Saving money can be a very difficult task for some. Regardless of your income, the amount of money you set aside can vary from person to person.
Whether you have a difficult time controlling your spending, don’t feel you earn enough to save anything extra, or can’t wrap your head around holding onto money for the future which is unknown, saving can be tough.
However, with a few minor changes to your budget, lifestyle, and mindfulness, you can get started on your saving journey now.
Don’t let money control you, but you control your money!
Here are 8 tips for how to save money that can get you on the right track quickly.
1. Have a Money-Saving Mindset
Saving is not something that comes naturally for many people.
I, on one hand, have always been pretty frugal and made good financial decisions.
However, my brother was the complete opposite even though we were raised by the same parents. He, on the other hand, had no concept of a dollar and will blow through money as soon as he gets his hands on it.
So I realized that having a good money mindset does not come easy and you may really need to work at learning how to save.
Luckily, there are ways that you can alter your thinking in order to make better financial decisions, but you have to be conscious of where you were going wrong prior.
Here are some ways to think positive about saving:
- Understand that you’re going to have to say no to a lot things like those expensive group dinners, a new pair of shoes, or a lavish vacation.
- Strive to meet a goal that you know requires saving a lot of money. Constantly think about that goal and how much it will mean to you if you accomplish it.
- Think of money as time worked. If you know that the stereo that you want is equivalent to two days of work, you may think twice about buying it.
- Instead of constantly living in the present, think more about the future. Think about retirement, owning a home, buying a new car, or other things that will make you happy. Picture where you want to be in 5, 10, or 15 years and what you need to get there.
- Hold yourself accountable for your actions. Don’t place any blame on others for your spending habits or lack of saving. Just because your friend invited you out for a night at the bar, doesn’t mean you have to go. If you decide to make poor financial decisions, it’s on you.
- Always analyze your purchases before you make them. Think ‘do I really need this item?’ ‘Can I live without it?’ ‘Can I wait one more week to buy and see if I still want it then?‘
2. Make short-term and long-term goals
Having goals where all of your extra saved money will go is a very wise decision. Goals will help to keep your mindset on track by saving more and spending less.
Think of both short term and long term goals.
Short term goals can include purchasing a birthday gift, saving for a vacation, or even getting your emergency fund started. Long term goals can be for retirement, buying a home or vacation home, or a new car.
If a vision board works best for you, try that. If writing your goals down in a journal helps, stick with that. Maybe telling someone else about your financial goals will help to hold yourself accountable, so do that too.
3. Understand Your Monthly Income and Expenses
This is a really important step. Before you can even plan a budget or savings plan, you must know how much money is coming in and out per month.
This will give you an idea of how much you typically have leftover after expenses, can keep for spending, and can inevitably put away into savings.
So set aside a day to write down ALL of your finances. I’d prefer you to do it on the computer so you can update it as needed. Use a Google spreadsheet or an online program that does all the work for you.
Websites like Mint or Personal Capital are free services that can keep track of all of your finances for you. On these programs, you can link every account, loan, credit card, or expense to keep a close eye on how your money is coming in and out.
We have been using Mint for years and love the ease of managing our finances with it. This program will take into account all of your spendings and break it down into categories to tell you where your money is going.
Once you’re adding up all of your income and expenses, make sure you’re including:
- Income you bring home from all sources (after taxes, health insurance premiums, and retirement contributions)
- Monthly bills or expenses: mortgage/rent, insurance, loan/car payments, utilities
- Charges that reoccur monthly such as monthly membership charges (gym, meal delivery, self-care, grooming, presriptions), transportation/commuting expenses (gas, tolls, parking)
- Your estimated monthly credit card or cash spend including necessities, such as groceries and toiletries, as well as entertainment, leisure, and other obligations
- Don’t forget to include yearly or semi-annual expenses that you’ll need to divide through your monthly budgets
4. Divide your spending up into categories
Dividing your expenses up into categories will help you to understand what areas that you are spending the most. When you’re creating your budget later on, this will help to know where you should start cutting back and where you can stay the same.
Some popular categories are:
- Medical and Healthcare
- Saving, Investing, & Loans
- Food & Dining
- Personal Care
- Health & Fitness
5. Determine Where You Can Cut Expenses
Now that you have all of your expenses clearly shown in front of you, you can go through them and see how much you have leftover to save.
But before you do this, see what items can be cut out from your current expenses to reduce your monthly spending.
First, determine your needs vs. wants. If it’s something you just want, cut it out and make do with only the things that you need.
- Do you really need that Starbucks every morning or can you bring a cup from home?
- Do you need to eat out for lunch every day or can you bring lunch from home?
- Do you need the name brand of cereal and chips or can you buy the store brand?
- Do you need a new outfit for this weekend or can you wear an old outfit?
- Do you need to order the filet mignon on the menu or can you opt for the burger?
Next decide what activities, services, or purchases you can cut out or decrease to save more money.
You may think that it’s impossible to cut back on expenses for your ‘needs’, but if you really want to save, you will figure out ways to make changes.
When trying to reduce monthly expenses, think of questions like this:
- What ways can I cut back on groceries, entertainment, and leisure expenses?
- Can I find ways to decrease my monthly payments for some expenses like consolidating, decreasing membership level, or calling for a better rate (ie asking for the newest promotion from your cable company)
- Can I cancel my gym membership and just run outside instead?
- Can I eat out 1 day less per week?
- Can I carpool with a coworker to reduce gas and toll charges?
There are so many ways to reduce your spending, but it all comes from what I stated above: You gotta have that money saving mindset!
Yes, it will be hard to live without your Mocha Latte every day, but after a few days of kicking the habit, you won’t even miss it anymore!
6. Make a Budget and Stick to It
Now that you have all of your finances mapped out, you can put a budget in place.
A budget simply means capping off your spending and try not to go over.
Don’t be too restrictive on your limitations or it will only end up failing you. Try to be wise and budget incrementally.
If you notice that your average eating out spending is $250/month, have a budget of $220 for your first month, then $200, etc. This will be a lot easier to stick to than cutting out $100 from that expense right away.
7. Pay High-Interest Debt First
Before you even think about starting a separate savings account, make sure you are paying off any high-interest debt. This typically just includes credit cards or any debt with over 15% interested rates.
Student, car, and mortgage loans are usually lower interest and are safe to pay off gradually. It’s the credit card interest and fees that will spirel you into a never-ending cycle of wasting money.
So if you have $5K of credit card debt, don’t even think about starting that savings account for your Hawaiian vacation. Get those credit cards paid off immediately.
8. Saving A Little Bit Still Helps
If you have the mentality of, I’m just saving a quarter, it’s not worth it, you’ll never end up wealthy.
That’s how the rich get richer! We save every nickel and dime that we can.
If there’s ever an opportunity to save money, whether it’s using a coupon to save 40 cents, driving an extra 3 miles to save $1, spending an extra 10 minutes comparing prices to save $2, or clicking through an app before you make an online purchase to save 90 cents, IT IS WORTH IT!
It will all add up someday and even make you aware of how to be more frugal.
9. Keep Good Records
Jotting down all of your expenses and having a visual of where your money is going can make a huge difference. This way you can start to adjust your spending accordingly.
If you see that you’re going over budget in one category, you know what you need to work on for next month.
This is one instance where it can be helpful to use credit cards. However, if you are already not financially savvy, I don’t recommend getting yourself a credit card.
Just save all of your receipts and try to put them into a spreadsheet as you make them.
10. Make Sure You Have an Emergency Fund
The first thing you want to start saving for is an emergency fund. Always have a little extra money available to you if you’re in a pinch.
The rule of thumb is to put away 3-6 months worth of expenses. However, this heavily depends on your lifestyle.
Think about if you are ever in a time of high need (losing your job or replacing an expensive appliance), how much money would you feel comfortable having?
The first goal that you set for saving should be to start your emergency fund. You can still add to other goals as you save for your emergency fund, as well.
11. Download an App
There are some apps that literally take the guesswork out of saving.
First, you give them access to your financial institutions and accounts. Then they’ll tracking your income, spending habits, and monthly expenses.
Lastly, they’ll set aside a predetermined amount into a separate savings account before you even see the money! It’s such a great way to be completely hands-off with your saving.
If you’re the type of person who has to spend money as soon as you get it, you need an app like this. Even if you have been trying to work on a savings plan, but just can’t seem to put the time and effort necessary into it, this is a great tactic for you.
These apps make saving money super simple.
12. Put Any Extra Earnings in Savings
Just because you got a raise, bonus, tax return, or birthday money, doesn’t mean you should go out and blow it.
Take any extra money you receive and put it into savings or add it to your retirement account. This is a great way to watch your accounts increase without noticing any direct impact.
Saving money does not have to be difficult. By making a few minor changes, you can see your savings accounts grow and your goals met quickly.
I hope these tips on how to save money helped you. Good luck!
Ask me any questions in the comments below!
Eugene is a Chemical Engineer with a passion for personal finance and is constantly learning new tricks to make his money work for him. He obtained an MBA part time and hasn’t stopped finding ways to make money, save money, and properly invest money. He currently lives at the Jersey Shore with my wife and two children.