So you want to learn how to save money?
Whether you are trying to save money for your first home, college, a new car, or simply just because you're tired of feeling broke, saving money doesn't have to be hard.
That being said, learning how to save is a process that goes just beyond knowing what to do. The difference typically boils down to two things:
Today, we will help you with the knowing part so that you can learn how to save so you can get to the doing!
Finally, How to Save Money!
1. Eliminate debt
First and foremost, before you can even begin to learn how to save, you need to eliminate all your debts. That’s because you are inevitably paying interest on your debts, and while it might not be a lot at the moment, it’s almost certainly more than the interest you would get from a savings account. In other words, every dollar you owe in debt will be undermining every dollar you save, making saving a pointless exercise.
[Related reading: 25 Smart Ideas to Pay Off Debt Fast (A Complete Guide for 2020)]
2. Set a target
While your initial goal should be to pay off your debts (if you have any), you also need to set yourself some savings targets, too, for once that’s done.
Maybe you’re saving for something big, like the deposit for your first home, or a smaller item, like a new TV, sofa, or Whatever it is you’ve got your heart set on, figure out how much it’s going to cost and how much you need to save each month to buy it. This simple step will significantly boost your motivation and, in turn, your success.
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3. Make a budget
A budget — even a really simple one — should be at the heart of every savings plan.
Not only does it help you see how much you need to live each month and how much extra money you’ve (in theory) got left over each month, it also provides an easy way to identify where your hard earned cash is going.
4. Track your spending
With your budget calculated, it’s time to really start tracking your spending. This is a really important step as it helps prevent you spending beyond your means. Keep track of everything you buy on a day-to-day basis so you can identify exactly where your money is going.
Just the action of tracking your spending can change your behavior and make you think twice about making that impulse purchase. You can track your money by using:
- Personal Capital App – Net worth tracking & budget tracking
- Or check out these 13 other options
Now let’s look at some of the ways you can shave some money off your monthly spending…
5. Cancel unnecessary subs & memberships
Chances are you’re paying for at least a few subscriptions or memberships, such as Netflix, Spotify, Sky TV, your local gym, etc.
Ask yourself which of these you need and which you can actually live without. While each might not seem that expensive on its own, they all add up.
There might also be some services that you’re paying for automatically each month and not even using! Check your bank statement to see if you can identify these rogue recurring payments.
6. Reduce your energy costs
Many people don’t realize that they can make some significant savings on their energy bills by making just a few small adjustments in their homes.
For example, taking shorter showers, installing dimmer switches and LED light bulbs, and lowering your thermostat (just a tiny bit) can make a real dent in your energy bills, without negatively impacting your life.
7. Forego that daily Starbucks
How often do you buy coffee at one of those big chains? Every day? Twice a day? Think how much this is costing you on a monthly basis.
If we say a coffee in one of those places is like $5 and you’re having two a day, that adds up to around $300 a month! Why not consider cutting down to one a day and saving yourself a cool $1800 over the course of a year.
8. Quit smoking
In the same way that your daily coffee habit is draining your wallet, so too is your smoking one (and it’s harming your health at the same time). With a packet of cigarettes costing around $10, just one pack a day is another $300 a month.
Just think what else you could spend that money on instead…
9. Eat at home more
While eating out is enjoyable, it’s also costly, especially if you do it on a regular basis. According to the Bureau of Labor Statistics, the average household spends approximately $3,526 on food outside of the home each year. That’s $293 per month!
A few meals out can cost the same as a week’s worth of groceries. Consider cutting back on restaurant meals and saving them only for a special occasion.
10. Go generic
When it comes to grocery shopping, you can make huge savings by dumping brand names and embracing generic products. Medicines, cleaning supplies, and tinned staples like beans and tuna all usually have generic alternatives. The best part is you probably won’t even notice a difference in taste, just the extra money in your pocket.
11. Shop around for insurance
Whether it’s car insurance, home insurance or pet insurance, you can usually save money by shopping around and getting a range of quotes from different providers.
Just because your insurer gave you the best deal last year, doesn’t mean they necessarily will this year. You owe it to yourself to at least check, and with most reputable companies having online offerings, getting quotes has never been so easy.
12. Consider a staycation
This article is being written amid the COVID-19 pandemic, a time when international travel seems both unlikely and unwise.
One way to get out of the house and enjoy some new surroundings is to have a staycation in your local area. It will save you money and give you an excuse to explore what there is to do in your own backyard.
At the very least, you can travel and have fun on the weekend for free! Here are 40+ ideas to help!
13. Sell stuff you no longer need
One man’s trash is another man’s treasure. So consider holding a yard sale or selling your old stuff on eBay. It’ll help you realize some extra space in your home and put some $$$ in your pocket, making it a win-win!
14. Take advantage of a 401(k)
If you’re employed, a 401(k) retirement plan is one of the best ways to save money. That’s because it gives you a tax break and your own contributions are often matched by your employer.
You can read more about 401(k) retirement plans in this post: The 7 Best Ways to Invest $1,000 (& Beyond)
15. Set up a direct debit (save automatically)
Finally, if you want to ensure you are saving a little bit each month, set up an automatic transfer from your checking account to your savings account each month.
If you configure it so the transfer comes out just after you’ve been paid, you probably won’t even notice the impact. But when you check your savings account a few months later you’ll be greeted with a pleasant surprise.
As David Bach always says, “Automate your savings, automate your future.”
Bonus: Use the Percentage Rule!
Here is what we mean:
- Percentage Rule Saving: Save a percent of your income each month. Let's say 4%. Each month, strive to increase how much you save by 1% until you're saving at least 20% of your income, ideally 25%. This means if you make $4,000 per month, perhaps you're saving $160. The next month you would want to save $200 and keep increasing it until you're at $1,000 per month. Saving means retirement contributions, investments, and general savings.
- Buying Percentage Rule: The $3 coffee doesn't cost $1 more than the $2 coffee, it costs 33% more. See the difference? Use this approach when buying ANYTHING and EVERYTHING. It will help you save money when buying, thus you have more money to save!
Final Word on How to Save:
So if you're looking how to save money, here is what you will quickly realize:
It is not that hard, it just requires a little effort and attention!
Don't making saving hard, make it a habit. Saving money is a habit, just like brushing your teeth, making coffee, and exercising. When we make habits a part of our life, they become automatic.
Saving can be a habit.
- Every time you go to buy something, you can remind yourself you're saving money.
- Every time you go shopping online, you can remind yourself you're saving.
- Every time you decide you want to buy a big ticket item, you can tell yourself you're saving
And the more you tell yourself you're saving, the more you save! That is how you save money!
Question: What tips can you add to this list on how to save?
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! I got serious with money when I used Personal Capital to track my finances.