Whether this is your first job or you have finally decided to start saving, there are numerous ways you can save money from your salary. These are simple hacks that do not involve investing is risky investment tools. There are several methods you could use to know how to save money from salary.
Look at your offer letter
This is applicable if this is your first job. Look at your salary breakup to see what your take-home pay is. There are multiple components mentioned in your offer letter that will include additional benefits that are not monetary. So, before you start saving, you should know exactly how much you’re earning in hand, so as to make better saving decisions.
Download a budget app on your phone
There are many budgeting apps that allow you to enter all your expenses into the app into different categories. This will tell you how much of your salary goes into different categories. Apps also offer insights on areas you could cut down on expenses, and you could use that excess amount towards your savings.
Open a recurring deposit account
Once you start cutting down on your expenses, you will have a set amount every month. After a few months that amount will become clear to you, i.e. exactly how much you’re able to save each month. You can open a recurring deposit (RD) account to deposit this money in a separate account so you’re not tempted to use it. With an RD, a fixed amount as decided by you will be deducted automatically each month on the same date and saved separately. This deposit also earns interest on your savings. You could earn anywhere from 6% to 8% interest p.a. on a recurring deposit. So, you will get back more than what you save.
Opt for a food card
Many companies offer tax incentive benefits to their employees and food cards are one such benefit. Every year you are required to pay income tax on all types of income that you have earned. But if you apply for a company-offered food card, which is a prepaid card where a portion of your salary gets deposited into the card, this portion is completely tax free. You might not see the money directly into your account, but this is money that you’re not paying to the government as tax.
Automate payments so you don’t pay interest
Many of us lose money in ways by missing payments on credit card bills, utility bills, etc. Whenever you miss a payment, you will be charged a late payment fee. For instance, credit card late payments are usually Rs.500 or more for each missed payment. So, it is advisable to automate your recurring bills, so you never miss a payment and subsequently pay a penalty. This way, you will have more savings at the end of the month. You can set up an auto-debit facility conveniently through online banking.
At any given time, it is advisable to have an emergency fund that is at least 6 months of your salary. This cushion will give help you in times of financial emergencies.