We always love to earn more money. Well, a person never gets satisfied with the amount of money that he/she is earning. But here, we will consider earning below INR 15,000 as a small salary. But some people earn irregular salaries every month. While one month they earn a lot, another month the salary might not be too much. In such cases, it becomes a responsibility to save money. So, in this article, we will read about tips to save money from small salary.
There are many rules which people follow for saving money. One of the most famous rules is the 50/30/20 rule. Once you start saving money, people will tell you to follow this rule. Though this rule is highly useful, it is not effective for everyone. Why? We will explain it in some time.
Apart from this, there are various plans, schemes, and insurance too. Investing money is good, but it is not possible to maintain it if your salary is uncertain.
Smart Ways To Save Money From Small Salary
Here are some of the most useful tips that will help you to save money even if you are having a small income. Follow these tips if you want to save money.
1. Set Your Financial Goals
So, now we know that we cannot apply the 50/30/20 rule everywhere. How can we save money then? The first step that you need to take for saving money is by setting your financial goals.
A human being needs some reason or aims to do a certain thing. Even when you are saving money, you need some reason which will encourage you to keep going. By setting goals, you will be able to find your reasons for saving money.
One of the easiest methods of setting financial goals is by writing them all in a paper. Write down all your financial goals in a paper and then sort them out. You have to sort out your goals in 3 parts, i.e., short-term goals, long-term goals, and retirement goals.
Below you will find an explanation for each part.
I. Short-Term Goals
Short-term goals are those goals that you can fulfill within a year. These goals can be like buying a laptop, a new phone, or any similar thing for which you need to save money for at least a year.
It is wise to have short-term goals as they help you in staying focused. Once you start achieving these goals, it becomes easier for you to stay focused.
Think about that one dream vacation that you want to go with your friends. At present, you do not have any money for the vacation. Start saving money for that vacation from now.
Within a year, you will find yourself achieving that goal. It is always wise to give short-term goals as a priority as they make the path easier for you.
What path? The path to saving money. It is human psychology that when a person achieves his/her present goal, then he/she becomes more focused. Use this determination to work towards your next goal. State out the financial goals that you want to achieve at present and work towards it.
II. Long-Term Goals
Long-term goals are the goals for which you need to save money for a few years. It is also known as the decade-goals. Here, you can include buying your dream house, car, land, and things for which you need to save for at least 8-10 years. These goals are known as long-term goals.
Why are long-term goals important? Because these goals include things that we need for our future. Let’s say you are in a company which also provides you with a house. But, you cannot live in this house forever. After you retire, you have to leave your house.
If you have your own house, then it won’t be a problem. Here, buying a house is your long-term goal. You cannot simply buy a home by saving for a year or two.
You need to save for at least 10 years for having enough money to pay the house’s down-payment. A normal 2BHK flat will cost you around 80 lakhs and if you are planning to buy a flat, then you need to start saving now.
But, there are instances when a person does not want to save money anymore. Why does this happen? The common reason for this is that the person has run out of his/her short-term goals.
The short-term goals keep a person motivated to continue saving money. Only after doing so, a person can focus on achieving his/her long-term goals.
III. Retirement Goals
These are the goals that a person needs to set for having a secure retirement. After retiring, the only source of income is the pension money. But, it is not possible to fully live on pension money. For a secure retirement, a person should avail EPF or PPF facilities.
It would help the employee during the time of retirement. Even if your company does not provide you with EPF facilities, you can put your money in PPF.
PPF is completely safe as it is a government initiative and will help you a lot. You can open your PPF account and put INR 500 every month. This particular account even provides with nice interest rates.
Moreover, your money is safe in this investment. If you want to have a secure future after retirement, it is better to start planning from now.
2. How To Plan Budget?
If you are getting a low income, then the first thing that you have to do is make a budget for your salary. Note down all the things that you need to survive for an entire month.
Here, you only have to mention the essential things. Things like groceries, rents, bills and similar items which will help you to survive the month.
After you have written all the essentials, list down the approximate money for each item. Calculate the total and match it with your salary. If it exceeds your salary, you have to cut down your expenses on most things. Make sure that the amount should not exceed 40-50% of your salary.
If you are getting confused as to where you can cut down your expenses, then state out your priorities. Mark out the things without which it would become difficult for you to survive the month. The priority should always be the rent for the house you are living in.
After that comes the bills that you need to pay and the groceries. If you have any debts or loans, then they come after this in the priority list. Once you start ranking your list by priority, you will get to know where you need to spend money. After doing that, start cutting down your expenses on useless things.
Do not add any exclusive items in your list. Avoid adding things like entertainment services or dining out or clubbing. Those things are not essential and hit the rock bottom in the priority list. Yes, entertainment is useful but it is not something without which you cannot survive. You can survive the entire month without partying with friends.
But, you need to pay your rent, otherwise, it will become difficult for you to live in the city. While you are ranking the priorities, ask yourself “If I do not spend money on this thing, then will I go to the streets?” If the answer is “NO” then cut down the expenses from that item.
Sorting out your priorities will help you think clearly about the areas you need to spend money. It will help you to know where spending money is a necessity.
If you are a person who has an uncertain salary, then write down the least salary that you get each month. If that salary manages everything in your priority list, then you are good to go. Make sure that your salary always meets the budget of your priority list.
By doing so, you will get to know the least amount that you need for surviving. After knowing that, you will be able to earn more money and then save it. We will discuss this later.
3. Cash Envelope Method
Once you have made your budget list, you need to sort out your money as per the essential needs. Most people think that keeping the whole amount in the bank and dividing it mentally will work.
But, it doesn’t work that way. There are instances when people think that they will not harm the budget by spending a few bucks. By doing this, you are ruining your budget plan and will soon end your whole salary.
One of the most effective methods that have worked every time is the cash envelope system. In this method, you put the cash in different envelopes and label them as per the needs.
There will be a rent envelope, grocery envelope, and as such. By doing so, you will become aware of the amount of money you will spend on essential needs.
This will help you to prevent from spending them carelessly. It will even help you to know the exact amount which you will have after spending the essential money. After knowing the amount of the remaining money, you can proceed to plan on how to save the money.
Another method which you can use it by paying the bills in advance. Whenever you receive your pay-check, make sure that you pay the rent and the bills first. After that, clear off the monthly EMI for your loans and debt.
Take out the money for your groceries and then leave the remaining amount in your account. The more you delay in paying your bills, the more you will move forward on spending all your income. Hence, it is better to pay your bills immediately as you receive your pay-check.
4. Earning Extra Income
If you are having a small income and do have time to spare, then you can always go for some extra income. Try to do over-time to get a rise in your salary. You can even opt for internships in online platforms.
The best thing about doing online internships is that you do not have to go to any office for work. You have to do your work from the comfort of your home and at the end of the month, you get your stipend.
Moreover, there is even the option of working for nearby cafes or malls on weekends. Most of the shops do need an extra helping hand, and you can work during the weekends and get a few bucks for your work.
If you are a freelancer, then you can always work for extra money. Once you get to know the exact amount you need for your essentials, you can always try to work for extra money. Treat the least amount as your threshold amount.
Make sure that you cross the threshold amount every month. Once you start doing this, you would know how much you can work to earn a few extra bucks. Once you get your extra income, put that in your savings list and start your journey towards saving money.
With low income, it is difficult to divide the money and save every month. While some months you find it easy to save, others might not be so good. Hence, it is important to get some side hustle so that you would always get some money for saving.
5. Budget Planning Apps
If you are finding it difficult to maintain your budget, then it is better to look for a nice budget planning app. There are various apps available, which will help you in making your monthly budget.
Even if your salary is uncertain, these apps will help you out. They will plan out your whole budget and keep reminding you about your financial goals.
The budget planning apps look for the best ways in which you can not only fulfill your financial goals but even save money. These apps are free to use and you can even get recommendations and saving options from the apps too. But, if you are not a person who likes to use technology much, you can always create your budget.
There are various budget journals and binders which you can use to make your budget. These budget journals have everything printed in the pages. All you have to do is fill up the blanks and then your budget is ready. You can get a bit creative and use different colors for your savings, needs, and wants.
But, the important thing is to maintain the budget. After you finish creating your budget, make sure that you follow it. Even if you have a budget planning app, it won’t work unless you remain dedicated to saving money. Remain determined and you will start seeing your savings grow.
6. Go For Deals & Coupons
If you are getting a low income, then it becomes a task to save money wherever you can. Look out for deals whenever you want to buy something.
There are various apps on the internet that provide coupons and deals to the customers. If the customers use their link for shopping or booking, they get coupons and discounts as a reward. Use these coupons and save money on your next purchase.
You can see various payment or wallet apps that provide enormous discounts. Use such apps if you want to book your cab, room, or tickets. Moreover, these apps even provide discounts which are much more than the booking apps.
It is wise to use the payment apps if you want to make any bookings. Let’s say, you are going for a vacation and booking a room in a hotel. When you check the booking app, the price is around INR 700.
If you look at certain payment apps, you can find enormous discounts. Most of the payment apps provide INR 500 off on first booking from their site. If you book from the payment app, then you are saving 500 bucks.
Not only that, but these apps are also even linking up with food delivery apps and provide customers with greater discounts and offers.
Make complete usage of these apps and save your money in such places. Check out the apps while you are going for online grocery shopping, booking tickets, and as such. It is better to always look forward to offers and coupons before you start spending. Even if the payment apps are not providing discounts or offers, they do provide cash backs.
Most of the payment apps even provide cashback and coupons when you transfer money. With net banking at its peak, it is completely safe to use online payment apps. They are not only secure but are even a great source to save money if you use them wisely.
7. Use Simple Methods
You can always go for simple methods for saving money. You must open an RD or PPF account for saving your money. In such accounts, the least amount that you have to keep is INR 500. Commonly, a freelancer might not get a fixed amount of salary every month.
You can always keep more than 500 bucks in your account when you receive a higher payment. But, if you receive a low payment for a month, then keep only 500 bucks in the account. Meanwhile, start using a piggy bank in your house. Keep the coins in the piggy banks.
We often forget to use the coins and just shovel it in our pockets. Slowly, the coins start accumulating in the home. It is better to keep a small container where you can store your coins and use them regularly. Instead of using a note for paying your bus fare, carry some coins for your bus fare.
You will start to notice that slowly you can spend less on many items. There are instances when the shopkeepers give a toffee or candy instead of the coin.
Avoid taking the candy and insist on getting your change money. Every penny matters when you start saving. When you have a small income, then it is important to save every coin that you can. By doing this, you would be able to survive the entire month.
Keep that 500 bucks in the account and maintain a lean budget for the month. Try to survive the entire month by following your budget. When you get a raise in your income next, try to keep more than 500 bucks in the account and then follow the same routine.
8. Saving In Utility Bills
One of the areas where we spend the major amount of our salary is utility bills. These bills include water bills, electricity bills and as such. How can you save money in utility bills? One of the most common advice that you would get in this area is to unplug your devices when not using. This really works!
By doing so, you will be able to save tons of bucks. Start following this advice strictly. Make sure that all the electronic devices are unplugged when you are not using them. Turn off the tap when you are not using the water. Start taking these small steps and you will start seeing a huge difference in your utility bills.
Another thing which you can do is contact your utility services for offers. Most of the utility services have certain offers and discounts which most of the people don’t know of. Make sure that you contact your services and ask for any kind of offers or discounts that is available. Avail the discounts and make full use of it. Another method in which you can save money in your bills is by using online payment apps.
Instead of paying your bills in person, it is better to use online payment apps for doing so. Almost all the utility services now have online payment facilities.
The online payment apps even provide you with cash backs and discounts on your first payment. After that, the payment apps even provide you with various shopping coupons. You can use these coupons on your next shopping spree and save money.
If you are still using normal tube-lights, then switch to a more efficient lighting system. It is better to try CFL and LED lighting systems. They are energy-efficient and will decrease the electricity bills by a huge amount.
Apart from that, you can even look for other reliable forms of energy sources. One such energy source is the solar panel. Though it is a bit costly, it’s a one-time investment. You can start saving money for switching to solar energy and then install it in your home. It will help you in saving tons of money.
These tips help to save money on a low income.
Why 50/30/20 Savings Rule Is Not Suitable For Small Salary?
Before knowing the reasons, it is important to understand the 50/30/20 savings rule. As per this saving rule, a person should spend the first 50% of the salary on essential needs. The essential needs include rents, bills, groceries, and as such.
After doing this, the person should spend 30% of the salary on his/her wants. The “wants” categories include entertainment, movies, clubbing, and many more. Here, the person should keep in mind that spending should not be more than 30%. After this is over, the remaining 20% should be kept as savings.
The 50/30/20 rule divides the salary into 3 parts as per the needs and wants of the person. One should always save 20% of the salary. But, it is not possible to do so if your salary is uncertain or if you have a low income.
If you are having low income, then most of the salary will be spent on the needs of the person. After the “needs” parts are over, only a small part of the salary remains in the hand of the employee.
Sometimes, the employee does not get anything after spending the money on needs. Though some might question, how can a person spend the whole salary on needs? It can happen, especially if you are getting a low income.
If you are living in a metro city with an income of INR 10,000 or 15,000, then half of the salary will go towards rent. After paying for the rent and food, the person gets a small part of the salary. Now, with this small part, he/she has to use it for the whole month. In such cases, it becomes extremely difficult for a person to save money.
If a person is a freelancer or does a job that has an uncertain salary, then it would be difficult to save a month. Here, a person does not know how much he/she will get in a month. So, it becomes difficult for the person to maintain the flow of savings.
There are instances when a freelancer gets enough money to save for a month. But, the scenario changes, and then the next month, he/she has no money to save. In such cases, one cannot use the 50/30/20 savings rule as the salary is uncertain.
What If The Savings For Goals Exceed Income?
When you start making your “goal list” you will include tons of things. While some of the goals are useful and effective, most of the goals are not necessary. The next thing you see is the amount of savings for your goals starts exceeding beyond your salary. This will surely give you shock and you will get confused as to how you can solve this thing.
After observing this sudden hurdle, sit back and look at your list. Try and cut down your expenses from the savings. You can cut out most of the expenses from the short-term goals. Let’s say, one of your short-term goals is to buy a phone worthy of INR 70,000.
Now look at your salary and think whether the phone will fit into your budget from anywhere? If you start saving from the present month, will you be able to save that much amount in a year?
If the answer is no, then change the model of the phone. Try to look for a phone which will cost you less. Yes, it will be difficult to change your dream phone. But, technology changes every day. Within a few days, your dream phone will change and you will wish for buying the new model instead.
So, it is better to invest in a less expensive phone which will provide you with all the things that you want from it. Likewise, look for other ways in which you can cut down the expenses of your goal list.
Once you start sorting out your goal list by price, you will get to see a clearer path. This will help you in knowing the goals for which you should start working on. Though the ultimate aim is to achieve long-term goals, it is better to keep yourself accumulated with short-term goals as well. Keep giving yourself some short-term goals every year. This will help you in maintaining the consistency of saving money.
Frequently Asked Questions
1. What is the minimum amount that I need to transfer to my PPF account as my savings?
2. How can I save money with only INR 10,000 in my hand?
3. I am not able to make a proper budget for my small income. Help.
4. How can I get cash back from online shopping?
One can save money if he/she wants to. People say it is difficult to save money with low income and that they should wait till they get an appraisal. But, it would simply waste your time. It is important to start saving money as early as possible. We do not know when an emergency will hit us and during such times, the savings will help us through. If you have any debts, then make sure that you start repaying the debt amount within some days of your joining. By doing so, it will help you to avoid getting any fine for the amount. One can at least try to save 500 bucks every month. Though the amount is small, something is always better than nothing. So, it is better to start saving during the early days of your joining. Hope this article has helped you to save money from small salary.