Saving money is easier when you have a plan—follow these money saving tips to create one
Sometimes the hardest thing about saving money is just getting started. This step-by-step guide can help you develop a simple and realistic strategy so that you can save for all your short- and long-term goals.
Getting a handle on your spending is the first step towards saving money.
Keep track of all your expenses—that means every coffee, household item, and cash tip, as well as regular monthly bills. You can keep track of your expenses using a pencil and paper, a spreadsheet, or an app.
Once you have your data, organize the numbers by categories, such as gas, groceries, and mortgage, and total each amount. Make sure your expense tracking includes everything by checking your credit card and bank statements.
You can start making a budget now by saving money that you are aware of how much you spend each month. In order to organize your spending and prevent overspending, your budget should illustrate how your expenses compare to your income.
Make sure to account for costs like car maintenance that happen frequently but not every month. Include a savings category in your spending plan and try to save money up to a level that feels comfortable to you at first.
Eventually, aim to increase your savings by up to 15–20% of your income.
It could be time to make spending cuts if you aren’t able to save as much money as you’d like. Determine the non-essentials you can do without, such as entertainment and eating out.
Look for ways to cut costs on your fixed monthly bills as well, such as your cell phone plan and auto insurance. Other suggestions for reducing daily spending include:
Find free or low-cost entertainment by using resources such as community event listings.
Cancel any subscriptions or memberships that you no longer use, especially if they renew automatically.
Plan to prepare the majority of your meals at home, and look for local restaurant specials for nights when you want to treat yourself.
Wait a few days before making a non-essential purchase. You can realize that the item was something you wanted rather than something you required, and you can create a plan to save for it.
Setting a goal is one of the most effective strategies in saving money. Begin by considering what you might wish to save for in the short term (one to three years) and long term (four or more years). Then calculate how much money you’ll need and how long you’ll need to save it.
Common short-term objectives include an emergency fund (three to nine months of living expenses), a vacation, or a down payment on a car.
Common long-term objectives include a down payment on a house or a renovation project, your child’s education, and retirement.
Set a little, attainable short-term goal for something fun that exceeds your monthly budget, such as a new smartphone or holiday gifts.
Reaching smaller goals and enjoying the reward for which you have saved can provide a psychological boost, making the payoff of saving money immediate and reinforcing the habit.
After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings.
For example, if you know you’re going to need to replace your car in the near future, you could start putting away money for one now. But be sure to remember long-term goals—it’s important that planning for retirement doesn’t take a back seat to shorter-term needs.
Learning how to prioritize your savings goals can give you a clear idea of how to allocate your savings.