Establish a Budget
The first step to saving money is understanding where your money is going each month. “You can’t start effectively saving money until you have a well-defined monthly budget,” finance writer Chris Panteli told The Balance in an email interview. A budget puts you in control of your money. The trick is finding the one that’s right for you. A proper budget should contain at least your monthly income, your fixed expenses, and an allocation of funds toward entertainment. There are many free budgeting tools and apps that can help you stay on track.
Treat Savings Like a Bill
After your budget is set, a sure-fire way to save money is to treat your savings like a bill, said financial analyst Sophia Jones to The Balance in an email interview. “Whenever you get your pay, take out savings first and put it somewhere else, maybe in a high-yielding bank account. By doing so, you train yourself to consistently save, and practice living within your means while still having savings,” Jones said.
Calculate Your Purchases by Work Hours Instead of Cost
Thinking like a saver means thinking about the true cost of the things you buy and how many hours you will need to work to afford them. Start by taking the dollar amount of the item and dividing it by your hourly pay. For example, if you want to purchase a $48 shirt and you earn $12 per hour, ask yourself if buying it is worth the four hours you’ll have to work to pay for it.
Try the 24-Hour Rule
This is an easy and effective trick to help you save. When you see an item you think you need or want, don’t buy it right away. Instead, set a “24-hour” rule. Maybe you’ll buy it after all, or maybe you won’t. But at least you can give yourself more time to think it through. One way to enforce the 24-hour rule when online shopping is to disconnect your debit or credit card from your browser or phone. Sometimes putting a little friction between you and that “Check Out” button is all it takes to cut down on impulse purchases.
Set Up Savings Automatically
“Habits work best when they happen in the background,” Catch CEO Kristen Anderson told The Balance via an email interview. Using smart defaults such as directing a percentage of your paycheck to a separate savings account will have you hitting your savings goals in no time.
Start Small
Anything is doable when it’s done in baby steps. Corey Noyes, a financial advisor at Balanced Capital, said, “Too many people stretch themselves too thin when they first try to save.” This can lead to frustration, discouragement, and eventually giving up your savings goals. The key is to “choose a manageable amount that doesn’t cause you stress and set it on autopilot,” Noyes said.
Budget Your Savings Using Cash Envelopes
According to a 2021 study by the MIT Sloan School of Management, people spend more money when they use a credit card rather than cash. However, if your spending habits prevent you from saving money, you can try using the envelope-budgeting method. After creating your monthly budget, use cash to separate your savings and each of your other expenses into envelopes. Once the envelopes are empty, you’re done for the month, and your savings are intact.
Open a Spend-and-Save Account
A spend-and-save account works by automatically helping you save the spare change left after making a purchase. It rounds up each debit-card transaction to the nearest dollar, then deposits the difference into your savings. Of course, to reach larger saving goals, you’ll need to supplement a spend-and-save account with a regimented budget, but you might be surprised how quickly your spare change piles up.
Take Advantage of Company Matches
Many companies offer employee incentives by matching a certain percentage of the money you save in retirement plans such as your 401(k). This means that for every dollar you save, they will give you an extra dollar, hence the match. So if you’re not taking advantage of your employer match, you are leaving free money on the table.
Pretend Your Windfalls Don’t Exist
When you need an easy way to save money, setting aside a windfall of extra cash needs to be a “no brainer.” Whether the money comes from a work bonus, bingo winnings, or tax refund, commit to adding it to your savings and pretend like it doesn’t exist.
Shop on Wednesdays
Why is Wednesday unique? “When most grocery shops start their new bargains on Wednesdays, customers typically get early access to the latest deals and special offers,” financial analyst Steve Wilson told The Balance in an email interview. “Additionally, shops occasionally accept coupons from the prior week,” Wilson added.
Commit To Eating Out One Day Less Each Week
If you enjoy eating out, you don’t have to give it up. Instead, just commit to cutting back. For example, suppose you spend at least $15 per day eating out five days a week. That quickly adds up to $300 a month. However, if you cut back even one day a week, you’ve just found $60 a month to add to your savings.
The Bottom Line
There are many benefits to saving money, and the reasons for saving are different for everyone. While consistently putting money aside can be a challenging habit to start, the trick is finding a few saving methods that resonate with you and your lifestyle.
