Have you always thought luxuries are not meant for salary earners? Well, that is not entirely true, and neither is it false. It is just a matter of wisdom and perspective. What am I saying?
The author of the international bestseller Rich Dad Poor Dad, Robert Kiyosaki, once said something; Attaining financial security is not by how much you earn but by how much you keep. When we have more money, we spend more. This phenomenon is termed ‘lifestyle inflation. Our standard of living increases along with our income. You may continue to YOLO but also restrict your capacity to amass wealth simultaneously.
Budgeting money from your paycheck takes a lot of commitment and self-discipline. However, this post will cover how much money you should set aside each month from your salary and the habits that make your budget plans most effective.
10 Budgeting Practices for Salary Earners in 2023
First of all,
Make a monthly budget plan.
A budget’s primary goals are tracking your spending and maintaining financial management. By separating your costs into essential areas, create a monthly budget plan and follow it. As a result, you will have more funds to keep from your paycheck each month since the budget will help you avoid overspending.
You can save money from your monthly salary by cutting spending in these areas.
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Bolt rides
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Data plans
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Junk foods
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Entertainment
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Electricity Bills
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Food takeouts
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Credit card usage
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Alcohol and weed
What does an ideal budget look like?
Budgets could be relative based on specific situations. But a typical monthly wage should be allocated as follows:
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50% for living expenses.
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30% for lifestyle expenses.
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20% for savings and investments.
You need to adjust the rules when setting up a savings plan to achieve your short- and long-term financial objectives. For example, consider reducing your living expense budget to 40% rather than 50%. If you think cutting it to 40% would be too severe, think about cutting it by 1% instead and growing your savings by 1% each month. Such a strategy necessitates self-control and meticulous calculations, but it will unquestionably get you where you want to be regarding your financial objectives.
Debt must be avoided.
Pay off your existing debts first to avoid falling into a debt trap. The goal is to save money and earn interest on it. So, unless you have a compelling reason, avoid incurring new debt.
Save your pay raises or bonuses.
Using a raise, incentive, or bonus to reward yourself whenever you get one is tempting. There is such a thing as lifestyle creep! Isn’t that right? You can spend less just because you make more! Please resist the urge to spend the extra money and instead put it into savings.
Make your savings automatic.
As soon as you get your paycheck, put at least 20% of it into a savings or investment account. This process is recommended to be automated to generate interest in investments and avoid missing them through a systematic investment plan.
Unnecessary subscriptions should be cancelled.
People frequently pay membership dues even if they never use the services. You should avoid doing this because it adds to your monthly expenses.
There will be no credit cards or personal loans.
Despite the ease with which credit cards and personal loans are available, avoid using them. Both of these approaches result in steadily increasing debt, and you will eventually lose control over your monthly expenses.
Avoid making expensive purchases.
Young people frequently want to shop online, eat out, go to the movies, and buy new clothes. But are these outlays necessary? Set a limit on these pleasures based on your income. The standard recommended maximum for spending on fun and pleasure is 15% of your income. At all costs, avoid exceeding this limit.
Purchase in bulk.
It is advised to buy in bulk the items you require regular and have a long shelf life. It saves money by purchasing in bulk and reduces the frequency of store visits. As a result, impulsive purchases and movement are reduced.
Make it difficult to access your money.
Spending becomes more complicated when your money is less accessible, i.e. not in liquid form. The harder it is to get your money, the less likely you will spend it.
Take good care of yourself.
Don’t jeopardize your health. It is preferable to take care of your health in advance than to lose all of your savings to sickness. After all, health is the greatest form of wealth.
Follow these tips for saving money from your monthly salary to make your life more financially secure.
However, the best budgeting practices for salary earners might not be complete without having the mastery of salary negotiation. If you have yet to understand how much you are worth in the job market click here to download our salary negotiation guide.