Sometimes the hardest thing about saving money is just getting started. This step-by-step guide for how to save money can help you to develop an easy and practical approach, so you can save for all your short- and as well as long-term savings goals. Use these money-saving tips to generate ideas about the best ways to save money in your day-to-day life.
#1 Budget For Saving
Once you have an idea of what you spend in a month or what your monthly expenses, you can begin to organize your recorded expenses into a workable budget. Your budget should outline how your expenses measure up to your income—so you can plan your spending and limit overspending. and, make a budget for your saving sure to factor in expenses that occur regularly but not every month, such as car maintenance.
#2 Saving Goal
One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for perhaps you’re getting married, planning a vacation, or saving for retirement. Then figure out how much money you’ll need and how long it might take you to save it. Here are some examples of short- and long-term goals:
Short-term (1–3 years)
- Emergency fund (3–9 months
- of living expenses, just in case)
- Down payment for a car
Long-term (4+ years)
- Down payment on a home or a
- remodeling project
- Your child’s education
#3 Pick The Right Tool
If you’re saving for short-term goals, consider using these FDIC-insured deposit accounts:
- Savings account
- Certificate of deposit (CD), which locks in your money for a fixed period at a rate that is typically higher than savings accounts
For long-term goals consider:
- FDIC-insured individual retirement accounts (IRAs), which are tax-efficient savings accounts
- Securities, such as stocks or mutual funds. These investment products are available through investment accounts with a broker-dealer. Remember that securities are not insured by the FDIC, are not deposits or other obligations of a bank, and are not guaranteed by a bank. They are subject to investment risks, including the possible loss of your principal.
#4 Reduce Your Debt
For saving you have to cut down your debt, increasing the ratio of debt it affects on saving. Add up how much you spend servicing your debt each month, and you’ll quickly see. Once you’re free from paying interest on your debt, that money can easily be put into savings. A personal line of credit is just one option for combining debt so you can better pay it off.
#5 Cut Your Spending
If your expenses are so high that you can’t save as much as you’d like, it is time to cut down your expense. Recognize not so important items that you can spend less on, such as entertainment and dining out. Look for ways to save on your fixed monthly expenses like television and your cell phone, too.
Here are some ideas for trimming everyday expenses:
- Use resources such as community event listings to find free or low-cost events to reduce entertainment spending.
- Cancel subscriptions and memberships you don’t use—especially if they renew automatically.
- Commit to eating out only once a month and trying places that fall into the “cheap eats” category.
- Give yourself a “cooling off period”: When tempted by a nonessential purchase, wait a few days. You may be glad you passed—or ready to save up for it.