Managing your money wisely can come in all forms. It can include how you set aside money for investments, debt, savings, or paying for large purchases. It doesn't have to be complicated if you use some tried and true methods that don't require you to have a degree in finance. It could be as simple as reducing the urge to impulse shop out of boredom. From balancing "want" vs. "need" to investing early, here are 14 answers to the question, "What are your best tips for spending your salary wisely?"
How to Spend Your Salary Wisely
Recognize When Something Is a "Need" vs. a "Want"
One of the best tips I can provide for spending your salary wisely is to recognize when something is a need versus a want. Needs are things you genuinely require for your life to function on a basic level—food, housing, transportation, etc. Wants are things that make life more comfortable and enjoyable—takeout meals, new technology, and entertainment subscriptions. By prioritizing needs over wants, you can ensure that your salary is going towards the most important things in life first.
Michael Fischer, Founder, Elite HRT
Use an App to Track Your Spending
Using apps that keep track of your spending is a great way to find out where you spend your money and then devise a plan that helps you control unnecessary spending. In tracking your expenditures, you will know exactly where you are spending your salary.
Once you know where your money goes, you will pinpoint the channels you deem needless or extravagant and plug them in. After you've reined in these expenses, you can divert this part of your salary into savings and investments, thus diversifying your paycheck wisely. Since these apps also give you several tips on managing your money, you can also use these inputs to plan your spending.
Riley Beam, Managing Attorney, Douglas R. Beam, P.A.
Befriend Financially Conscious People
Make a friend or find a mentor who enjoys discussing and practicing financial wellness. The expression "you'veyou are who you hang out with" can ring true for finances—if your friends are spending a lot of money, you may also find yourself in expensive situations that might not fit your financial goals. Attempt to add people into your life who share your values and goals regarding money.
Patricio Paucar, Co-Founder & Chief Customer Officer, Navi
Prepare an Income-Tracking System
Making an income and expense tracking system is the best approach to spending one's salary wisely. It isn't easy to save money when people spend money when they have cash on hand without proper budgeting.
So, make an income tracking system and deposit a certain percentage of funds directly to a separate savings account with a high-interest rate on savings. The income tracking system helps to analyze credit and income and motivates one to save money. It minimizes impulsive purchases and makes one aware to avoid unnecessary lifestyles (more than affordable).
Karen Cate Agustin, Business Analyst, Investors Club
Automate Your Finances
Automatically drafting your paycheck into different bank accounts can be an efficient way to streamline spending your salary. For example, you can set up your paycheck to automatically deposit a portion of your income into a savings account for a vacation or a home down payment.
This way, you'll be able to save for a big purchase without having to think about it. Additionally, you can use this method to automatically draft money into accounts designated for specific bills, such as rent and utilities, so you never miss a payment. By automating your finances, you can ensure that you're always on top of your expenses.
Kate Duske, Editor-in-Chief, Escape Room Data
Don't Make Impulse Buys
Implementing a waiting period when you want to buy a large-ticket item that isn't urgent is smart because it gives you time to assess if you can afford it. There are always priorities for spending, such as rent, utilities, and savings. Any big items that aren't urgent should come after these. Thinking before you buy, you can prioritize properly and see whether you can manage the cost.
Brian Munce, Managing Director, Gestalt Brand Lab
Try the 50/30/20 Rule
The 50/30/20 rule has been around for quite some time, which is witness to the effectiveness of this salary spending pattern. The structure is simple to remember and even easier to execute once you realize how much it helps you save in the long run.
Moreover, since it doesn't require you to give up on your wants, you can create the right balance in your life and your budget. So, if it is a wise financial pattern you're after, following the structure of 50% of your salary towards your needs, 30% towards your wants, and the remaining 20% (or more, if you can manage) towards your savings is how your expenditure should look.
Neil Platt, Director, Emerald Home Improvements
Audit Your Own Spending
Many people have a vice that they spend too much on. It's not always negative; it can be as simple as dining out often. Auditing your own spending to see what you drain money on is a smart way to identify areas for improvement.
If you're covering all your bills, putting away money for savings, and have enough left over for something you like to do, that's ideal. But if you want to spend wisely, then knowledge is power. Knowing what you spend too much on can help you ensure you're within your means.
Rachel Roff, Founder & CEO, Urban Skin Rx
Looking for cheaper alternatives is an excellent way to save money and spend wisely. Develop the habit of shopping around and comparing prices at different stores or online. For sure, you'll find a better deal by doing some research.
Moreover, give up buying the most advertised products, which are usually the most expensive. It's probably not because of their quality but their popularity and marketing. If you need to buy an item that you will only use once, consider renting or buying a used one. Buying used items, such as clothing or electronics, is a great way to allocate money more wisely.
You may find gently used items at thrift stores, garage sales, or online marketplaces like eBay or Facebook Marketplace. Looking for cheaper alternatives and developing the habit of spending wisely rather than on the spur of the moment makes us conscious buyers.
Nina Paczka, Community Manager, LiveCareer
Create a Budget and Keep Tightening
Everyone who draws a salary already knows what they need to do with it; the problem is sticking to this plan! The best way to begin is by first monitoring your spending habits and then drawing up a budget around them. It doesn't have to be strict; all you have to do is create one you know you can adhere to.
After achieving this, tighten the budget even further and try sticking to this new one for a couple of paychecks. As time goes on, you will have a spending plan that optimizes your monthly salary and helps you plan your long-term financial journey more effectively.
Brendan McGreevy, Head of Strategy, Affinda
Prioritize Credit Card Usage
Don't overuse your credit card even if you have a good salary. Debt can get quickly out of hand if you're charging a lot of purchases, even for relatively small things. Monitor your expenditure and the frequency of your credit use. If you're making a lot or a single large purchase, be careful not to charge more than you can comfortably pay off.
Remember, credit cards are not extra bank accounts, so you shouldn't use them as if they are. Even if you're making good money on the job, be practical with your spending, and don't overdo things just because you've got room on your card.
Max Ade, CEO, Pickleheads
Pay Your Bills Before Anything Else
Pay all your bills first. Before spending your paycheck, make sure you've covered everything due before your next one. This includes setting aside whatever portion you need for rent or a mortgage payment.
Everything in your day-to-day life that you budget for, from your salary—things like food, entertainment, and savings—should be decided on after you pay your essential bills. If you always pay those first, you'll clearly know what is left.
Carrie Shaltz Haslup, Founder & CEO, Tabeeze
Get Insurance
Having the right insurance will help protect your hard earned money in case of an emergency or unexpected event. The best way to make sure you're covered is to do your research, figure out what types of insurance are available, and shop around for the best rates.
Also, look into ways to save on premiums. For example, many companies offer discounts if you bundle multiple policies together. In the end, having the right insurance can give you peace of mind knowing that your money is protected.
Yusuf Shurbaji, Co-Founder & Managing Partner, Prismfly
I cannot emphasize enough the value of saving and investing your money early. Even if it's only a small amount each month, establishing a pattern of investing can help you build wealth with compounding interest.
Additionally, taking advantage of employer-sponsored retirement accounts is wise—you'll benefit from the tax advantages they offer. Last, diversify your investments—that means a mix of stocks, bonds, and cash in order to balance your portfolio. By following these tips, you'll be well on your way to spending your salary wisely and securely building a financial future for yourself.
Ryan Delk, CEO, Primer
In what ways have you spent your salary wisely? Leave a comment to share what methods have worked for you.