Author: Divyanshita Singh, Chartered Accountant
Financial Content Strategist | 5+ Years of Experience in Personal Finance, Loans, Taxation, and Legal Compliance
Introduction: Why Saving on a Low Salary Feels Impossible
If you’re earning ₹20,000 a month, saving might feel like a distant dream. After rent, groceries, bills, and the occasional treat, your wallet is already gasping for air. But here’s the truth: you don’t need to be rich to save money — you need the right system.
Whether you’re a student, a fresh graduate, or someone supporting a family, this guide will help you build saving habits that stick, even on a tight income.
1. Understand Where Your Money Is Going
Before you start saving, you must first track your expenses. Most people don’t realize where the leaks are.
Action Plan:
- Use a simple spreadsheet or mobile app (like Walnut, Goodbudget, or Moneyfy).
- Track every rupee you spend for one month.
- Categorize it: rent, groceries, transport, entertainment, etc.
Real-Life Example:
Anita, a receptionist earning ₹20,000/month, discovered she was spending ₹2,500 monthly on food delivery. After switching to homemade meals, she saved ₹1,800/month effortlessly.
2. Follow the 50/30/20 Rule (Modified for Low Income)
The 50/30/20 rule says:
- 50% of your income → Needs
- 30% → Wants
- 20% → Savings
But with ₹20,000/month, this needs tweaking. Here’s a practical breakdown:
| Category | Amount (₹) | Description |
|---|---|---|
| Needs | 11,000 | Rent, food, bills, transport |
| Wants | 3,000 | Entertainment, dining out |
| Savings | 6,000 | Emergency fund, SIP, insurance |
Even saving ₹2,000–₹3,000 monthly is a great start.
3. Prioritize an Emergency Fund (Before Everything Else)
If you don’t have at least ₹10,000–₹15,000 saved for emergencies, start here. Medical bills, phone repairs, or job loss can hit hard when you live paycheck to paycheck.
How to Start:
- Open a separate savings account.
- Automate ₹500–₹1000/month to it.
- Avoid withdrawing unless it’s a real emergency.
Tip: Use sweep-in fixed deposits for better returns with liquidity.
4. Eliminate or Minimize Debt Early
Debt is the biggest barrier to savings. Avoid credit card EMIs or personal loans unless necessary.
Action Plan:
- Avoid “Buy Now, Pay Later” traps.
- Pay off any existing debt before saving aggressively.
- Use the Debt Snowball Method — pay the smallest debt first to build momentum.
5. Automate Savings: Save First, Spend Later
Most people spend first and try to save what’s left (spoiler: there’s never anything left!).
Instead, automate savings as soon as your salary is credited.
Set up:
- ₹500/month to an emergency fund.
- ₹500–₹1000 to an SIP (Mutual Fund).
- ₹300–₹500 for insurance premium (term or health).
Use apps like Zerodha Coin, Groww, or Paytm Money for easy SIPs.
6. Cut the “Hidden Leaks” in Your Spending
You don’t need to deprive yourself — just be smarter.
Common Traps to Fix:
- Frequent online shopping
- OTT subscriptions you don’t use
- Daily chai/coffee from cafés (₹60 x 30 = ₹1,800!)
Smart Alternatives:
- Buy groceries in bulk.
- Use UPI cashback apps (Paytm, PhonePe).
- Cook at home on weekends.
- Switch from cabs to public transport wherever possible.
7. Start a ₹500 SIP — Even on Low Income
Systematic Investment Plans (SIPs) are your best friend. Even ₹500/month in a good mutual fund can grow into lakhs in 10–15 years.
Top SIP Mutual Funds (as of 2025):
- Axis Bluechip Fund
- Parag Parikh Flexi Cap Fund
- HDFC Index Nifty 50
Tip: Start small and increase by ₹100 every 6 months.
8. Choose Affordable Term Insurance — Not Endowment Plans
Don’t fall for “investment + insurance” combo traps. Instead, get a pure term plan — it offers high cover at low premiums.
Example:
- Age: 25 years
- Coverage: ₹50 lakh
- Annual Premium: ~₹3,000–₹4,000
Why it matters: In case of death, your family won’t suffer financially.
9. Create a Monthly Budget Template You Can Actually Follow
Budgeting doesn’t mean spreadsheets with 40 categories. Keep it simple.
Budget Template (For ₹20,000/month):
| Category | Suggested Limit |
|---|---|
| Rent | ₹5,000–₹7,000 |
| Groceries | ₹2,500–₹3,000 |
| Transport | ₹1,000 |
| Mobile/Internet | ₹500 |
| Entertainment | ₹1,500 |
| Savings | ₹3,000–₹5,000 |
10. Supplement Your Income (Even ₹2000 Helps)
If saving still feels hard, increase your income.
Ideas for Extra Income:
- Weekend freelancing (content writing, design, tutoring)
- Online surveys (Swagbucks, Toluna)
- Affiliate marketing
- Selling homemade products (snacks, crafts, etc.)
- YouTube Shorts, Instagram Reels monetization
11. Develop a Money Mindset: Think Long-Term
Wealth-building starts with mindset. Understand the power of compounding, delayed gratification, and self-discipline.
One small saving decision today = Massive freedom tomorrow.
Quick Book Recommendations:
- “Rich Dad Poor Dad” by Robert Kiyosaki
- “The Psychology of Money” by Morgan Housel
- “The Millionaire Next Door” by Thomas J. Stanley
Conclusion: Start Small, Stay Consistent
Saving with ₹20,000/month isn’t about being cheap — it’s about being intentional. Build habits now that will serve you for life.
Remember:
“You don’t need to be rich to save — you need to save to get rich.”
Start today with ₹100, and in a year, you’ll not only have money in the bank — you’ll have confidence in your future.
About the Author
Divyanshita Singh is a Chartered Accountant and financial content strategist with over 5 years of experience in personal finance, loans, taxation, and legal compliance. Her mission is to simplify money decisions for young Indians through clear, trustworthy guidance.