a spending freeze for yourself.
It is a bit drastic, kind of like living stingy, but you can learn a lot about yourself and what is important.
By having a spend-free month and not spending money on anything but the essentials, you may realize there are some things you can do without that you thought you needed before.
It is similar to avoiding sugar or soft drinks for a month. When you go back to it, you may find that it is too sweet, and you don’t care for it as much as you used to.
Having a spending freeze is a great way to trim your expenses. While you’ll likely return to most of your regular spending once it is over, it is also likely that you’ll spend less in some areas going forward. And those savings will add up over time.
13. Set Aside Money for Fun
Now that the spending freeze is out of the way, let’s lighten things up a bit.
Saving money isn’t exactly fun, and if taken to extremes, it can be depressing. You need to have some fun in your life, so be sure that you have money in your budget set aside for this.
Another analogy to diets, if you completely eliminate your favorite food from your diet, you’re likely to fail and overindulge on it when you have a chance. Similarly, if you eliminate something you love to do to save money, you may get frustrated and give up your saving strategy altogether.
Saving money is important, but so is enjoying life. Just don’t overdo either one.
14. Make Intentional Purchases
If you struggle with impulse shopping or just find yourself wanting that big shiny thing your neighbor just got, this one is for you.
The first method I suggest when you’re faced with this situation is to stop for a minute and think about your needs and wants. Is this item truly something you need now? How will you feel about this purchase 30 days from now?
Asking yourself these questions can help you make more intentional purchases and avoid regretting purchases later on.
But how does this help you save money from your salary?
Well, instead of asking yourself how you’ll feel about it in 30 days, put the purchase off for 30 days and see if you still want to buy it. Put the money for the purchase in your savings in the meantime.
If you realize after 30 days that you no longer want to make the purchase, you’ve saved the additional money. You may have heard this referred to as the 30-day rule.
15. Start a Side Hustle
While starting a side hustle or creating passive income streams doesn’t directly help you save money from your salary, it provides you additional cash flow to cover your expenses or add to your savings.
Additionally, having other income streams provides additional financial security that can help you through difficult economic times.
You can start a side hustle related to your current work or around a hobby. You could start a blog, create a course, or start a YouTube channel. It could also be something in the gig economy like driving for Uber or delivering food.
Anything that creates additional income and provides income diversity can help save money from your salary consistently.
Frequently Asked Questions on How to Save Money From Your Salary
How can I save money on a low income?
Saving money on a low income is the same principle as with other incomes. Live within your means and budget your money proportional to your salary to ensure you have enough allotted towards your savings.
How much should I save?
Around 20% of your take-home pay is a good target to save money from your salary. And at least half of that money should be going towards retirement. However, determining how much you should save is dependent on your financial goals and purchases you wish to make in the future.
The amount each person should save can vary widely from person to person.
What is the 30-day rule?
The 30-day rule is a method to help you control impulse spending. When you want to buy something, you put the money for it aside in a savings account for 30 days. If you still want it after those 30 days, go ahead and purchase it. Otherwise, you’ve saved that money for future needs.
How much of your salary should you save each month?
An ideal target is to save 20% of your take-home pay each month. If you can do this consistently while meeting your other financial obligations, you should be well prepared for any financial hurdles you may face.
How can I save a lot of money in a month?
If you need to save a lot of money in a month, try a no-spend month. For the entire month, only spend money on the bare essentials. Not only will you save a good amount of money, but it can also help instill better spending habits over time.
What is the 50/30/20 budget rule?
With the 50/30/20 budget, you devote 50% of your take-home pay to your needs (housing, food, transportation), 30% to your wants (entertainment, eating out, etc.), and 20% towards your savings.
These numbers are excellent targets for a person new to budgeting and can be adjusted over time as they grow a better understanding of their finances.
What is the best way to save money?
The best way to save money is by paying yourself first. This means that you put your savings on autopilot by using direct deposit or automated bank transfers to move money out of your primary spending account before you even see it.
Summary of How to Save Money From Your Salary
As you can see, there are several ways to save more money from your salary. And saving money is important to provide you financial stability and comfort of mind.
You need to remember that it doesn’t matter what other people have. Don’t try to keep up with the Joneses.
Establish financial goals based on what you want out of life and ensure you save money from your salary to meet those needs.
I hope the methods outlined above to save money from your salary were helpful and help improve your financial situation.