What do you genuinely want to accomplish with your life? Raise a joyful family? See the world? Purchase a lovely home? Launch your own company?
Reality check: To reach any of those ambitions, you’ll need to master how to save money.
Sadly, Americans are not great at saving, and the situation is worsening. With rising prices, stagnant wages and student loan burdens, we’re stashing away less than ever.
Table of Contents
Step 1: Create Savings Goals and PlansStep 2: Choose Budgeting and Debt-Repayment TechniquesStep 3: Pick Where to Bank and Which AccountsStep 4: Automate Your MoneyStep 5: Adopt a Budget-Minded LifestyleStep 6: Increase Your Income
Here Are Our Top Tips to Save Money
Ready to actually begin saving? This is a step-by-step handbook on how to do it — how to craft savings plans, select a budgeting approach, pick the appropriate financial provider, automate your money and embrace a budget-aware way of living.
Pour a cup of coffee and get comfortable. It’s time to get serious about your finances.
Step 1: Create Savings Goals and Plans
You’re probably wondering, “How much should I put away?”
Your first task is to establish specific savings targets — emphasis on specific. Labeling your objectives makes them feel tangible. It helps you resist spending money on other things.
Plan for Short-Term and Long-Term
What exactly are you saving for? How much will you need? And which goals come first? Consider both short- and long-term needs:
- Short-term: Save for a real vacation or thoughtful holiday gifts. But start by building a usable emergency fund — three to six months’ worth of living expenses in case of an unexpected car repair or job loss, for instance.
- Long-term: This is big-picture saving for things like your children’s college fund or retirement.
Examine Your Income
How much can you realistically allocate to these goals once they become priorities?
Write down your income and expenses — every expense, from utility bills to streaming subscriptions. There are likely more opportunities to save than you think. Don’t forget student loans or credit-card balances. Know what you’re spending in every category. Focus on trimming nonessential spending, like dining out.
An easy way to streamline tracking is to use Trim, a small bot that monitors your transactions.
Link your checking, credit and savings accounts for a comprehensive view of your habits. Then inspect individual transactions. Set alerts that tell you when bills are due, when you’re nearing a spending limit or when you’ve overdrawn. These tactics will help you adhere to your savings objectives.
Monitor Your Credit
Do a personal credit check. Keeping an eye on your credit score and reports can steer you toward better financial health — especially with a free credit-monitoring tool like Credit Sesame. It offers tailored tips to improve your credit.
The healthier your credit, the better positioned you’ll be when seeking a mortgage or auto loan. Credit Sesame can estimate the size of mortgage you might qualify for, for instance.
Here’s our comprehensive guide to using Credit Sesame.
Step 2: Choose Budgeting and Debt-Repayment Techniques
It’s time to create a monthly budget and actually follow it — especially if you carry debt.
This ensures saving is part of your plan, not an afterthought.
Below are five budgeting approaches. We won’t tell you which one to adopt. Be honest with yourself and pick the one you think will work for you. This is how to save money on a tight budget.
The 50/30/20 Guideline
This rule was popularized by U.S. Sen. Elizabeth Warren, an expert on bankruptcy, and her daughter Amelia Warren Tyagi.
Divide your income into three categories: 50% for essentials and monthly obligations, 20% toward financial objectives and 30% for personal spending (everything you enjoy buying but don’t truly need). Put the money for goals into a separate savings account.
Good for: People worried they’ll miss out if they budget. Here’s our full guide to 50/30/20 budgeting.
Envelope Budgeting
Traditional envelope budgeting uses cash. Each month you allocate cash for spending categories and keep it in labeled envelopes — groceries, housing, phone, etc.
Prefer cards? Check out Mvelopes, an app that digitizes this method.
Good for: Folks who need strict spending limits. If an envelope is empty late in the month, there’s nothing left to spend in that category.
Zero-Based Budget
This budget is simple: Income minus expenses (including savings) equals zero. Every dollar must be accounted for.
Good for: People who want a straightforward plan that accounts for every dollar. Here’s our guide to zero-based budgeting.
Debt Avalanche
This repayment strategy is useful when managing debt. Focus on paying off the debts with the highest interest rates first — often credit cards. This can save significant money over time.
Good for: Those carrying large credit-card balances. Credit cards typically charge higher interest than other loans. Learn more about the debt avalanche approach here.
Debt Snowball
Financial adviser Dave Ramsey advocates the debt snowball method: clear the smallest balances first. This eliminates debts faster and can boost motivation to continue.
Good for: People with many different debts — credit cards, student loans, etc. — who need momentum. Here’s how to apply the debt snowball to become debt-free.
Step 3: Pick Where to Bank and Which Accounts
You might be thinking, I already have a bank. And of course you do. Like many people, you’ve likely stuck with the same bank for years.
Most don’t rethink it, believing switching is too much hassle. But researching better options can substantially affect how much you save.
What to Seek in a Bank Account
Did you know major U.S. banks collect more than $6 billion a year from overdraft and ATM fees?
Maybe it’s worth trying another financial provider. We’ve found strong online banks that help you avoid fees and offer features you won’t get from traditional brick-and-mortar banks.
One example: a mobile banking app called Varo Money.
The FDIC notes the average savings account yields a mere 0.08% APY*, but when you open an online checking and savings account with Varo, you can earn more than 20 times that rate on savings.
Opening a new account isn’t thrilling, but Varo simplifies it. You can start with just a penny, and more than 750,000 people have enrolled.
Plus, there are no monthly fees.
Want other choices? Here’s our comprehensive guide to selecting the right account.
*https://www.fdic.gov/regulations/resources/rates/
Reduce Credit Card Interest
Credit card interest rates frequently exceed 20% these days. How do you avoid paying so much interest? Your best option is to cut back on spending and pay down balances as quickly as you reasonably can.
Start by picking the right card for your situation. Do you want cash-back or travel rewards, a balance-transfer card, or a card that helps build credit?
Also consider consolidating high-interest debt with a low-rate personal loan. It’s easier than you might expect. Browse online loan marketplaces. Here are some we’ve evaluated:
- AmOne lets you compare lender rates side-by-side. It’s ideal for borrowers with solid credit who want to consolidate debt.
- MoneyLion is another marketplace that allows larger loans and longer repayment terms if that suits your needs.
- Upstart can benefit recent graduates with limited credit history and student debt by considering additional factors beyond the traditional credit score.
Step 4: Automate Your Money
Yes — we’re in the digital age, so let technology do the heavy lifting.
Automation is one of the most effective ways to save. It saves you time, and time is money. Below are a few money-management steps to set up now so you only spend a few minutes a month on finances.
Automate Bill Payments
Most bills are paid online now, according to the Credit Union Times. Take it further: arrange to receive and pay all your bills online through your bank. That streamlines everything so you won’t miss payments.
How to do it: Use your bank’s online bill-pay tool. Add all billers and their account numbers. Opt into e-billing where available.
Your bank can also send electronic payments to individuals (like a landlord).
Automate Your Savings
There’s an app for nearly every financial need. We’ve tested several.
- Digit is an automated savings app that estimates how much you can save. Here’s our Digit review.
- Long Game Savings mixes simple games with saving habits.
- Also, check whether your bank can automatically transfer funds from checking to savings each month.
Automate Investing
You don’t need to be a market whiz to invest. You don’t have to monitor the market round-the-clock.
Many apps offer effortless, automatic investing — a “set it and forget it” approach. They help condition you to save more without noticing.
- Stash lets you invest with as little as $5 and charges about $1 monthly for balances under $5,000. Bonus: Savinly readers may get a sign-up credit.
- Acorns links to your accounts and rounds up purchases, investing the spare change into a portfolio. Bonus: Savinly readers may receive a small sign-up incentive! Read our full Acorns review here.
- Blooom provides a free “health check” for your 401(k). For $10 a month, it can optimize and manage your retirement savings. See how Blooom helped one saver maximize her 401(k).
Automate Budgeting
You can automate your budget, too. There are several apps that help.
Charlie is a money-saving assistant that works via SMS or Facebook Messenger (Messenger tends to be more feature-rich). Charlie helps you save by pointing out better deals (like that $24 monthly overcharge on your cell bill).
Mint shows all your accounts, cards, bills and investments in one dashboard.
Medean for iOS benchmarks your finances against peers of similar age, income, location and gender. It calls itself a “health index for your finances,” helping you evaluate your situation and discover savings opportunities.
Step 5: Adopt a Budget-Minded Lifestyle
Here’s the blunt truth: To save more, you’ll likely need to spend less. (Or boost your income — we’ll cover that next.)
That doesn’t require ascetic living. You don’t have to subsist on instant noodles, wear shabby clothes or cut your own hair with garden shears.
You simply need to be practical and deliberate. Here are top tips to help you cut costs:
Trim Household Costs
Your home is important, but keeping it running can be costly. Luckily, there are numerous ways to save around the house.
Big-ticket items — appliances and furniture — are prime areas to save. Consider repairing appliances before replacing them. Here’s a helpful list of tips for saving on furniture and appliances.
Utilities for heating, cooling and lighting add up. Install thermal curtains and a programmable thermostat, or explore other energy-saving tactics to lower utility bills.
Find Free Entertainment
Entertainment can be expensive. But you still need to enjoy life — so seek free options. Next time you plan a night out, try one of these budget-friendly date ideas or group activities.
If you’re staying in, consider cutting cable. Many do, because cable costs have skyrocketed.
Choosing a streaming service? We compared Netflix, Prime Video and Hulu — costs, content type and library size — to help you decide.
Also reassess that gym membership if you’re not using it.
Reduce Food Spending
Groceries eat up a large portion of most budgets and are a key area to trim. When you plan your shopping, try these money-saving grocery strategies:
- Look for printable coupons.
- Compare local grocery prices using a simple worksheet.
- Ibotta gives cash back for purchases if you upload grocery receipts — and a $5 bonus on your first receipt!
- Check grocery websites for deals and shop multiple stores when it makes sense.
Not a fan of grocery shopping? Nearly 70% of people say they overspend on takeout or dining out. Here’s how to save money at restaurants, too.
See If You’re Overpaying for Insurance
Insurance choices can be confusing and overwhelming because of the many options available.
Here’s how to find more affordable coverage:
Car Insurance
The simple ways to lower auto insurance: have fewer accidents, get fewer tickets and improve your credit score.
Additional expert tips include:
- Buy a used vehicle.
- Enroll in your insurer’s safe-driving program.
- Shop around. A digital marketplace like SmartFinancial can help and may save you up to $715 annually on car insurance.
Health Insurance
Health coverage is often confusing.
If you’re shopping for yourself, start at the federal marketplace on Healthcare.gov to see if you qualify for subsidies or assistance.
Freelancers face particular challenges finding affordable health care. Here’s how the self-employed can obtain coverage.
Life Insurance
Life insurance provides a lump-sum payout to beneficiaries if you die. Whether you need it depends on your situation.
Life insurance is more important if you’re married or have dependents. A basic policy might cover funeral costs, mortgage debt or other obligations.
You’ll usually choose between term and universal policies. Most people pick term — the simplest, most affordable and most common option.
To save money and simplify choices, new digital providers are streamlining the process:
- Bestow offers instant online quotes from major carriers to speed decision-making. You can apply online and get a brief follow-up call.
- Haven Life can provide coverage quickly based on online health information.
- Ethos can issue term life policies in under 10 minutes with no medical exam for coverage up to $1 million, offering a digital application and responsive customer support.
Step 6: Increase Your Income
How can you grow your income? Saving is easier when you bring in more money.
Here are easy ways to earn extra cash from home:
Share Your Views
Surveys won’t make you wealthy, but if you’re relaxing on the couch, why not earn a few dollars? We’ve tested many paid-survey sites and recommend My Points and InboxDollars.
Declutter Your Closets
Sell items you no longer need. Use the Decluttr app to get paid for old DVDs, Blu-rays, CDs, games, consoles and phones.
You can also list items quickly on Letgo by snapping a photo and creating a listing in about 30 seconds. For more effort, sell on Craigslist or eBay.
Pick Up a Side Hustle
For more ideas to boost your earnings, see:
- Creative ways to make money at home.
- How to earn additional income online.
- Strategies for passive income.
- Savinly Readers’ regularly updated page of remote job openings.
Jordan Carter ([email protected]) is a senior writer at Savinly. He’s steadily improving his saving habits.
