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How to use your salary effectively

5 ways to make effective use of your salary

When it comes to the subject of money, spending is a lot easier than earning. For salary earners with just one stream of income, it is even more important that they spend cautiously. For salary earners, there could be a sense of financial freedom. The financial freedom that it gives can help you fulfill many of those dreams, both big and small, that you have nurtured for long but this can only happen when you spend right.

Living the flashy lifestyle as a salary earner might not be feasible and even if it seems feasible at first, it could prove to be unsustainable. Planning and discipline are essential ingredients in reaching financial goals. Usually, people subscribe to the school of thought that as your salary increases, your expenditure should also increase significantly. So we have people who move from comfortable houses that are affordable to high end houses just because there is an increase in salary. The other house did not suddenly become uncomfortable but the urge to move to a more expensive environment needed to be satisfied. In economics, the insatiable nature of human beings is usually referred to; the quest for more never ends.  

The biggest challenge for most salary earners is sticking to the monthly plan as it directly affects other projected plans for the month. For some, having the discipline to even create a monthly plan is where the problem starts from.

Here are some tips on how to make the best use of your salary

Create a monthly plan/budget:

A budget is a financial plan for a defined period. Your budget should be done on a monthly basis and adjusted to meet your increasing or reducing requirements. A budget should contain every income you get (basic salary and allowances) and then be allocated to different areas. Example: Budget should contain the estimated value to be spent on Food, clothing, housing, hangout, transportation, data, emergency and miscellaneous. Note that the budget changes from person to person. If you spend a lot of time on the internet then the amount for data allocation monthly would be significantly higher than that of a person who does not.

Also, if you are mobile and do carpooling, the amount spent on transportation would vary from that of a person who does not do carpooling.
Create your budget/monthly plan to suit your needs and lifestyle pattern.

Create room for emergencies and minor splurges:

The reason why most budgets and monthly plans do not work is because they are very stringent and rigid. Flexibility in creating a budget is key if it will be stuck to. You need to take reconnaissance of your discipline level and implement it in your monthly plans and budgets. Emergencies such as health and the likes should have a place in your budget. Also, splurges such as eating your favorite comfort food on a bad day should be put into the budget. You cannot predict how good or bad some days may be and on such days you might just want to curl up in your favorite pajamas, in front of the television, watching your favorite movie and having some comfort food or even taking yourself to an exotic restaurant or taking friends for drinks. However this works for you, you must take reconnaissance of this and implement it in your monthly plan else it will never be stuck to.

Do not spend before you earn:

Do you know those people who come around your office with lots of goodies for you to buy? Avoid them. They always tell you that you can pay whenever you want, but we all know that it’s a sham. As soon as your payday approaches, they come around the office and start smiling. They may even use statements like “I just came to say Hi”. All those are marketing strategies aimed at causing you discomfort so that the debt you owe to them would be at the top of your mind. The worst is when these people are actual colleagues. Do not buy things from your colleagues without comparing prices with the market relative to the comfort that purchasing from them brings.

Also, do not feel pressurized to buy something just because you feel that you might not see it when you need it. When you need it, you will see it if you search well. That colleague is not running away. That item you intend to purchase has not finished in the market and it probably won’t between now and when it is actually on your budget. Expenditure like this may seem insignificant until you actually take a look at your bank statement at the end of the month or do a recap of all your expenditure. It would surprise you how true the statement “Tiny drops of water make a mighty ocean” is.


Create a scale of preference. You either have this or you have that. Create a scale that works for you based on your lifestyle. Your lifestyle determines the things that are most important to you. What works for A will most likely not work for B. The things that top your priority list should be given the utmost attention. For instance, the priority list for a single man will defer from that of a married man. While a married man has to think of His wife and children, a single man just has to cater for His needs and probably that of His immediate family (Parents and siblings). A single man can even choose to share an apartment with His friend and split the bill or even still stay with His parents while a married man has to provide the necessities (shelter, food and clothing) and meet the needs of His family. Your expenditure should be made based on your scale of preference. Each dime you spend reduces the money in your bank account and you must never forget that.

Have an expenditure journal:

Have a journal where you record your daily expenditure at the end of each day. An expenditure journal will not only help keep you disciplined it will also help you recognize your spending patterns, know where to cut down and how to adjust your monthly budget/monthly plan to suit the patterns that you have observed in your lifestyle. Tracking of expenditure is the best way to stay accountable financially so that you do not keep living from salary to salary and barely surviving. If you can manage your income properly then you can fulfill your dreams.

Making conscious efforts to make the best use of your salary is a step closer to achieving your financial dreams. If you fail to plan, you plan to fail. Therefore, it is essential that you plan your expenditure per time.

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