The great thing about saving money is that it's a lot easier than you might think. You don't have to cut out your morning coffee or start walking to work. You can save money on the things you buy every day, and it will add up to a tidy sum over time.
Some of the best ways to save money are the simplest: Reduce the amount you spend on things you don't truly value, and direct your savings to the things you do. It sounds obvious, but without a plan, it's all too easy to let your spending get out of control.
Even if you're not a big spender, there are still ways to trim your budget and put more money away. Here are 10 ideas:
- Adjust your withholdings.
If you're overpaying on taxes, that's essentially a loan to the government that you won't be able to access until tax time next year. If you're underpaying, on the other hand, you'll face penalties and interest fees. Check with your employer to make sure you're paying the right amount in taxes throughout the year.
- Skip one night out per month.
The average American spends about $230 each month on dining out, according to a 2016 survey from TD Bank. To put that in perspective, $230 is more than most people spend on groceries for a single month or their cell phone bill over three months — four months if they have an iPhone XS Max with unlimited data. You can save hundreds of dollars each year by cutting back on one or two nights out
- Track Your Spending and Savings
The first step to saving more money is figuring out where your money is going. If you find that a lot of your money is coming from unknown sources and vanishing into thin air, you should start tracking your spending.
There are two ways you can do this: manually or automatically. If you want to track your spending manually, I recommend keeping a notebook with you at all times. Every time you spend money — even if it's just a dollar for a bag of chips — write down the amount and what you purchased. You can also use an app like Mint to track your spending on auto-pilot.
After tracking your spending for a couple of weeks, take some time to figure out where your money is going and how much you're actually spending on necessities versus wants. You might find that you're spending way too much money each month on fast food meals or coffee shop drinks. And once you find these holes in your budget, it'll be easier to save more money by cutting back on the things you don't need.
- Make it automatic.
If you're not good at saving, make your savings as hands-off as possible. Have a portion of every paycheck deposited into an account you can't easily access (such as a retirement or brokerage account). Or set up an automatic transfer from your checking account to a savings account on the day you are paid. You'll never miss the money because you won't see it in the first place. And then when you do come across some extra cash, like the yearly bonus from work or an unexpected windfall, deposit all or most of it into your bank accounts to further boost your savings goal. But don't forget to put away enough for fun activities too — life isn't just about working and saving!
- Don't talk payment until you're ready to buy
Salespeople will want to talk price first, but you should hold off until you've negotiated the purchase price and trade-in value. Dealerships work hard to make sure their salespeople make money by “working the payment,” which means persuading customers to stretch their budgets in order to buy more car than they had planned with a monthly payment in mind.
- Get it all in writing
You'll need a sales contract that lists all the terms of your purchase or lease. Read it carefully before signing, and don't let any blank lines remain on the contract. If there's something on it you don't agree with or understand, ask questions — preferably before you sign anything.
- Set saving goals.
Once you know how much you spend each month, it’s easier to see where your money is going and set realistic savings goals for yourself. These goals could include paying off credit cards or loans, building an emergency fund, or saving for retirement or another future goal.
- Have a plan for unexpected expenses.
Unexpected expenses happen to everyone: a car repair, a medical bill, or maybe a lost job due to illness or injury. That’s why it’s important to have an emergency fund with at least three to six months of living expenses in case something like this happens to you.
Spend less than you earn. If you spend more than you earn, you will always be in debt, and in many cases your debts will be increasing as interest and penalties are added on.
If you're not saving anything at all right now, start with something small, like 5 percent of your salary. Then set a goal to increase it by 1 percent each year until you're saving at least 20 percent of your income.
Get on the same page with your partner or spouse about money. Agree on a budget and how much each of you can contribute toward that budget.
Learn to manage credit responsibly. Be cautious with new credit and know what interest rates you're paying on existing cards. Pay bills on time to avoid late fees and prevent your credit score from taking a hit — which could also make it harder for you to get loans in the future.
Build up an emergency fund of six months' worth of living expenses in case the unexpected happens, such as a job loss or major medical expenses. In general, aim to save 10-15 percent of your gross (pre-tax) income for retirement so that you can live comfortably once you stop working. You may want to consider increasing this percentage if you plan to retire early or if your employer does
Don’t feel bad if you’ve been struggling to save money. Plenty of people have found it difficult to start saving. I hope this post helped you see that there are plenty of ways to save, and that you haven’t uncovered all the possibilities. At least now you know what you can do to get started saving so that your money can work for you.