Do you have the habit of spending on frivolous purchases and end up regretting it later? 

Are you left with no money to spend by the end of every month?

Does it feel like that you can never save money from your modest salary? 

If you answer yes to any of these questions, you’re in the right place. The hardest part of saving money from your salary is just getting started. In this step-by-step guide, we list out simple but effective ways to start building your savings. Without further ado, let’s dive into the actionable steps. 

Step 1: Track your Monthly Expenses Religiously 

The first step to saving money is to track your inflow and outflow every month. Most salaried individuals do not monitor their expenses. They are content that they have a fixed paycheck every month and spend frivolously without any care. This is a cardinal sin, as it prevents you from keeping track of your finances.

Start by tracking your take-home pay. This is the amount available to you – after deducting taxes, insurance, and other deductions made by your employer. This is your monthly budget.

The next step is to track every expense you make in a month. Classify costs into two categories: fixed and variable. Include house rent, utility bills, basic groceries, transportation, and other essential spending under the fixed expense category. Other expenses, like eating out, takeaway, entertainment, shopping, etc. come under the variable expenses category.

#CreditMantri Tip: Use a mobile app to track your spending. Whenever you open a wallet or do an online transaction, make it a point to note the expense in your tracking app. Cross-check the app with your monthly bank statement to see if it matches.

Additional Reading: How Can I Save The Most Money In 2020? 

Step 2: Set a Monthly Savings Target 

Once you have a clear idea of your monthly expenses, the next step is to set a savings target to accomplish every month. Reorganize your budget – so that you limit unnecessary costs and avoid overspending.

Here’s a formula to help you decide on the amount to save every month. 

Savings = Take-home pay – (Regular Expenses + Variable Expenses)

#CreditMantri Tip: Personal finance planners recommend that an individual saves 10% to 15% of his/her monthly income. 

However, we recommend that you set a target of 30%. While this may seem challenging to achieve in the beginning, it can help you build a significant savings corpus in the long run. Having a savings fund that you can rely on is a must during these uncertain times.

Step 3: Figure out how to cut down Non-Essential Expenses 

Now that you have set a monthly savings target, the next step is figuring out how to achieve it. It's time to go back to your expenses chart. Look out for ways to reduce spending. Here are some tips to trim down non-essential spending:

  • Reduce your expenditure on restaurants and takeaways by committing to eating out/ordering food only once a week. Learn new recipes to try out at home.

  • Before going grocery shopping, make a list and stick to it. Avoid adding random items to your shopping cart, just because it looks tempting. 

  • When making online purchases, give yourself a cooling period before you check-out. Add the item to your shopping cart, but do not complete the purchase. Check after 24/48 hours to see if you still feel excited about the product. This helps you avoid splurging on spontaneous purchases and regretting it later on.

  • Look for ways to cut back on your fixed expenses like mobile plans, OTP video subscriptions. Cancel subscriptions that you don't use, or you can even consider switching to a cheaper plan.

These are just a few ideas on how you can cut down your non-essential spending. Discuss with your friends and family to find out other creative ways to reduce your spending so that you can start saving a significant sum every month.

Step 4: Start Saving for Specific Goals 

An easy way to motivate yourself while saving is to – set goals. Decide what you're saving for – a family vacation, a flagship mobile, your dream wedding, etc. Then, work out how much money you need for each goal and how long you plan to save.

Divide your goals into two categories: long-term and short-term goals. When it comes to long-term goals like a child's education or retirement, investing instead of merely saving will help you enjoy better returns. Some long-term investment products include mutual funds, insurance cum investment plans, PPF, etc. For short-term goals, make use of FDs, RDs to achieve them within a specific timeframe. 

#CreditMantri Tip: Set a small, achievable, and fun short-term goal. Something that you're really looking forward to – like an overseas vacation or a new designer dress. Achieving small goals and enjoying the rewards gives you a psychological boost and inculcates the habit of regular saving.  

Additional Reading: Step-by-step Guide to Investing in the Stock Market in India

Step 5: Make Savings Automatic 

Today, all banks offer automated transfers from your salary account to a savings bank account or recurring deposit. You can set various parameters like – when to transfer, how much. Using automated transfers, you can make sure that you save every month, irrespective of the other expenses. It's a great way to make savings a priority and practice the habit of saving before spending.

Step 6: Finally, Review your Goals and Budgets Periodically 

Saving is a regular activity. It's not something that you do once and forget. Make sure to check your progress and review your budget periodically, say once every six months, or when you receive a hike at work. This helps you identify and fix problems in your budget quickly.

Also, understanding how your money is spent and watching your savings grow gives you the adrenaline rush to hit your goals faster.


You may have a great job with a great paycheck. But, in today's challenging and uncertain job scenario, you cannot afford to be complacent. Building your savings today assures you of a secure and comfortable future tomorrow.

Don't fall into the trap of putting off saving for the future. Ideally, you should get started building your savings from the moment you receive your first paycheck. If not, the best time is to start now.

Don’t delay and use the tips listed in this article to save money from your salary and watch your savings grow!