Ideas to Save Money from Your Income

Previously we have mention that saving is a must before investment because the money which has been used in investment shall not be disturbed in long term. The money in the saving named as Emergency Reserve shall be used only during emergency case and should cover your daily expenses for 3 months.

Function of Emergency Reserve

Let say Andrew is very concern on the investment as it’s highly return. He use most of his salary to do investment but didn’t plan to have a saving as the interest from the bank is low. One day, he meets an incident that requires $10k immediately, but he found out that he doesn’t have a saving which reserve for emergency use. He plan to sold the shares, but realized that the funds obtained will be less than the capital that he put in the investment after deducting the broker commission fees and actual share price. This making him losing money as investment only returns money in long term. From this case, we should realize the important of Emergency Reserve.

How to Save Money from Income?

From now on, we should record every daily expense at end of each day. This is important as we will know where our money are heading from pocket. You can create a spreadsheet to record every expense at the end of the day. You can make a comparison to view which category that you expense a lot. 

After deducting your fixed expenses from income, the remaining will be your “available budget” for your daily expense. Based on this available budget, you must reserve part of it as your saving first, let say 15%, while the other 85% will be served for your individual use. You may refer to pie chart as below. In other terms, you will act as financial minister that monitor how your budget is being allocated, since this is your money. The lesser you spend, the balance can be shifted to the “saving fractions” at end of the month. The 10% for entertainment is required as you need this money to release your stress. If you didn’t consider this 10% entertainment budget, you will lose control due to stress and eventually consume a lot from your hardly save money just to enjoy and release your stress.

Nowadays, there is lot of apps that can be downloaded to your phones, and I also using one of them. The apps can record the daily expenses and also set the budget that you have allocated in each category, so that you wouldn't exceed the budget.

Hopefully this article can give you some ideas on how to save more money and to control the way your money being used.