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Knowing you want to save money and actually starting to save are two different things. Whether you’re saving money for a house, bucket list vacation or another goal, here are simple tips to get the ball rolling.
1. Review Your Expenses
It’s hard to save if you don’t know where your money is going or if you’re struggling to keep up with everyday expenses. Reviewing your checking and credit card account statements can help you identify expenses you may be able to cut.
Here are some tips to reduce spending:
- Cancel subscriptions or memberships you no longer use
- Downgrade internet or mobile phone packages
- Make coffee at home rather than buying it from coffee shops
- Bring lunch to work
- Switch to a no-fee checking account
- Review insurance policies to ensure you’re not paying for more coverage than you need
- Leave credit cards at home
- Don’t add credit cards to your mobile wallet
2. Get Clear on Your Goals
When it comes to saving money, staying motivated is half the battle. It’s easier to stick to a savings plan if you know the goals you’re trying to achieve.
Here are some common savings goals:
- Building an emergency fund
- Saving for a home or vehicle down payment
- Starting a business
- Taking a vacation
- Funding retirement
- Paying for your children’s college education
- Buying a second home or investment property
- Leaving a legacy to loved ones
The best way to set clear goals is to make them SMART—specific, measurable, attainable, relevant and time-bound.
For example, “I want to save money” is a general goal. On the other hand, “I want to save $500 for an emergency fund in 6 months” is a SMART goal.
3. Understand Your Spending Triggers
Identifying your spending triggers can help you reduce your expenses and save money. Spending triggers are often emotional, like overspending when you feel stressed or overwhelmed. Spending triggers can also be a specific place, such as a shopping mall or favorite store, or they can be linked to a person, such as a family member or friend.
To identify your specific spending triggers, review recent unplanned expenses to uncover patterns. If you were always with a specific person, at a certain store or feeling a particular way at the time of purchase, that might be a spending trigger.
4. Pay Off Debt
Paying off debt is one of the best ways to get to a place where you can put more of your paycheck toward savings. If your monthly debt payments total $200, that’s $200 you could be stashing away in a savings account each month.
Prioritize repaying high-interest debt, such as credit card balances, and consider lowering your interest rate with a balance transfer card or a debt consolidation loan.
5. Automate Your Savings
Automation streamlines your finances and can help you build a savings habit without even trying.
There are two main ways to automate your savings:
- Set up automatic transfers. Log into your savings account and set up automatic transfers from your checking account into your savings account. You can typically choose the withdrawal date and frequency, such as weekly or monthly.
- Direct deposit through your employer. You can ask your employer to deposit a portion of your paycheck into your savings account. You can typically choose either a dollar amount or a percentage.
How To Save Money
Here are tips to help you save money in some of the top spending categories.
How To Save Money on Groceries
Food is often the most significant household expense after housing and transportation costs. According to the Bureau of Labor Statistics, the average U.S. household spends $5,259 a year on groceries. That number can be significantly higher depending on family size and geographic location.
One of the best ways to cut grocery costs is by meal planning—choosing your breakfast, lunches and dinners for the week. Make a list of the ingredients needed for each meal and only buy those to avoid impulse purchases at the grocery store. Check weekly flyers in the mail for any relevant coupons.
How To Save Money on Gas
Saving money on gas is trickier since there’s less flexibility in how often you drive, especially if you commute to work. It’s worth shopping around, as gas station prices can vary significantly even within the same town. Apps like GasBuddy can help you find the cheapest gas station in your area.
Stay up to date with maintenance tasks that can impact fuel economy, such as replacing filters and monitoring your tire pressure.
How To Save Money on Electric Bills
Though we can’t control the impact of inflation on utilities, we can manage our electricity usage with small lifestyle changes.
Here are some ways to reduce electricity usage:
- Use cold water for laundry
- Wash full loads of laundry and dishes
- Lower the thermostat at night or when you’re out of the house
- Unplug appliances when not in use
- Turn off lights and electronics when not in use
- Turn off the heated-dry function on your dishwasher
- Use energy-efficient lighting
How To Save Money on Food
According to the USDA, U.S. consumers spent an average of 10.3% of their disposable income on food in 2021, with 5.1% spent on food outside the home.
The easiest way to save money on food is to limit how often you dine out. Meal planning helps with this in addition to keeping your grocery bill low. You could also pick one day per week when you permit yourself to dine out, so you don’t feel too restricted.
How To Save Money on Taxes
No one can avoid taxes, but there are ways to reduce your tax bill. One easy way to save money on taxes is to avoid late fees by filing your tax return on time. If you’re self-employed and make more than $1,000 in a tax year, you must make quarterly estimated tax payments to avoid penalties.
Boosting your savings can also help you save on taxes. For example, contributing to a tax-deferred 401(k) retirement plan, health savings account (HSA) or flexible spending account (FSA) can help reduce your taxable income and lower your bill to Uncle Sam.
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Why Saving Money Is Important
Having money in the bank provides a buffer against life’s uncertainties. If you get laid off, you can take your time to search for the right opportunity instead of accepting the first offer that comes your way. If you receive a medical diagnosis and need to take some time off work, you can do so without worrying about how you’ll keep the lights on.
Knowing you can handle anything that comes your way provides peace of mind, and that’s well worth the effort it takes to get there.