It’s a common misconception that effective ways to save money are only for the rich. Truth is exactly the opposite. No matter your monthly budget, you must put aside some money for emergencies, larger purchases, or simply for peace of mind.
Effective money-saving only builds wealth over time, so don’t expect to become a millionaire overnight. The best ways to save money start from good financial habits you can practice every day.
From saving on groceries and cutting on subscriptions to basics of investing – we’ll cover practical ways to build your savings account into something you can rely on.
10 Practical Ways to Save Money Each Month
Let’s not sugarcoat it – saving isn’t fun, and nobody does it when it isn’t necessary. As with all things unpleasant, to save money, you must start thinking about it correctly. The ten tips below are not only practical but will also help you form good habits to get into the money-saving mindset.
1. Set Realistic Financial Goals
One of the most common reasons why people don’t save money is their disbelief in reaching their financial goals. Just because you’ll never save for a mansion doesn’t mean you shouldn’t put money aside. Start with realistic goals that won’t discourage you.
Having financial goals is crucial for simply starting to budget your expenses. Once you know your priorities, you can start tracking your budget, cut down on what’s unnecessary, and set aside money in a separate account for savings.
2. Open a Separate Account for Savings
Generally, it’s recommended to set aside around 20% of your income per month for savings, but simply having a savings account is already a big step forward. Many Americans don’t even have one, not to mention a high-yield savings account or an investment portfolio.
An account with an annual percentage yield (APY) higher than 5% can be treated as a high-yield savings account, but anything that will give a better return than inflation will save money. If you are keeping your savings in a regular account or cash, you are actually slowly losing it.
3. Manage Your Debts
Loans and other debt forms can be a good tool to gather money you do not have at the moment. People tend to forget that it’s exactly that – a tool and financial tools need to be taken care of as well. You cannot take on debts and forget about them.
Besides making monthly payments, you must analyze the market and see whether you can get a better deal. Check refinancing options for your mortgage, auto, or student loan and negotiate for a better contract. Sometimes, it might be useful to pay the debt more quickly if the rates aren’t in your favor.
4. Lower Transportation Expenses
According to the US Department of Commerce, food, housing, and transportation are the three largest expenses. You can save money on all of them, but transportation presents the most options with a large impact on your monthly budget.
Using public transportation, avoiding taxis and ride-hailing services, sharing daily commutes with coworkers, or getting a more fuel-efficient car are known to be effective. If you live in a city, there are always options to move around more economically.
5. Budget Your Grocery Shopping
There are plenty of effective tips on how to save on groceries, but it all starts with determining your budget and buying a meal plan. Then, you can look for ways to buy produce in bulk and make use of various other discounts and loyalty programs.
If you have the means and skills, you can even start growing your own vegetables as a hobby. The amount you can save highly depends on the needs of your household, so it’s important to involve the whole family and keep your grocery shopping list healthy.
6. Avoid Ordering and Eating Out
If cutting your grocery bill is too difficult, then minimizing your food ordering and restaurant spending should be easier. The convenience of not making your food at home has created non-frugal habits for many.
One of the most effective strategies to minimize your restaurant spending is to gradually lower the frequency of your visits. You can also order cheaper meals and split the bill with others. Eventually, you want to leave food orders or go to restaurants only on special occasions.
7. Address Recurring Payments
Recurring billing is great for services that you actually use and get a good deal when buying, but it’s not always the case. Online subscriptions for entertainment are one of the biggest culprits because companies rely on you not noticing that they have raised prices or that you no longer use their services.
A frugal strategy is to review your recurring payments periodically and set reminders for when they end. Almost any recurring bill, from a cell phone plan to Netflix, will change pricing and other conditions over time. Subscriptions must be managed just as debts if you want to save money.
8. Optimize Electricity Usage in Your Home
Trying to reduce your electric bill actively is one of the best ways to save money. There are many practical steps you can take – unplug unused appliances, purchase more energy-efficient devices, such as energy-saving light bulbs, or invest in green energy solutions.
Taking steps to actively reduce your electric bill is useful not just because of the money saved. It’s one of the best ways to get into the saving mindset. Unlike other ways to save money, each step you take to reduce electricity usage has a measurable effect on your bills.
9. Try a No-Spend Period
If your spending habits are out of control, try to implement a no-spend period. Depending on your current habits, this can be a month, a week, or a few days. For short periods, you can prepare food up front and try not to buy anything at all.
Keeping your wallet closed for more than a few weeks might get complicated. There are bills to pay, and free activities may run out quickly. So, the challenge here is to save money on unnecessary expenses – fast food, bars, online games, or anything else ruining your budget.
10. Hire a Financial Planner
Sometimes, problems are so complicated that you can’t find a solution yourself. It can happen with finances as well, and it’s nothing to be ashamed of. Starting to change your situation and seeking the help of a professional is more important.
Be sure to look for a certified financial planner and not someone who is simply advertising as one. Usually, they help most with mortgages and other big financial responsibilities, but you can get some good advice on building good financial habits.
Achieving Specific Savings Goals
It’s much more difficult to save money when you don’t have a saving goal. It can be a new gaming PC, holidays, tuition fees, or anything else that makes you excited. Building good habits is easier with a goal, and then you can start saving a specific sum regularly.
How to Save $1,000 in 30 Days?
A thousand dollars is a lot of money to save in a month if you don’t have any previous savings. Most Americans, for example, have an after-tax income of up to $5,000 per month. So you need to save a fifth of your income in a month.
Saving that much might require some harsh measures, like selling stuff you own but don’t use frequently. Clothes, electronics, jewelry, furniture, and other high-value items can be considered.
Another way to pull this off is by setting aside $1,000 just when you get your paycheck and then cutting on other expenses. However, such a strategy might result in you missing important payments or even taking on debt.
It only shows the importance of saving money consistently each month. For example, just by choosing a cheaper cell phone plan, you could save up to $50 monthly. Over a year, this will be around half of the $1,000 you aim to save.
Saving for Larger Goals
Strategies for saving even larger sums, such as a down payment for a house, will require longer saving periods. Additionally, you could try out investing, but keep in mind that high and quick returns will also create a high risk of losing your savings.
So, cutting on expenses and automating transfers into your savings account is the only way to save large sums of money. Depending on your income and the percentage of savings you save, every financial goal can be reached over time.
How to Save Money Fast?
The fastest way to save large amounts of money is by drastically cutting your expenses. Most people can cut half of their monthly expenses. So can you, but you’ll need to sacrifice your quality of life.
Canceling unnecessary subscriptions, creating a meal plan for groceries, and saving on electricity are among the main things to look out for. If that doesn’t bring the desired result, consider selling some unused belongings.
Finding a second job or a profitable side hustle is also an option if you want to earn money fast. Check out answering surveys, internet sharing, and playing games for money on Pawns.app.
Budgeting Rules to Follow
Your budget cannot be based entirely on your own saving goals. Any certified financial planner will point you to specific rules when making your budget. There are no silver bullets in personal finance. The budget will need to be adjusted to your individual needs, but the rules below are a great way to start.
The 50/30/20 Rule
The 50/30/20 rule is an easy-to-understand method of managing your finances. It gives a simple guideline on the proportions of your monthly spending. There are only three categories.
- 50% of expenses go to needs – bills, health care, groceries, etc.
- 30% is for wants – hobbies, luxuries, vacations, etc.
- 20% remains for your savings – money that you put into a savings account or for larger purchases.
The last 20% is crucial and should not be missed unless you have a lot of debt. Interest rates on your debt might eat all of your savings, so it makes more sense to pay it out first in such cases.
The 30-Day Rule
Another important budgeting rule helps to contain impulse spending. The 30-day rule recommends waiting for thirty days before committing to a major purchase. It gives time for you to evaluate whether you actually need the purchase or if it’s a momentary want.
If thirty days are too long, you can wait for a shorter period, but 30 days are usually mentioned because of budgeting reasons. Depending on when you start counting your monthly budget, you can wait for a calendar month or the next salary.
Other Useful Budgeting Rules
There are as many personal finance rules as there are personal finance advisors and books. Many of them are variations of the above 50/30/20 rules.
- The 60/20/20 rule moves 10% of wants to needs for those who have more financial responsibilities.
- The 80/20 rule is a stripped-down version of the 50/30/20 rule, where 20% is allocated to savings, and everything else goes to the spending category.
- The 50/15/5 rule splits the 20% of savings into 15% for retirement or other savings and 5% for an emergency fund. The remaining 30% are unallocated by purpose.
No matter which budgeting framework you choose, all categories will have further subcategories. Deciding between them will require you to have clear priorities. In many cases, you’ll understand that some purchases can be pushed to another month or even later. That’s a variation of the 30-day rule.
One more rule worth mentioning is to pay yourself first. The allocated savings budget must be allocated first. Otherwise, you may not have enough left to save, and the vicious cycle of not saving will continue. Again, there are exceptions with debts, extremely important payments, and emergencies.
Are You Saving Enough?
Most budgeting frameworks operate in percentages and recommend saving at least 10% of your monthly after-tax income. Over time, this should amount to at least three months of salary. Some personal finance experts claim this number should be closer to around six months of income.
Don’t worry if you don’t have that much saved. It’s a financial goal for many and a flexible amount depending on your spending habits and living situation. That’s why it’s often useful to think about savings in terms of how old you are.
Savings Benchmarks by Age and Income
Only a few students will have six months’ salary saved, while a thirty-year-old should already have twice that much (an annual salary) saved. If you start early and save consistently, your savings should steadily grow.
- In your 20s – savings equal to six months of your salary.
- In your 30s – one-year salary savings.
- In your 40s – three-year salary savings.
- In your 50s – six-year salary savings.
- In your 60s – eight-year salary savings.
With such a benchmark and a 50/30/20 rule, you can calculate your expected savings amount. Suppose you consistently earn $60,000 per month since your twenties.
- In your 20s – from $15,000 to $30,000
- In your 30s – $60,000
- In your 40s – $180,000
- In your 50s – $360,000
- In your 60s – $480,000
These numbers are orientational and don’t mean that all savings are in cash you can spend immediately. Many people have that much saved in the form of real estate or other investments they control. There are also other tools like investment portfolios, 401(k), or life insurance plans.
Conclusion
As much as money-saving practices are helpful, sometimes they are not enough. The last tip is that not every financial problem can be solved by saving. It might even distract you from how to earn more. Check out how the Pawns.app can help you earn money on the side.
