Many individuals, especially young people, find it difficult to save their salary each month. This is because many people still do not know how to save money (from salary), which can be harmful in the short and long term. This article will share eight smart ways that you can follow to save your salary money to help you be financially free.
How To Save Money From Your Salary?
You need to know how to manage your salary money correctly as it is very important. It doesn’t matter if your salary is RM1,000, RM1,200, or so – if you’re smart and know how to save no matter how big or small it is, you can avoid financial problems. Here are ways to save your salary that you can try:
1. Formula to Manage and Save Salary Money
How should money be set aside when your salary comes? You can follow this salary management method using the 10-10-10-70 formula as follows.
- 10% – Savings
- 10% – Takaful
- 10% – Emergencies
- 70% – Expenditures/Monthly Commitments
Setting aside 10 percent for savings is the recommended amount, but it is even better if you save more. Even though 70 percent is for expenditures such as shopping, you should spend wisely. You can combine it with monthly commitments such as car debt, house rent or room rent, parental allowance, money for utility expenses, food, etc.
If this formula is to be followed, try to make a schedule of expenses every month. This is to ensure that your expenses can be tracked.
2. Store Money on Platforms Like ASB or Tabung Haji
The following way on how to save money (from salary) is to keep it in a safe place. You can try making Tabung Haji savings or ASB savings. In this way, not only can you save money, but it is an excellent way of investing because you will get annual dividends and bonus returns. Try to discipline yourself not to use the savings except for emergencies.
3. Limit Credit Card Use To Save Money
A credit card has many benefits but can be dangerous if it is misused, especially for some people who spend too way much. Statistics also show that many individuals are declared bankrupt for failing to manage their finances as they do not know how to use a credit card properly.
There are a lot of individuals who do not think of their financial status and simply spend. As a result, their debt increases, leading to failure to repay the debt on time. Make sure you limit using credit cards and only use it for certain expenses such as for petrol. This way, you can enjoy benefits offered by the card company.
A study by Research For Social Advancement Berhad (REFSA) found that 2.2 million households in Malaysia with an income of RM1,000 or less, and the majority of those who live in cities have bad financial habits of spending more than their income – 50 percent of them are credit card holders under 30.
4. Check Cost of Household Expenses
The next way on how to save money (from salary) is to reassess the cost of your household expenses. This is because household expenses are one of the main reasons why many cannot afford to save a small amount. Household expenses include rent rates, electricity and water bills, food, medical, and other related matters.
It would be best to control your household expenses so you do not spend more than 25 percent of your salary. If you live outside the Kuala Lumpur area, it may not be a problem. But for those who live in urban areas, especially Kuala Lumpur, your finances may be affected if your spending habits are not appropriately managed. You can change your lifestyle by spending moderately and sparingly.
5. Plan Your Spending To Save Money
Planning expenses carefully is one of the most helpful ways to save money. If you have always spent freely, you may find that your money runs out much faster than usual. For example, whenever you want to go to the supermarket to buy kitchen items, write down and list the things that need to be bought. This list will ensure you stay disciplined while shopping.
By planning expenses, you can avoid overspending. This strategy can also be applied to other costs and is not limited to spending on kitchen items only. You can use this strategy such as for the cost of car fuel, motor service, tolls and so on. When you start planning and tracking expenses, you will notice a significant difference, allowing you to save money every month.
6. Pay Attention To Small Expenses
For some people, spending money, such as buying coffee, does not have such a significant impact. You might think that spending RM15 on a cup of Starbucks every morning doesn’t make a substantial difference. But this habit will actually eat up your money without you realising it.
It seems small, but if you do the maths, you will see how much money you spend on expensive food or drinks. Due to this, you need to change and limit unnecessary expenses. You’ll be surprised at how much you can save by cutting back on excessive spending.
7. Avoid Eating Outside and Save Money
Eating at a restaurant every once in a while is not wrong. However, if possible, cook more at home and avoid eating out as it costs more. Okay, let’s make some guesses:
- Fried Rice: RM7.00
- Teh O Ice: RM2.50
The cost for each meal is in the price range of RM7 to RM10. Imagine if you have a wife and two children; this cost can be four times more expensive. Try to do the calculations yourself. Because of this, you need to control and limit the expenses of eating out and try to cook at home. Compared to the cost of cooking at home, which will probably only cost you RM100, you can probably prepare a complete meal for at least two to three days.
8. How To Save Money, Prioritise Needs
Prioritise your needs over wants because it can harm your financial position in the long run. Try to pay attention to these situations:
- “Wow, brand A has a discount of 40 percent; I should grab the opportunity to buy this shirt.”
- “This shirt is beautiful; I don’t have this colour yet. I can wear it during the party this weekend.”
You may have been in this situation before. Therefore, you must spend according to your needs and not your wants. If it is not well controlled, you may spend more than you can afford. However, how do you distinguish between wants and needs?
Needs are expenses that must be there to live your life well, such as paying for house rent, food, etc. However, your desires are expenses that are not necessary but can make your life comfortable such as going to the spa, buying new bags ,clothes and so on.
3 Formulas and Tips for Saving Up Money
There are many salary management formulas and saving tips that you can practice. However, this method depends entirely on each individual. For example, method A may not work for individual B, and method C may work for individual D. It is essential to choose the method that suits you.
1. Salary Management Formula 30 + 30 + 30 + 10
This formula includes dividing your salary into four parts which are 30 percent, 30 percent, 30 percent and 10 percent. For example, if your net salary is RM3,000, this RM3,000 is divided into RM900, RM900, RM900 and RM300. The first 30 percent is saved for the future, such as for educational savings, insurance/takaful protection, and investments.
The second 30 percent is for debts and expenses savings. For example, if you want to finance a house or car, make sure that the amount of debt is limited to only 30 percent of the salary. The third 30 percent includes other expenses such as food and drink, kitchen items, personal needs, rent, bills and other monthly expenses.
Meanwhile, another 10 percent can be used to give to parents, charity, gifts or pay zakat if there is enough. This is a good formula for you if you have just started working or do not have much commitment.
2. Salary Management Formula 20 + 50 + 30
The first 20 percent is used for the savings fund for this money-saving formula. You are encouraged to open a special savings account to save money for future use. Quickly set aside 20 percent of your paycheck directly into that savings account when your paycheck comes in.
If you are disciplined and don’t touch this fund except for emergencies, you will be able to see double returns. You can consider putting savings in an ASB account as it is a low-risk investment alternative. Saving money in ASB can help you achieve financial goals such as buying a house or a car; it is also one of the best and most profitable old age savings.
- Salary RM3000 x 0.2% = RM600 (put directly in savings account).
- RM600 per month x 12 months = RM7,200 per year.
50 percent is allocated to pay debts and fixed bills such as electricity, water, internet, telephone, etc. In other words, it only involves monthly fixed commitment payments such as personal, car/house, business loans and so on, not including credit card bills used for spending on dining out, entertainment, clothes, and others.
If you want to apply for a personal loan, make sure that the monthly debt payments, including existing commitments, do not exceed the 50 percent set amount.
Salary RM3,000 x 0.5% = RM1,500 (limit for commitment payments and monthly bills).
The remaining 30 percent is for living expenses such as kitchen items, transportation, entertainment and so on.
3. Salary Management Formula 90+10
This salary-saving formula is usually used by individuals who do not want to divide their salary into many things. For example, 90 percent is allocated for all expenses, including fixed expenses or variable expenses, including expenses for needs and wants.
This means that 90 percent of the salary is to pay debts, bills, food, drink, personal needs, entertainment, buying dream items, etc. The remaining 90 percent is divided into four parts representing four weeks – 30 percent, 20 percent, 20 percent and 20 percent.
For the first week, use 30 percent to pay fixed commitments such as debt, rent and bills. While for the other weeks, use the remaining 20 percent. This method is not a problem if you spend according to the allocation that has been set. The remaining 10 percent is specifically used for savings or investments.
How To Save Money on a Low Salary
Having a low salary should not prevent you from saving money. Here are ways to save money on a low salary.
Accurately Calculate Expenses
You are advised to record your expenses against your salary to help you monitor your financial situation more clearly. It can also help you plan and outline costs for the next month.
Buy Items in Wholesale
Even if you’re young, that doesn’t mean you can’t buy wholesale. Buy items in bulk because it saves money. For example, non-perishable items that you can always use, such as toothpaste, are usually offered at a lower price and are more economical in bundles or twin packs.
Bring Home-cooked Meals
You can also bring home-cooked meals to work. Cooking at home is more economical than eating out. In addition to saving money on expenses, you can also adopt a healthier diet.
Disciplined in Spending
Make sure you only buy things on your list. Avoid going to the store too often as you tend to buy unnecessary items such as snacks and soft drinks.
If you don’t have savings yet, it’s not too late to start now. Start with a small amount of savings and increase little by little. If you are looking for the best car insurance, visit the Qoala website for more info. Qoala is the best insurance platform in Malaysia, guaranteeing a safe, affordable and easy insurance buying process.