If you're looking to take control of your financial future and finally get serious about saving money, activate these ten tips to start saving.
There are two ways Americans save money: watching your costs on purchases by making smart, in-the-moment financial choices, and by making savings long-term goals a part of your overall financial plan.
Whether right now, or for the next twenty years, developing a savings strategy doesn't happen overnight. It's a lifelong process — a skill you develop over time. And it doesn't come naturally to everyone. For some people, the hardest part is simply getting started.
The keys to saving money are developing smart habits and disciplined behaviors. But there are also a few tools and tricks to help you grow your savings faster.
If you're looking to take control of your financial future and finally get serious about saving money, activate these ten tips to start saving. You might have questions, and if so, check out these FAQs about savings.
10 tips to help you start saving money
1. Start with your savings goals.
Often saving up for a purchase or an expense is the first way we learn how to save. Even as children, financial literacy lessons revolve around the concept of saving up for special toy or outings to make the financial goal more tangible.
But it's a good way to begin. Setting an initial savings goal can add extra motivation because you can picture the finish line. The more specific each of your goals, the less intimidating they seem. After all, the idea of saving a ton of money seems like a pretty daunting task at first.
Breaking your savings up into smaller, more achievable goals along the way can help keep you on track. Simply "saving for retirement" is both unspecific and intimidating. For each savings goal, put a dollar amount and a timeline around it. WHEN do you want to have reached $X,XXX amount in your savings account?
2. Establish a few ground rules.
You know yourself and your existing habits — good and bad. Establish some checks and balances to make sure you're sticking to your own plan. For example, ask yourself a set of questions before you allow yourself to dip into your savings.
Is this an emergency situation?
Is this unexpected expense right now more important than my next savings goal?
Will I be able to get this money back?
When will I be able to put back the money I take out of my emergency savings?
Life happens. You can't always save as much as you'd like to — it's okay for today's needs to come first when it makes sense for you and your family. As long as you're having honest, upfront conversations with yourself, you won't have as many regrets later.
3. Pay yourself first.
When that next paycheck comes around, make sure you're looking out for you — that means paying yourself first, in savings. Talk with your employer about splitting your direct deposit into both your checking account and your savings account. That way, you don't have to think about taking money out of your budget to set aside for savings.
When you save automatically, you don't miss the money as much. The process itself becomes a lot less painful. The next best option is to create an automatic transfer on payday that moves a portion of money directly to your savings account.
4. Pay ahead on your debt.
Not only does debt eat away at your disposable income each month, the longer it drags out, the more it costs you in total interest. Plus, having to worry about making your monthly payments also makes it difficult to start setting aside real money on a regular basis. More than half of Americans say debt negatively impacts their life, so eliminating the source of stress can only help your financial (and overall) wellness.
When you pay down your outstanding credit card debt and loan payments as soon as you can, it actually saves you money on interest in the long run — even if it takes a bit more money out of your budget right now. Your personal finances may feel the pinch now, but the benefits are worth a little temporary squeeze.
Prioritize getting out of debt as one of your first savings goals. Once you're finally debt-free, you can start actively saving more money for your future.
5. Make sure you have a fabulous bank account.
If you're paying monthly service fees or too much in ATM fees for using your checking account, you might want to ask yourself, "Why?"
There are more options out there than just "the account my parents set up for me" even if it is the only place you’ve banked."
In fact, a lot of community banks and credit unions will actually reward you for banking locally — not only letting you earn higher APYs (Annual Percentage Yields) on checking accounts, but they can also provide you with cash back, refunds on purchases, and other rewards. And if you don't have a savings account yet, you can comparison shop for the best APYs on those accounts too.
Some megabanks simply charge fees and offer lower rates because they can. But when you know your options, you can get a lot more for your money. Literally. Those local community banks and credit unions allow you build a real relationship for when it's time to ask for a loan or mortgage.
6. Compare insurance plans and choose the right type of health insurance.
A lot like your bank account, your health insurance plan can make a real difference in how much money you have to budget each month and it's something you shouldn't take for granted. Finding the right health insurance for you can save you a lot of money, whether in terms of how much you're paying as a monthly premium, or how much you might rack up in medical bills.
Two common types of health insurance plans are PPO (Preferred Provider Organization) and HDHP (High-Deductible Health Plan). With a PPO plan, you typically pay more upfront in your monthly premium, but you're on the hook for less money when it comes to your medical bills thanks to a lower deductible. An HDHP, on the other hand, saves you money with a lower monthly premium, but if you do get sick, you run the risk of more out-of-pocket costs.
If you're the type of person who rarely goes to the doctor, you can also check out a Health Savings Account (HSA). An HSA also works in conjunction with an HDHP — offering tax-advantaged savings to help you cover qualified medical expenses (that you would be paying for out-of-pocket with your higher deductible). Some employer health plans may even kick in some money to your HSA, so be sure to get all the funds coming your way.
7. Pay more attention to your spending.
We all spend money. There’s no need to apologize, but do you actually know how much you spend — and what you spend it on?
The most basic step in saving money is understanding where all your money goes. That means checking your account balances regularly and looking at your transaction history in full detail. When it comes to your money, ignorance isn't bliss. It's a dangerous game, but one you can definitely win.
Once you know what you're spending the most money on, you know where you can cut back. Do you still use all those monthly subscriptions? Are all your Amazon purchases piling up? If you're spending too much money going out to eat, then a trip to the grocery store for some meal prep might be a great place to start.
According to the Bureau of Labor Statistics, the average American spent $8,169 on food alone in 2019 ($3,526 on eating out), so for a lot of us, this is an easy place to start. Whether you cut back on the overall spending or the frequency, pick the savings strategy that you know you can tackle.
But to get your finances where they need to go, you first need to know where they stand with a full breakdown of your own personal spending. Checking your balance is easy with online banking. Comparing it against your budget may require a little more time, but the effort will be worth it.
8. Cut down those energy bills.
Energy saving tip time: Unlike cutting into your spending, cutting down on your energy costs doesn't require hard choices. Rather, make simple changes in lifestyle and habits. It's true that energy usage adds up.
According to Energy.gov, you can save up to 10% on your annual heating and cooling bills by turning your thermostat down just 7° to 10°F, for only 8 hours a day. Consider a programmable thermostat, too.
If you still work in an office or are out of the house during the work week, you won't even notice the change most days. You can also set it to account for slightly cooler nighttime temperatures in the summer to save energy. In the cooler months, you can save on heating costs by adjusting your indoor temperatures to fend off the outside weather.
Remembering to turn off your devices when you leave can also save money on your utility bill. Find more ways to cut your energy usage to start making cuts that you manage yourself.
9. Don’t deprive yourself.
Just like a diet, changing your savings habits too drastically might end up causing you to splurge, crave, and binge more on the back end. Take steps that become habits and in time you’ll be a savings machine without giving it another thought.
Saving is about making smarter choices, not suffering. Instead of thinking about your budget like cutting out all the things you enjoy, turn your favorite luxuries into a reward for sticking to your plan. Make your savings strategy a rewarding one.
You also don't have to cut out your most expensive hobbies or habits entirely. Try scaling back a bit first and see how much you can save.
10. Think about retirement now.
Like, right now. Compounding interest is your friend. Unfamiliar with the term? It's when you earn interest on your interest. Interest rate 101: the money you earn earns more money. The sooner you start making contributions to a 401k or an individual retirement account (IRA), the more money that retirement plan can earn.
Five to ten extra years of compounding interest can make a HUGE difference in how much retirement savings you have when you reach retirement age. Huge, as in hundreds of thousands of dollars, depending on how much you contribute each month.
If you have a 401k through your employer, make sure you're contributing to that plan, especially if your employer offers to match funds. That's almost as good as getting an actual raise — oh wait, that's actually part of your employer compensation package. That's money you should absolutely snag.
Retirement plans are designed to offer tax advantages to help you save more money for the future.
FAQs: Make saving money simple
If you still have questions about your savings strategy, you may be searching for additional ways to increase your savings. Keep asking questions and planning to reach your ultimate savings goals.
How much should you have in savings?
That depends on your age. Obviously, if you just graduated college you're not going to have had the time or means to save as much as someone who's approaching retirement age.
It also depends on how much money you can live on and still live comfortably. People who make more money often need to save more as well because they develop expensive habits that are tough to break once the money stops rolling in. Everyone's long term goals are different.
At age 30, you should have saved roughly one year of salary.
At 40, you should try to increase your savings to 2x to 3x your current salary.
By age 50, that number should be all the way up to 5x to 7x your current salary.
In your 60s — as you get closer to the retirement age of 67 (when you can withdraw without tax penalties from your 401k or retirement account) — you'll want to have saved at least 10x to 11x of your annual salary.
If those numbers sound ambitious, don't let the anxiety set in. You're definitely not alone. In fact, according to a 2019 study by the Federal Reserve, nearly 25% of all Americans have no money set aside for retirement at all. Falling behind doesn't mean you should give up on retirement. It means it's high time you get started.
What's the right emergency fund amount?
The size of your emergency fund also depends on how much money you make and the amount you're used to living on. Your emergency fund should be enough to account for three to six months of your living expenses, whatever that total may be.
That's money you can quickly have on hand in case of a crisis. After all, you can't really prepare for the unexpected — that's why they call it an emergency fund.
Of course, you can also have too much in your emergency fund. Unlike a savings or investment account, your money won't grow if it's just sitting there waiting. So don't spend too much time or money worrying about what could happen today instead of putting money away for your future.
Can multiple savings accounts help you save more?
Yes, it can. But not because you're earning any additional money. You can earn just as much money in one savings account as in multiple savings accounts as long as you have a really high APY.
However, having multiple savings accounts is a tactic some savers use to compartmentalize their savings goals. Opening a specific savings account for something like a new car or vacation can help you visualize and compartmentalize your savings. It also can make it less likely that you dip into that money if you set it aside in its very own separate savings account.
If you think multiple savings accounts make sense for your savings plan, just be sure you're getting a competitive APY on each account, so you don't miss out on extra money and more total savings overall. You might also consider a short-term certificate of deposit (CD).
How can you start saving more money today?
Direct deposit is the easiest way to start — and stick to — a savings plan. Have money go directly from your paycheck to your savings account. It's an easy way to get started.
Make sure to enroll in a 401k plan ASAP if you're offered one through your employer. Again, both time and compound interest are your friends when it comes to retirement savings. Contribute as much as you comfortably can today because you can't get that time back later.
Automating savings also makes getting started simple and manageable. It's much easier to “set it and forget it” than to try to set aside money here and there only occasionally.
Does switching insurance save money?
If you watch TV, you've certainly seen the commercials. For auto insurance, "Fifteen minutes can save you up to 15%!" How much you can actually save on any type of insurance will ultimately come down to your specific situation.
That's why any insurance company will offer you a rate quote of how much your plan should cost (aka the “premium”) by accounting for specific factors like your age and other personal information.
The trick to saving money on insurance is getting quotes from multiple insurance providers. Though insurance shopping may not be as much fun as traditional shopping, comparison shopping is always a smart strategy when it comes to saving money. Shop around before you decide to switch, making sure you’re comparing coverage types and amounts as apples-to-apples as possible.
If you’re shopping with an insurance agent that won’t take the time and effort to point out those details (instead of just throwing a cheap premium in front of you), consider trying again with another agent. There's no obligation to buy whatsoever when you’re just asking for a quote.
When your health insurance is renewed each year, take a close look at your health care spending to determine if you can save with an alternative insurance plan. Doing an assessment of your budget and your spending will allow you to make the best decisions for your financial and physical self-care.
Money-saving tips are just the start.
There's no one life hack, savings tip, or answer on the internet that can solve all your savings goals. It comes down to planning, smart spending, and commitment.
The next step is to take an honest assessment of where your finances stand today and setting attainable targets for where you want to be. Only then can you implement these simple saving strategies and lifestyle changes to better fit your budget within your means.
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