Practical Ways to Save Money
- Say goodbye to debt. …
- Cut down on your grocery budget. …
- Cancel automatic subscriptions and memberships you don’t use. …
- Buy generic. …
- Cut ties with cable. …
- Save money automatically. …
- Spend extra or unexpected income wisely. …
- Adjust your tax withholdings.
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.
1
Record your expenses
The first step to start saving money is figuring out how much you spend. Keep track of all your expenses—that means every coffee, household item and cash tip as well as regular monthly bills. Record your expenses however is easiest for you—a pencil and paper, a simple spreadsheet or a free online spending tracker or app. Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Use your credit card and bank statements to make sure you’ve included everything.
2
Include saving in your budget
Now that you know what you spend in a month, you can begin to create a budget. Your budget should show what your expenses are relative to your income, so that you can plan your spending and limit overspending. Be sure to factor in expenses that occur regularly but not every month, such as car maintenance. Include a savings category in your budget and aim to save an amount that initially feels comfortable to you. Plan on eventually increasing your savings by up to 15 to 20 percent of your income.
3
Find ways to cut spending
If you can’t save as much as you’d like, it might be time to cut back on expenses. Identify nonessentials, such as entertainment and dining out, that you can spend less on. Look for ways to save on your fixed monthly expenses, such as your car insurance or cell phone plan, as well. Other ideas for trimming everyday expenses include:
Use resources, such as community event listings, to find free or low-cost entertainment.
Review recurring charges
Cancel subscriptions and memberships you don’t use—especially if they renew automatically.
Examine the cost of eating out vs. cooking at home
Plan to eat most of your meals at home, and research local restaurant deals for nights that you want to treat yourself.
Wait before you buy
When tempted by a nonessential purchase, wait a few days. You may realize the item was something you wanted rather than needed—and you can develop a plan to save for it.
4
Set savings goals
One of the best ways to save money is to set a goal. Start by thinking about what you might want to save for—both in the short term (one to three years) and the long term (four or more years). Then estimate how much money you’ll need and how long it might take you to save it.
Common short-term goals: Emergency fund (three to nine months of living expenses), vacation or down payment for a car
Common long-term goals: Down payment on a home or a remodeling project, your child’s education or retirement
Quick tip
Set a small, achievable short-term goal for something that’s fun and goes beyond your monthly budget, such as a new smartphone or holiday gifts. Reaching smaller goals—and enjoying the reward you’ve saved for—can give you a psychological boost, making the payoff of saving more immediate and reinforces the habit.
5
Determine your financial priorities
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.
6
Pick the right tools
There are many savings and investment accounts suitable for short- and long-term goals. And you don’t have to pick just one. Look carefully at all the options and consider balance minimums, fees, interest rates, risk and how soon you’ll need the money so you can choose the mix that will help you best save for your goals
Short-term goals
If you’ll need the money soon or need to be able to access it quickly, consider using these FDIC-insured deposit accounts:
- A savings account
- A certificate of deposit (CD), which locks in your money for a fixed period of time at a rate that is typically higher than that of a savings account
Long-term goals
If you’re saving for retirement or your child’s education, consider:
- FDIC-insured individual retirement accounts (IRAs) or 529 plans, which are tax-efficient savings accounts
- Securities, such as stocks or mutual funds. These investment products are available through investment accounts with a broker-dealer
7
Make saving automatic
Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money or even split your direct deposit so that a portion of every paycheck goes directly into your savings account. The advantage: You don’t have to think about it, and you’re less likely to spend the money instead. Other easy savings tools include credit card rewards and spare change programs, which round up transactions to the nearest dollar and transfer the difference into a saving account.
8
Watch your savings grow
Review your budget and check your progress every month. That will help you not only stick to your personal savings plan, but also identify and fix problems quickly. Understanding how to save money may even inspire you to find more ways to save and hit your goals faster
1 Remember that securities are not insured by the FDIC, are not deposits or other obligations of a bank and are not guaranteed by a bank. They are subject to investment risks, including the possible loss of your principal.
Reduce energy costs.
Did you know that you can save money on your electric bill just by making a few tweaks to your home? Start with some simple things like taking shorter showers (nope, we didn’t say fewer), fixing leaky pipes, washing your clothes in cold water, and installing dimmer switches and LED lightbulbs.
While new, energy-efficient appliances are a great way to save money on your electric bill, they’re expensive! But if you work it into your monthly budget, you can save up and pay cash for those improvements over time.
10. Check your insurance rates.
No, really. Did you know people save an average of $700 when they have an Endorsed Local Provider (ELP) check their insurance rates for them? $700! You owe it to yourself to at least have them look things over for you and see what savings they can dig up.
11. Pack lunch (and eat at home).
Get this—the average household spends about $3,030 on food outside of the home each year. That’s $253 per month! Buying lunch a few times a week may seem harmless in the moment (especially when your favorite restaurant is walking distance from your office), but you can save quite a bit of money just by packing a lunch.
Not only that but a lot of times you can buy a solid week’s worth of groceries for the same price as two dinner meals out. Instead, prepare your food at home and watch your savings pile up month after month.
12. Ask about discounts (and pay in cash).
You never know until you ask—and you should always ask. Next time you’re getting tickets at a movie theater, museum or sporting event, check to see if they have any special discounts for seniors, students, teachers, military or AAA members. If not, never underestimate the negotiating power of cash!
13. Take advantage of your retirement savings plan.
If your employer offers a 401(k) match and you aren’t taking full advantage of it, you’re missing out big time! Talk to your HR department to set up an account. But remember, you should wait until you’re completely debt-free (except your mortgage) and have a fully funded emergency fund of three to six months before you start saving and investing for retirement.
14. Lower your cell phone bill.
If your monthly cell phone bill competes with your monthly grocery budget, it’s time to find ways to cut back. Save money on your cell service by getting rid of extras like costly data plans, phone insurance and useless warranties. And don’t be afraid to haggle with or completely switch your provider! It might require a little persistence and research, but the savings are worth it.
15. Try a spending freeze.
Don’t buy any nonessential items for a week—or even a month! Think about it as a contentment challenge. While you’re at it, take inventory of what you’re grateful for each day. This should help kick your “want-itis” in the pants!
Make your spending freeze work by prepping meals with the food you already have, avoiding stores where you tend to impulse buy (did someone say Target dollar spot?), and saying no to anything that isn’t a basic necessity.
16. DIY . . . everything!
Before you shell out the cash to pay for a new backsplash, bench or fancy light fixture, think about doing it yourself! Usually, the cost of materials and a simple Google or YouTube search will save you a ton of money on your latest home project. Plus, you won’t have to pay someone to do something you can most likely do yourself. But if you’re the type who can’t seem to hit the nail on the head, you might want to ask a friend or neighbor for help so you don’t have to spend money on new drywall.
Oh, and when you need to do some DIY work (or any kind of work), borrow whatever tools you need from a friend or neighbor instead of going out and buying it.
17. Skip the coffee shop.
Ouch. This one is painful—we get it! Notice we aren’t saying to cut coffee—just to lower your coffee spending. Instead of spending $6–8 on that daily latte, you can save money by just making your coffee at home—or at least limiting the amount of times you hit that drive-thru and using coffee shop hacks to save on each trip.
18. The library is your friend.
Before you click Add to Cart on that brand-new book, check your local library to see if you can borrow it! Most libraries also have audiobooks and digital copies of your favorite books for rent. It’s an easy way to get your reading in without breaking the bank.
Bonus tip: Look online or visit your local used bookstore for major deals on like-new or even well-loved books . . . for next to nothing!
19. Try a staycation.
When your goal is to save money, a vacation is possibly the worst thing you could spend your money on. Instead of whisking your family off to the Greek Isles, try being a tourist in your own city. Not only will this save you hundreds (or potentially thousands) of dollars, but you can also explore your neighborhood with fresh eyes and have some fun while doing it.
20. Use cash-back apps and coupons.
Nothing beats a good old-fashioned 20% off coupon when you’re buying something. But did you know there are plenty of cash-back apps out there to help your savings go even further? Check out Ibotta, Rakuten and Honey (a browser extension).
21. Refinance your mortgage.
Here’s the deal: This is a long-term money saver. If you’ve got a 30-year mortgage, you’re spending a ton on interest over the life of that loan. Refinancing to a 15-year fixed-rate mortgage will save you thousands of dollars in the long run. Reach out to one of our RamseyTrusted Real Estate Agents to see if a refinance is worth it for you.
22. Sell everything (that doesn’t bring you joy).
Marie Kondo has the right idea. Declutter the things in your home that you don’t need and are willing to let go of for the sake of your financial future. That vintage chair your aunt gave you? Sell it. That crystal vase you found at an antique shop? Sell it. You’d be surprised at how much clutter you have in your home (that you don’t even use or think about). And the cash you can make on those things can be the difference between living paycheck to paycheck or not.
23. Learn the power of “no” (or “not now”).
We live in a world of instant gratification. Food from our favorite restaurants can be at our door in an hour or less. The show you want to binge is right there at the ready. The ads on social media say you need this, that and the other. Right now. We’re a couple clicks away from satisfying our desires for nearly anything!
But if you can delay some gratification by using the magic of “no” (or “not now”)—you will save so much money. It’s a huge mindset shift to build better spending habits overall. And it’s another way to become a more content person. Savings with a side of mental and emotional health? Yes, please!
How to Start Saving Money—Right. Now.
You’ll only start saving money when you learn healthy money habits and let your future needs be more important than your current wants—aka when you make saving money a priority. So do it! You can stop the cycle of living paycheck to paycheck with a simple secret: Make a zero-based budget before the month begins.
A budget is all about being intentional. It helps you create a plan so you can see where your money is going and find out how much you can actually save each month. When you make a zero-based budget, you’re giving every
