Saving money sounds easy, but life can get in the way quickly. One day you have a budget you’re dutifully following and suddenly your rent or property taxes go up. Or gas jumps up above $5. Or you get a medical bill you didn’t expect.
Now you need to free up any extra money you might have in order to afford your monthly bills. At least in my experience, savings is always the first item to cut during tough times.
How to Start Saving Money
To crack the savings code, you have to get creative. Thankfully, just about anyone can follow these simple savings methods.
1. Start Small
It’s common to feel like you’re not saving enough, but here’s the thing about saving money: saving anything is always better than saving nothing. Given enough time, you’re liable to find yourself with hundreds of extra dollars just from your pocket change.
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Luckily, the savings world has become a little more automated. You can now save your spare change using apps like Acorns.
Just connect your debit card to get started. Every time you make a purchase, Acorns rounds up to the nearest dollar and invests the difference. Acorns handles your investment allocations as well — all you need to do is answer a few questions about your risk tolerance. Saving doesn’t get much easier than that.
2. Pay Off High-Interest Credit Card Debt
Debt can eat up hundreds if not thousands of dollars each month. Between credit cards, student loans, car payments, and mortgage payments, it can feel impossible to save anything after paying your bills.
Making an actionable savings plan to pay off your debts can help you free up that money in the future.
Of course, not all debt is created equal. Credit card debt tends to carry much higher interest rates than other debts, and paying it down quickly can save you thousands in interest payments over time. Your debt payoff plan should prioritize paying off your credit card debt first.
3. Cut Your Spending
Cutting back on unnecessary spending now could help you save for the future.
And no, we’re not talking about cutting out your daily latte. Cutting the bigger lines from your monthly budget is how you’ll see the biggest return on your savings. Consider reducing or cutting the following costs:
- Car Payments. New cars can come with astonishingly high price tags, which means a costly monthly payment. Consider buying used cars or refinance your current loan to see if you can secure a lower interest rate.
- Eating Out. I don’t like to admit it to myself, but I spend way too much eating out. Luckily, I’ve balanced that out by cutting other unnecessary spending, but it took me a while to get there. If you find yourself going out for drinks and meals a little — or a lot — more often than your wallet can handle, it’s time to cut back.
- Insurance Premiums. If you’re not taking advantage of discounts or shopping around every six months or so for insurance rates, you could be losing out on some serious savings. Talk with your insurance agent or get quotes directly from other providers to see if you can lower your premiums.
- Subscriptions. Between your gym membership, multiple streaming service subscriptions, a regular pet food subscription order, and your personal care products subscription, you’re likely spending hundreds each month. Figure out which subscriptions cause you to spend the most and decide if you can cut them out.
4. Set Savings Goals
Most people give up on saving because they lose momentum. To avoid this trap, set regular savings goals.
Make sure you’re not just focusing on the big financial goals like putting a down payment on a home or paying for a wedding. Set smaller ones too.
Make timelines for goals like creating an emergency fund, taking a vacation, making small home improvements, or investing in a new hobby.
I use sinking funds to manage my savings goals. This is a fancy name for a budgeting method that involves having different savings accounts for each goal. When it comes time to pull the money from one of these accounts, I don’t even feel it.
5. Budget for Savings
Saving needs to be a line item in your budget. In fact, it should probably be multiple lines in your budget.
That’s because each savings goal needs a portion of your paycheck, no matter how small. If you view saving as just another expense, you’re more likely to get into a routine that lasts.
If you want a simple approach, try the 50/30/20 method.
With this method, you’ll put:
- 50% of monthly paycheck toward your necessary expenses, such as your housing payment, utility payments, grocery bills, and so on
- 30% towards your wants, also known as discretionary purchases
- 20% towards savings and debt payoff
So, if you make $5,000 each month, you have $2,500 to spend on the necessities, $1,500 for your wants, and $1,000 for debt and savings.
6. Pay Yourself First
Can you really prioritize yourself when you have so many other expenses piling up? You can if you pay yourself first.
Paying yourself first doesn’t mean you take a chunk of money and spend it on whatever you want. It means setting aside a set amount of money each month in a savings account — preferably via automatic transfer each month so you don’t even have to think about it.
The goal of paying yourself first is to make saving for your future as easy as possible. No matter what else happens with your finances, you know that you’re sticking to at least one of your savings goals.
Make sure to pay yourself a realistic amount each month and don’t overdo it. Otherwise, you could end up falling behind on your fixed expenses. How much exactly you should put aside will depend on your income, but try to start with at least 5% to 10%. Slowly increase this figure as you’re able.
7. Automate Your Savings
When you make saving easy, you’re much more likely to stick with it. Rather than storing all of your money in your checking account where it’s easy to spend, automatically move your money to a savings account — or multiple savings accounts. You’ll spend less this way.
Review your income and expenses to figure out how much you can afford to save each month and move that money out of your bank account. Leave only what you need to spend and a small cushion in your checking account. This will force you to stay accountable and only spend what you truly need to.
When you make a list of your expenses, make sure you include everything, including:
- Rent or mortgage
- Renters or homeowners insurance
- Utilities
- Car payments and insurance
- Health insurance
- Groceries
- Household essentials like toilet paper and cleaning supplies
- Pet food and vet needs
- Clothes
Some of these expenses will change throughout the year, so take a look at least six months back and take an average of your expenses.
Additionally, when calculating the income you have to spend in these categories, consider all after-tax sources. Don’t include pretax earnings unless you’re self-employed and pay estimated taxes, in which case those count as another expense.
8. Bank Any Windfalls
Windfalls are large amounts of unexpected income that can make you feel like you’re made of money. However tempting, spending them aimlessly can set you back in your savings goals.
Often, this extra money comes in the form of:
- Tax refunds
- Payouts from legal settlements
- Bonuses at work
- Prize winnings, such as lottery winnings
- Gifts from family members
Instead of spending an entire windfall on things that make you feel good in the short term, put most or all of it into your savings. In doing so, you’ll accelerate your progress toward your savings goals and help your future self live better.
9. Open a High-Yield Savings Account
High-yield savings accounts, which have higher APYs than your local banks and credit unions, are one of the easiest ways to start building automatic savings.
The best high-yield savings accounts are easy to open online. Some even offer sign-up bonuses. Plus, most high-yield savings accounts don’t charge monthly fees, so all the interest you earn goes straight into your pocket.
10. Try a Savings Challenge
Sometimes, a challenge is all you need to take your savings to the next level.
Savings challenges make saving fun and approachable. You can challenge yourself to simply track your expenses and pinpoint unnecessary purchases. Or you can take a more extreme approach and challenge yourself to a no-spend month.
These challenges are designed to get you saving small amounts quickly. From there, the hope is that you can get into the habit of saving larger amounts regularly each month.
11. Take Advantage of 401(k) Matching
If your employer offers 401(k) matching and you aren’t taking advantage of it, you’re missing out on your full compensation package. With an employer match option, your employer matches a percentage of your contributions up to a certain percent of your salary. The average employer match is 4.7%, according to Fidelity.
Your personal 401(k) contribution does shrink your paycheck and might prompt some tightening elsewhere in your budget. But your employer match is the closest thing to free money you’re likely to get.
12. Make More Cash for Savings
If you’re already saving so much that you don’t have enough left over at the end of the month, look for ways to make more money. You can make money in a ton of different ways, including:
- Using Cash-Back Apps. Cash-back apps can help you earn a few dollars on your everyday purchases. When you use apps like Ibotta and Fetch Rewards, you’ll earn cash-back just for making common purchases.
- Selling Your Unwanted Things. Sites like Craigslist and Facebook Marketplace make it easy to sell almost anything of value for some extra cash. From furniture to gently used tires to clothes and everything in-between, someone will likely pay for your extra things.
- Starting a Side Hustle. Thanks to the gig economy, you can have almost any side hustle you can think of. Remote opportunities include blogging, teaching English online, or becoming a virtual assistant. In-person side hustles include working for or starting a cleaning service, driving for rideshare services, or doing odd jobs.
- Creating Passive Income. Passive income opportunities let you take the set-it-and-forget-it approach to making money. Investing is a classic example of passive income.
- Residual Income. After taking the time to create a product, the income you continue to earn in sales is considered residual income. Creating and selling e-books is an example. Once the book is created, all you have to do is list it for sale and collect your money as it sells.
13. Look for More Ways to Save
Some things will always have a solid price, but you can often get things for less simply by asking. Here are just a few things worth negotiating:
- Your Wardrobe. Buying thrifted clothes or buying from consignment shops can help you save on your entire wardrobe. You can find brand-name clothes for a fraction of the original price after they’ve been worn a few times.
- Your Groceries. You can’t negotiate at the register, but you can shop using cash-back apps and coupons to reduce your spending when you go grocery shopping. Follow the weekly flier deals at your local grocery store chain and you could save even more.
- Your Utilities. Every year when his Internet provider raises the rates, my father calls and asks for a discount. While he often has to argue with multiple representatives, he always ends up getting a break. The best tactic here is to research the competition, note cheaper rates, and threaten to change providers if your utility doesn’t match them.
14. Negotiate Your Debts
For those with student loans, credit card debt, and car payments, your debts cab some of the highest monthly payments you have. If you can lower these payments, you could end up saving hundreds each month.
You can negotiate certain debts, such as credit card debt. Credit card companies are aware that, out of all your debts, you’re less likely to prioritize theirs. Rather than getting nothing, they’ll work with you and reduce your debt so they can ensure they get back something.
If you’re unsure where to begin, debt management programs can help you get your debts under control. Be wary of who you’re working with though. Start with nonprofits like The National Foundation for Credit Counseling, which offers debt counseling and debt management plans.
Be mindful that some other debt-reduction strategies, such as debt settlement negotiation, can negatively impact your credit score because they require you to stop paying your minimum monthly payments. Even if they work in the short term, they could set you up for financial pain in the years ahead.
15. Go Green
Many environmentally-friendly choices are the more affordable option. For example, Americans spend billions on plastic water bottles every year. By contrast, a reusable bottle might cost $10 or $20 as a one-time expense. If everyone switched to reusable water bottles, that’s a lot of money not being spent on plastic waste.
Americans also waste an astounding amount of energy each year, which has a direct effect on our electricity bills. By unplugging electronics and appliances, you’re not only being more energy-efficient — you could also save yourself $100 to $200 per year.
Installing solar panels on your home is a more expensive but still worthwhile option. Having them installed can be fairly pricey, often north of $10,000 per array. But low-cost loans can help reduce the out-of-pocket expense, and the typical U.S. homeowner saves $1,500 per year moving forward. Some people even end up making money when energy companies buy back their unused energy.
Final Word
There’s a nearly never-ending list of ways to start your money-saving journey. Whether you’re looking for smaller, practical saving strategies or ways to save quickly, you have options. You can set aside any extra money you unexpectedly end up with, open a high-yield savings account, create recurring savings goals, cut down on your major expenses, or all of the above.
If all else fails, there are also plenty of ways you can earn some extra income which you can throw towards savings. With cash back apps, marketplace apps like Facebook Marketplace, and numerous side hustle choices, you have numerous options for upping your income too.
