How to Start Saving Money (Benefits of Saving and Ways to Get Yourself in the Saving Mindset)
Saving money is kind of like flossing: you know you should be doing it and it’ll save you a lot of trouble down the road, but you convince yourself that so long as your bills are paid (or you’re brushing your teeth), you’ll be fine.
Or you may be from the school of thought that says the best way to save money is to make more money.
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Interestingly, even those who experience an increase in income find themselves with just as little savings as before. We have a tendency to spend what’s we’ve got, no matter how much we’re making.
That’s why even those with high incomes still tend to have significant amounts of debt. However, with some discipline and strategy, you can figure out how to start saving while still enjoying your day-to-day life.
What Are the Benefits of Learning How to Start Saving Money?
Figuring out how to start saving money and actually doing it can only have positive results.
One obvious outcome is more money to put aside for emergencies, trips, retirement or just as a rainy day fund to give you peace of mind. Unfortunately, while many Americans like the thought of money saving ideas, they are simply not making them a priority.
Many families live paycheck to paycheck. This isn’t necessarily because they are not making enough. Simply, they are spending too much. Forty-seven percent of Americans say they cannot cover a $400 emergency expense without using credit, according to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2014.
Clearly, there are a lot of Americans who could benefit from some money saving ideas.
While available cash in the face of an emergency is a huge incentive, learning how to start saving money has other beneficial effects, particularly on your health. Setting a savings goal and meeting it has terrific mental health benefits.
For starters, you build your confidence knowing that you can successfully work towards a goal. Furthermore, you have the peace of mind of knowing that you can take care of yourself and that you will be fine if an unexpected expense crops up.
Deciding that you’re going to learn how to start saving money will also help decrease one of the recurring features of modern life: stress. Constant stress can lead to a number of health problems, like headaches, chest pains, and an upset stomach.
It can also affect a person’s personal life by making them more irritable or dependent on drugs or alcohol. And what do most Americans report as one of the main sources of stress in their lives? You guessed it: money.
So, as you can see, learning how to start saving money is an investment not only in your bank account but in your body and mind too.
The Best Way to Save Money Is to First Get in the Right Frame of Mind
If you have poor spending habits, jumping into a savings routine unprepared is bound to fail. The best way to save money, especially if you’re just starting, is to come up with a realistic plan.
Make sure you understand that a sustainable savings strategy involves figuring out how to continue enjoying your life while living within your means.
Cutting out all the enjoyable things in your life and obsessing over every single expense are not effective money saving ideas, but learning how to start saving money will require an honest assessment of your current spending habits and where your expenses are going. This can be difficult.
A lot of people are unsure where exactly their money is going and simply can’t understand how they have no savings, especially around tax time, when they see just how much money they actually made that year.
How to Start Saving Money: Track Your Expenses
It can be tempting to jump right into saving the minute you decide to start, but make sure you are prepared by first tracking every little expense. That’s right.
Everything you buy, from your $2 coffee to your monthly Internet bill, should be recorded in a little notebook, in Excel or on your phone – whichever method is the easiest for you. The best way to save money is by first understanding how you spend your money.
Recording every little expense may not sound like the most exciting money saving idea, but it can be quite illuminating. For those who don’t want to carry a notebook around everywhere they go, ask for a receipt after each purchase to keep yourself accountable and then record those expenses when you get home.
But be careful not to let days of expenses pile up, or the exercise will become too tedious to follow through with.
You are not yet at the point where you make significant changes to your spending habits. This is simply an observational activity. But you will be stunned at the effect that paying attention to every little purchase can immediately have on your spending.
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How to Start Saving Money: Categorize Your Expenses
A couple weeks to a month are usually enough time to get an idea of what your day-to-day spending habits are. Now before turning to specific money saving ideas, it’s time to categorize your expenses. This does not have to be too complicated. In fact, you can break down your spending into three main categories:
- Fixed expenses: These are expenses that are either impossible to get rid of or difficult to change, such as your mortgage or rent and utilities.
- Variable expenses: These are expenses that can be adjusted, like groceries, clothing or entertainment.
- Savings: The amount of money you put aside for long-term goals, like retirement, or short-term, but irregular needs such as property taxes or health expenses.
Once you’ve broken down your spending in this manner, you will have a more concrete idea of how you spend and how to save money each month.
The best way to save money is to be critical of where your money is going, and you can do this by looking more closely at all the items in your categories. Do you really need to be spending that much money on groceries?
Cable is a fixed expense, but why do you have premium cable when you’re rarely home and you stream shows online?
If you want to know how to save money fast, asking these questions is one way to cut out a lot of unnecessary costs.
I Want to Know How to Save Money Each Month (Frugal Living Tips and Strategies for the Best Way to Save Money)
After taking a look at your spending habits, you may be in awe of how little you knew about your own financial life. That feeling can leave people uncertain about how to move forward and, frankly, unwilling to trust themselves to come up with a sustainable strategy for how to save money each month.
The first question for many people is: how much am I supposed to be spending in each category?
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Of course, this varies depending on your financial goals, income levels, and lifestyle, but if you’re just beginning to learn how to start saving money, there is a rule of thumb that is very helpful for beginners. It’s called the 50/30/20 rule:
- Fifty percent of your money should be going towards needs
- Thirty percent can go towards wants
- Twenty percent should be going towards financial goals
As far as money saving ideas go, this may shock a few people for a number of reasons, particularly the part about giving yourself 30% of your income for wants, like clothing and entertainment. But if you take a look at the breakdown of your spending, chances are you’re spending more than this amount.
Additionally, this rule of thumb recognizes that you do want to enjoy your life while saving, and that a radical saving regiment will have you relapsing into reckless spending. As mentioned earlier, the best way to save money is to create a realistic savings plan.
The financial goals section, which receives 20% of your income, includes things like paying down debt, retirement or other savings. It’s an automatic method for how to save money each month.
Concrete Strategies & Frugal Living Tips for How to Save Money Fast
Automatically allocating 20% of your income to your savings account is a great way to save money fast. However, you can take things a bit further by implementing some frugal living tips.
For starters, take a look at your other expenses. Things like rent and car payments are hard to change, but could you possibly make life transitions that cut those costs?
If you’re wondering how to save money fast, downsizing your apartment or moving to a cheaper area is one solution, although keep in mind that, in some cases, the cost of moving itself may be too expensive. The principle is that a fixed expense doesn’t have to be a permanent expense.
One of the ways to save money on a tight budget is to consider alternatives. Are car payments and insurance taking a huge bite out of your income?
Consider taking the bus instead. According to the American Public Transportation Association, individuals save, on average, $9,797 per year by switching. If you were wondering how to save money fast, there’s your answer.
- Plan Ahead
You’d be surprised at how much you eat out. In fact, a report by Visa found that people spend $936 annually on lunch alone. While going to a restaurant is considered a social event, particularly among Millennials, packing a lunch for work, at least, is one of the frugal living tips that could see significant savings.
Especially when you consider that most of the time, you eat that $10 salad at your desk anyway.
Even planning ahead by cooking for the following week on Sunday – so you have quick meal options when you’re exhausted – instead of ordering in is a money saving idea that can reap plenty of rewards.
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Incorporate Frugal Living Tips into Your Entertainment and Social Life
- Substitute Walks for Unused Gym Memberships
Do you have a gym membership that you never use? Why not cancel it, make to-go coffee at home, and take a walk with a friend? These frugal living tips let you get healthy, save money, explore your area, and stay social all in one go.
- Replace Eating out with Staying in
Instead of going out to eat, invite your friends over for a potluck, or everyone can pitch in to buy some snacks at the grocery store. Most of the time, people go out to eat in order to socialize, and if you find low-cost options, like staying in with company, that can be the best way to save money without sacrificing your social life.
- Check out the Library for Free Entertainment
If you’re a movie buff or are simply looking for cheap entertainment alternatives, you’d be surprised at the selection your city’s library system probably has in DVDs. Not every money saving idea requires a cold turkey approach.
The selections at public libraries are usually quite up to date on the latest releases, and the best part – they’re free to watch.
Other creative ways to save money can also include volunteering more, taking up a no-cost hobby like learning a new language or taking on freelance work in a field you’re passionate about.
How to Save Money Fast Using Technology
For some, no solution is a real solution unless there’s an app for it. Luckily, the fintech industry is booming with money saving and investing apps, and a lot of them have come up with creative ways to save money.
- Mint is a popular money management app that allows users to track their spending, set financial goals, and create budgets.
- Acorns is an app that automatically withdraws the spare change in your bank account and invests it for you, making use of your nickels and dimes.
- Betterment is an online platform, which is also available as an app. After users plug in their financial goals and timelines, it automatically comes up with an investment strategy to grow an individual’s money.
Additionally, those trying to figure out how to save money each month can also check with their banks to see if they offer simple savings solutions, like automatic monthly withdrawals. Setting a fixed amount to come out right when your paycheck goes in will have you saving before you even notice it’s gone.
Some banks even offer a product where you can have as little as fifty cents deposited into your savings each time you make a purchase from your checking account, allowing you to spend while you save.
Everyone’s financial situation is different. Certain pieces of savings advice and frugal living tips may be irrelevant to some people from lower income backgrounds who are struggling despite already sacrificing small luxuries.
When finding ways to save money on a tight budget, downsizing on fixed expenses may be the best solution while those with comfortable incomes will find the best way to save money is to cut back on their discretionary spending. With strategy, discipline, and a good attitude, building a comfortable nest egg doesn’t have to be an impossible task.
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