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How To Save Money From Your Salary Every Month Step By Step

Saving money can be a challenging task for people of all ages, no matter how much you’re earning you still seem to not have enough, but how do you begin saving money from your salary?

To save money from your salary every month you need to create and stick to a budget plan that allows you to cover your expenses, your wants, and enough to save and invest, like the 50-30-20 rule or the 75-15-10 rule.

But there’s more…

You see having a budget in place is only one of the fundamental areas you need to consider when saving money.

This is because you either need to find a way to increase your income or cut out unnecessary expenses to have enough disposable income for you to enjoy.

The video below will go through 7 frugal living tips to help you get started with saving an extra $200+ each month easily, take a look…

Frugal living tip number 6, is the most cost-effective hack you can take action on right now, and save up to $1,000/year.

You can try all the methods in the world to increase your income, but if you don’t know how to save money, then you’ll be in more financial struggle longer than you plan to.

Again this is a core component you need to pay attention to if you want to achieve financial independence, and you can find out all you need to know in this free ebook here.

So that’s why this post will go through everything you need to know about how to save money from your salary every month in a step by step format that you can start using right now to achieve your financial goals.

That’s not all…

As you’ll also be able to see how having even a small salary you can still comfortably manage to save an extra $200-$400 a month comfortably with the techniques being used in this post.

Why Do People Struggle To Save Money From Their Salary?

Why Do People Struggle To Save Money From Their Salary

As of right now, the common issues people face when saving money from their salary are down to either not having enough income to cover their expenses or inflating their lifestyle according to the salary they earn.

This is especially an issue for people ages 35-64 because they tend to have a much higher income bracket than younger ages.

Look…

It’s important to establish where you are financially and determine which expenses are necessary compared to the other expenses you have which are not.

If you don’t, then you’ll always be just scraping by with barely any money left over after covering your expenses.

Once you manage to control your overall spending habits, then you can begin to make a plan of action that can help you retire early, and you can find out more about saving for retirement in this post.

TOP TIP:
Create a list of which expenses you need, like housing costs, insurance and groceries etc and create a list of expenses you want such as entertainment or materialistic items, then work out which unnecessary expenses you want to cut out first.

How Much Of Your Salary Should You Save Every Month?

The amount of money you save will always be down to the income you earn and this is why your focus should be down to saving a portion of your salary first, but how much is that exactly?

You should aim to save at least 20% of your income after taxes before using it to cover your expenses, so if your earn £2,000 a month after tax then you should save at least £400 available to cover any debt to pay off along with investing for the future.

But wait…

you may be reading that thinking you’re not earning anywhere near that or you earning way more.

In that case, take a look at the table below for the average salary earnt by age along with the bottom 10% of earned income and the top 10% of high-income earners.

Table Of Average Salary Income By Age: 

AgeBottom 10% Income By Age (£)Average Income By Age (£)Top 10% Income By Age (£)
16-17£0£10,910£0
18-21£10,906£17,284 £26,208
22-29£16,850 £24,600 £43,094
30-39£18,681 £30,865 £61,058
40-49£18,949 £33,477 £73,236
50-59£18,275 £31,358 £68,901
60+£17,305 £27,508 £59,691
The average income earnt by age before taxes.

As you can see these are the average salaries earnt of different age ranges from 16 to 60+ but these range from the lowest income earners to the highest income earners across the UK.

To work out how much should be saved each month from their salaries then taxes need to be applied to see the net income of each age group.

The table below shows the average salary earned by age along with the bottom 10% of earned income and the top 10% of high-income earners (after applying taxes).

Table Of Average Net Income After Salary By Age:   

AgeBottom 10% Income By Age (£)Average Income By Age (£)Top 10% Income By Age (£)
16-17£0£10,209 £0
18-21£10,205 £14,724 £20,437
22-29£14,448 £19,401 £31,238
30-39£15,616 £23,412 £42,274
40-49£15,789 £25,092 £48,970
50-59£15,360 £23,728 £46,585
60+£14,738 £21,264 £41,517
The average income earnt by age after taxes.

As we can see, all the average salary income after taxes, then we can no use these to estimate how much each person from each age group should save each month by age.

The table below shows the average amount of money that should be saved each month by net income earned by age along with the bottom 10% of net income and top 10% of net income earners (after applying taxes)

Table Of Average Net Income Should Be Saved Each Month From Each Age Group:   

AgeBottom 10% Income Saved By Age (£/month)Average Income Saved By Age (£/month)Top 10% Income Saved By Age (£/month)
16-17£0£170.15£0
18-21£170.08 £245.4 £340.61
22-29£240.8 £323.35 £520.63
30-39£260.26 £390.2 £704.56
40-49£263.15 £418.2 £816.16
50-59£256 £395.46 £776.41
60+£245.63 £354.4 £691.95
The average income that is saved each month by age after taxes.

As you can see above the table shows the amount that people should be saving after their income is taxed along with their standard pension contributions (5% used as an example).

That’s not all…

The lowest net salary income should be saving at least £170 a month from £10,205 and this is based on saving at least 20% of your income for yourself first.

After you save a portion of your salary each month, you can then begin investing this extra money to help build your wealth faster.

Now, index funds and mutual funds are commonly suggested, especially for beginners, if you want to find out more about the benefits of mutual funds you can find out more in this post here.

TOP TIP:
If you can afford to at least save 20% of your net salary income this may be down to you having too many unnecessary expenses which you need to prioritise first before increasing your salary even more.

How To Save Money From Your Salary

How To Save Money From Your Salary

Although there are many ways you can save money and increase your income, there is a 6 step plan you can follow that will help you save more money, pay off debt and increase your income faster.

But where do you begin with saving money from your salary?

To save money from your salary every month, you need to prioritise a budget that works for you to help cut out unnecessary expenses first, then pay off high-interest debt and then use it to save and invest your money, such as the 50,30,20 rule or the 75,15,10 rule to budget.

Now there are many steps you can take to start saving a lot more money from your salary, and here is a step by step approach you should follow: 

  1. Make A Monthly Budget Plan
  2. Cut Down On Your Monthly Expenses
  3. Make Sure You Pay Off Your Credit Cards & Loans First
  4. Save & Invest Your Money In The Right Tools
  5. Don’t Take On Unnecessary Debt
  6. Save Any Increases Or Bonuses In Your Salary

1)- Make A Monthly Budget Plan

As mentioned before having a monthly budget plan is the most important factor in begin saving more money, this is because you’re allocating your income to specific areas needed.

The most common approach is the 50/30/20 rule which is split up so you can use 50% of your monthly net income to cover your “needs” such as mortgage, groceries, bills and insurance etc.

In addition, the 30% will go to your “wants” like entertainment and materialistic aspects of your life followed by the remaining 20% going towards “savings and investments” (which is crucial for financial independence

That’s not all… 

This budget can be harder as you get older and take on responsibilities, which is where the 75/15/10 rule is more efficient.

Which would mean 75% of your income goes towards all expenses, along with 15% or 10% being allocated specifically for “savings and investments” of course you allocate more in this budget for savings but you have the majority of your income to cover your expenses.

To find out all you need to know about making an effective budget that works for your financial situation, you can look at these 8 easy steps you can follow in this post here.

TOP TIP:
Choose a budget that fits your current financial circumstances, these budgets are used as a guide to help you understand if you overspending or are on track to achieving your financial goals.

2)- Cut Down On Your Monthly Expenses

After choosing a budget that works for you, now is the time to allocate your income accordingly to meet specific areas of your budget.

For example, if your budget is 75/15/10 and you’re allocating 90% of your income to cover your expenses, then you need to find a way to reduce your expenses by 15% and in most cases, this is down to the bills you pay to cover entertainment or your car insurance.

Look…

You’ll be surprised that more than 60% of people have no idea how much they are spending and therefore run the risk of overspending their income.

In most cases, people have too many entertainment subscripts, like Netflix, NowTv, Disney+ etc (this all adds up) along with an expensive car that only adds more costs to your bills.

TOP TIP:
Make a list of every expense you have and decide between a “must have” (in order to live) and “want to have” (for entertainment) then cut out what’s necessary to fit your budget.

3)- Make Sure You Pay Off Your Credit Cards & Loans First

Now that you have a budget in place, along with cutting out the unnecessary expenses from it, now you can begin saving more money.

But there’s more to this…

You see before focussing on saving and investing your money, you need to pay off any high-interest debt first because you could be paying high interest which is costing you extra money your saving.

The longer you are in debt the more unnecessary spending your doing.

TOP TIP:
When paying off any debt, focus on paying off the small debts first and work your way up to the higher debt, this way you can save more money to pay off more debt much quicker.

4)- Save & Invest Your Money In The Right Tools

After paying off your debt you now, have your extra money available which allows you to save what you need and then invest the rest of it in the right tools to build your wealth.

Some common methods could easily be investing in stocks, funds or ETF and you could also open a retirement account and begin investing in a tax-free account.

A good example is Freetrade.io as they have many benefits which make it easy to start investing in fractional shares today, you can find out more about Freetrade.io here and get a free share worth between £3 and £200.

Either way, you can use your extra money to invest into “assets”, not “liabilities” (don’t fall into this trap of just spending whatever money you have spare).

TOP TIP:
You could use the extra money you have leftover to max out your pension with your employer this way your employer will contribute more to your pension each month as well as yourself.

5)- Don’t Take On Unnecessary Debt

At this point, you’ll be in a fairly comfortable position with your finances and the worst thing you can do is take on unnecessary debt.

Look…

This is where people think because they have extra money they can start getting some materialistic items on finance like a new phone or car for example.

While on your path to financial independence, it’s important to avoid any form of unnecessary debt.

TOP TIP:
Any extra money you have available set up automatic payments to your savings account or pay off your mortgage to give you the illusion that you don’t have enough to even consider taking on more debt.

6)- Save Any Increases Or Bonuses In Your Salary

As you work depending on the company you work for and the specific role you work in, then you may be getting a salary increase as the years go by or bonuses.

It’s important that with the extra money you have you immediately save it and allocate it to where you need it first, or where you think it may be useful in the near future.

TOP TIP:
To reach your financial goals quicker you can invest the difference or use the difference to pay off your mortgage quicker, either way, both options will increase your disposable income over time.

How Much Money Should You Have In Your Savings Account?

How Much Money Should You Have In Your Savings Account

The amount of money you save is all down to your income along with your general cost of living every month.

As a result, once you determine how much you spend on average each month then the amount you have saved up will be much clearer.

That’s not all…

You also need to focus on specific savings goals among what you need to save money for.

These are commonly split into:

  1. Have an Emergency Fund in Place
  2. Save At Least 6-12 Months’ Worth of Expenses

1)- Have an Emergency Fund in Place

This is the first thing you need to have in place before paying off any debt or even covering your general expenses.

Without having an emergency fund in place you’re likely to take out unnecessary debt just to cover what you need.

So you must at least have $1,000 saved up for this, which sadly majority of people don’t have saved up and very few have up to $5,000 saved.

2)- Save At Least 6-12 Months’ Worth of Expenses

If your spending is around $2,000 a month then you need to make sure you keep 6X to 12X of this amount saved up.

This would mean you have an extra $12,000 to $24,000 in your savings account alongside your emergency fund.

So after you saved the amount you need to cover these two areas, then you can use whatever money is left over to pay off debt, your mortgage, or even invest your money.

Hang On A Moment…

It’s clear saving money is important and should be your priority the moment you start working alongside keeping your budget.

So make sure your savings goals align with your current financial situation and stick to a budget that will help you get closer to your financial independence.

By following these steps on how to save money from your salary every month, you will build the foundation you need to take control of your future.

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