Do you want to start saving money but your current lifestyle is eating up your entire salary each month?
Maybe you want to build up an emergency fund so that you can relax a bit knowing you can survive a financial hardship or unexpected expense.
Maybe you want to save money for a large expense like a downpayment for a house.
Or maybe you want to start saving more for your retirement so you can retire before 65 or just live it up in retirement years.
There are so many reasons to want to save money each month instead of spending it all.
But for many of us, saving for things like retirement or an emergency is no easy task.
We like our life as it is. And the thought of changing our current spending habits to save money can feel daunting.
I’ve been there.
Saving didn’t come naturally to me in my early earning years. And to this day, figuring out a way to live the life I want, while also saving money, is not always an easy task.
But I’m here to tell you that it is possible to make it easier to start working towards your savings goals. Even if it feels like you don’t have the money to save.
After a lot of trial and error, I’ve created a method that I use to save money.
I call it my Money Plan. And I want to share it with you so you can start meeting your savings goals.
Let’s start by looking at why creating a plan to save money helps you reach your savings goals.
Why You Need a Plan to Help You Save Money From Your Monthly Salary
To start saving money, you need to think about your money differently.
It’s that simple. Your money mindset simply needs to shift.
And to start your mindset shift, you need a system – a Money Plan.
When you create your very own Money Plan following the 5-steps below, you will start to feel your money mindset shift.
This shift happens because by creating your own Money Plan you will identify your money priorities (which includes your savings goals) so that you can align your money with those priorities.
And when you make savings a priority in your Money Plan, you will start to save the money you’ve always wanted to but thought you never could.
Let’s take a look at how a Money Plan changes your mindset.
How a Money Plan Changes Your Mindset so You Start Saving Money From Your Salary
Many people like to use a typical budget for this sort of thing, but I prefer to create a system that helps me see the big picture of my finances.
Over the years, I’ve used my own Money Plan to create my savings goals and align my money with my priorities, both present and future.
It has been a game-changer for me, and it finally got me saving some money each month. Now I’m so excited to be working towards my goals!
Here’s how creating your own Money Plan will shift your money mindset.
1. Saving Money Is No Longer An Afterthought
Oftentimes, saving is the thing that we do with our money that is left over after we pay our bills and fund our lifestyle (our wants). And because we wait to save only the money that is left over, we often don’t save at all.
In this plan, you think about and budget for your savings goals before your wants.
2. You Will Learn To Differentiate Between Your Wants And Your Needs
After going through the process of creating your Money Plan, you will have a firm grasp on what expenses of yours are actual needs versus simply nice to have (a want).
Those darn wants like to disguise themselves as a need, luring us to spend more money than we need to.
By going through these steps, you will know what those wants are in order to be able to make more intentional decisions on whether or not to have them as part of your life.
3. Money Decisions Will Be Made Intentionally
Creating a Money Plan that makes savings a priority will give you the big picture of your finances. You will begin to understand your expenses and spending habits and how they affect each other.
It will provide you with the framework you need to make intentional and confident money decisions that are right for you.
Being intentional with your money is one of those actions that will continuously reward you.
In a life where many things are out of our control, when we control how we use our money we will feel more in control of our lives. And that is a powerful feeling.
That is why personal finance is so exciting to me. It’s about being purposeful with every cent of your hard-earned money.
But what you do with that money is all up to you, and you alone.
With that said, I think it’s time to create your very own plan to help you start saving money.
How to Save Money From Your Monthly Salary with a Money Plan
There are five steps to create a plan to help you save money each month.
- Brainstorm and create a list of your savings goals
- Figure out your monthly salary
- Determine your bare-bones budget
- Allocate money to your savings goals
- Spend the remaining on your wants
If you execute these five steps, you will create a plan that balances your spending habits with your savings goals.
This method asks you to put your basic needs first, your savings goals second, and your wants third.
And when you think of your finances in this way, you will start to feel confident in your ability to meet your money goals. It will help you feel more financially stable, save for retirement, and save for a future purchase.
Let’s dive into the steps.
1. Brainstorm and Create a List of Your Savings Goals
This may seem like an odd place to start.
Shouldn’t we be figuring out much money we have to save before thinking about our savings goals?
It seems logical.
But I think it’s beneficial to think about your savings goals before you even dive into how much money you can save. This way you avoid shortchanging your savings goals. If you know you have a limited amount to save, you may not even consider trying to put money aside for some of your savings dreams.
Therefore, I want you to think about all of your savings dreams. If you could start saving for something what would it be?
Do you want to save for an emergency fund, your child’s college, a home remodeling project, and/ or fancy vacation?
Your savings goals are completely up to you.
When determining your savings goals list out the following:
- What do you want to save for?
- How much do you think it will it cost?
- When do you want to have all of the money saved for this?
- Is this savings goal a want or a need? Short term or long term?
Creating this list will help you later identify which savings goals you want to start working towards.
2. Determine Your Monthly Income
This is the easiest step.
Figure out how much money you take home each month, after taxes.
This is the amount of money you have to work with each month on your journey.
Easy peasy!
3. Determine Your Bare-bones Budget
When determining how to spend your money each month, start with figuring out how much you need for your basic living expenses.
If you don’t already track your expenses, now is the time to get out your bank and credit card statements and create your very own bare-bones budget.
A bare-bones budget is a stripped-down budget that only includes the essentials you need to survive. It will tell you exactly how much money you need to live off of each month.
Your bare-bones budget will include things such as
- Rent/Mortgage
- Groceries, including pet food
- Loan payments
- Utilities
- Insurance premiums
- Car Maintenance/Fuel/Transportation Costs
- Household goods
- Personal care
- Health care, including prescriptions
- Any other basic need you have
Don’t forget those pesky non-monthly essential bills such as insurance policies.
If you need help thinking of all of your essential expenses, check out this list of 100+ budget categories I put together.
Once you have your bare-bones budget, add all of the expenses up. This is the amount of money you need from your salary each month for your basic living expenses.
Now subtract the total expenses in your bare-bones budget from your monthly income. The resulting number will be the amount of money you can use to allocate to your savings goals and then your wants each month.
4. Allocate Money Towards Your Savings Goals
Now is the fun part.
You get to decide what you want to do with your remaining money.
Start by taking a look at the saving goals that you brainstormed and listed in step 1.
Take into consideration their priority, timeline, and feasibility and select a few savings goals to start working towards.
By thinking about your savings goals before your non-essential wants (step 5), you are making them a priority.
And this is the step where your money mindset starts to shift and you will start to save the money you’ve always wanted to.
You have made your savings a priority, something that is just as important as paying your bills.
This simple mindset shift is what you need to finally start saving some of your hard-earned money instead of spending it all.
And it is going to feel so damn good.
5. Spend Your Remaining Income On Your Wants
Now that your essential living expenses and savings priorities are taken care of, you are now free to spend the rest of your money on your wants, guilt-free.
Your wants would include things such as:
- Going out to eat
- Clothing that goes beyond your basic needs
- Spending Money
- Subscription services
- Alcohol
- Gym memberships
- Deciding to own a pet
- A bigger house than you need
- A fancier car than you need
What you spend the rest of your money on is completely up to you.
But because you already have your basic needs and savings goals are taken care of, spending on these wants won’t induce stress or guilt.
This is another magical side effect of this process. You have complete freedom to indulge in your wants while still meeting your savings goals.
Tips and Tricks To Start Saving Money From Your Monthly Salary
The beauty of this step by step way to approach your money is that it guides you to make savings a priority, to better understand your wants and your needs and provides the framework for you to make intentional money decisions.
But I won’t lie, you may get frustrated at times. And that is ok. The frustration will drive you to dig a little deeper to figure out what is truly important to you.
I’ve gone through quite a few ups and downs as I’ve implemented my own Money Plan over the years.
Here are a few things I’ve learned along that way that has helped stop me from throwing in the towel.
A Successful Savings Focused Money Plan takes Commitment
It’s one thing to lay out your plan on paper (or in a spreadsheet), but it’s a whole other animal to actually implement and commit to the plan.
Once you have your plan in place, make a commitment to yourself that you will follow it. Commit to making your savings goals a priority.
It may be a difficult mindset shift at first. It’s not easy to change our habits.
But after you start to experience how good it feels to use your money as a tool to help you meet your goals, it will get easier.
And this amazing feeling will continue to fuel your commitment.
To help me stay committed, I like to set some smaller savings goals along the way. That way I can use meeting those small savings goals as fuel to continue on my journey.
It’s not easy to stay committed so find something that works for you to continue to inspire you to work towards your goals.
Track Your Progress
Now that you have your plan, how do you actually make sure your spending and saving match that plan?
That’s where tracking your spending comes in.
You can track your spending by using budgeting software such as Mint, YNAB , or Every Dollar (I’m a YNAB believer), using a spreadsheet or a simple pen and paper.
It’s up to you how you want to assess how you are doing against your plan.
For me, a Money Plan and tracking my spending go hand-in-hand. I have found that if I don’t track my spending, then I’m nowhere near meeting my savings goals.
So after you create your Money Plan, figure out a way that you will assess your progress to help you stick to your plan.
Shit Happens – Goals change
Yes, you have to commit to your plan. But that doesn’t mean it will always go exactly as you have hoped.
Life is constantly in flux. And your wants and needs are constantly changing.
Give yourself permission to change your plan as needed.
Maybe an unexpected expense arises and you have to divert some of the money going towards your savings goals to cover the expense.
Don’t be afraid to change courses.
And more importantly, don’t beat yourself up if you can’t meet your savings goals for some reason or another. Shit happens. Let yourself off the hook.
If you adjust and adapt your plan in times of hardships, you’ll still be able to jump right back on the savings horse when you can.
Creating a Money Plan is a Balancing Act
You will likely go through these 5 steps to creating your Money Plan and at some point will say: “I give up! There is no way I have enough money to cover all of my basic needs and savings goals while still being able to enjoy my life. I’m going to go back to my old spending ways.”
While reaching this point is frustrating as hell, this is also the point where changes in your money mindset start to happen.
This is the time to remember to align your money with your priorities and take charge of your money.
Start to look at all of your spending and your savings goals and make the tough decisions on what things are truly important to you.
You may find that some things that you may have thought were important aren’t as important as saving for that campervan or for your retirement.
And when you whittle out those unimportant expenses and start spending on what will truly enhance your life, birds will start to sing.
For example, I find that I don’t spend as much on clothes and random household gadgets anymore. These are items that I’ve deem not as important to me as my saving goals.
But on the other hand, I haven’t cut back as much on going out to eat and taking vacations. This is because I’ve deemed these things as being just as important as my savings goals.
Going through this process has helped me identify the wants that aren’t as important to me as my savings goals are.
You May Not Be Able to Work Towards All of Your Savings Goals at Once. And That Is OK
This has been a hard reality for me to accept.
I started with a ton of savings goals: vacations, home renovations, retirement, a new car, etc. The list went on and on.
I ended up getting frustrated. Frustrated that I couldn’t work towards all of these goals at once and actually meet them anytime soon. I wanted to throw in the towel. What was the point of saving if I was never going to meet my savings goals?
And then it dawned on me.
I don’t have to save for all of these goals at once.
Maybe I could put off saving for that new kitchen for a few years while I save for the campervan that I’ve been dreaming of.
Prioritizing your savings goals is the lesson I learned here. Pick a few savings goals that are most important to you now and work towards them. Meet those goals and then move on to the next.
By using these wins, you can keep fueling your motivation to continue to save.
You Got This
Saving money from your salary each month is no easy task. Especially when you are so used to your current spending ways.
But with this 5 step process, you can make your very own Money Plan to help you finally save that money you’ve always wanted to.
When you follow your very own Money Plan, you will start to have the confidence you need to knock your money goals out of the park.
Go ahead. Think about all of those savings goals you want to achieve and use this new knowledge to shift your money mindset.
Get after it!
Download a free money template to create your Saving Money Plan.
