It’s a common misconception that effective ways to save money are only for the rich. However, it’s not necessarily the truth. 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 reach your savings goals and live a more stable life.
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 money-saving tips below are not only practical but will also help you form good habits to get into the money-saving mindset.
Lower Income
1. Budget Groceries & Necessities
There are plenty of effective tips on how to save on groceries, but it all starts with determining your budget and preparing 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 need help with discounts, you could use apps like Ibotta, which is handy for accessing discounts, cashback offers, and grocery rewards.
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.
2. Lower Transportation Costs
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, bike-sharing, or carpooling with coworkers can lower your transportation costs significantly. Also, there are cities that provide free transportation passes for students, seniors, or struggling families, so make sure to look up if these conditions apply to your city.
3. Cut Unnecessary Subscriptions
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 some companies rely on you not noticing that they have raised prices or that you no longer use their services.
Tracking your subscriptions with dedicated apps, such as Rocket Money, can help you avoid paying for services you no longer use. Additionally, you could research free alternatives for paid subscriptions, like free streaming platforms, trial versions, and more.
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.
4. No-Spend Periods
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.
Medium Income
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.
There are two types of financial goals: short-term and long-term. Short-term goals include vacations or emergency funds, and long-term goals revolve around saving for a house or retirement. Set up realistic goals for both types, stick to them, and your financial goals will come true.
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 high-yield savings accounts or investment portfolios.
Consider opening a high-yield savings account and automated savings apps like Digit to maximize your savings potential. These tools will make a direct deposit from your checking account to your savings account automatically, meaning you won’t have to do any of the manual work every month.
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. Lower Transportation Expenses
If you can’t transition completely to public transport, bikes, or carpooling, then another idea for you would be to downsize to a fuel-efficient car to cut fuel costs. Or, if you can afford it, consider investing in an electric car and a charging station.
Also, you could try to negotiate better rates with your insurance company to reduce overall transportation expenses. If you’re considering changing your car, make sure to check what cars usually have the cheapest insurance costs.
High Income
1. Invest in Retirement Accounts
Retirement accounts are a great way to save for your future while also getting a tax refund. For example, 401(k) offers reduced taxable income, which helps save money before retirement; and Roth IRAs provide tax-free withdrawals, which is great for those who expect to be in a higher tax bracket.
If your employer offers a 401(k) match, make sure to take full advantage of it. It’s essentially free money that could increase your retirement savings exponentially. Let’s say that your employer offers a 50% match on your contributions. That’s basically 50% ROI (return on investment) there. It’s a great way to boost your retirement fund without an active effort.
2. Green Energy Solutions
Installing green energy solutions, such as solar panels or energy-efficient home improvements, not only are great for your wallet, but the environment, as well. Depending on your geographic location, solar panels could cut your electric bill significantly since you will be generating your own energy.
Even though the initial setup cost is rather expensive, it pays off in the long run. Not only that, it also increases your property’s value in case you may be considering moving out.
Additionally, your government may offer financial incentives to help alleviate part of the cost as the green initiative gains traction. If you’re planning to install any green energy solutions in your home, make sure to check if you would be eligible for government support.
3. 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 who has a strong reputation for helping clients manage and grow their wealth effectively, 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?
- Create a budget and track spending. Review what you spent last month, cut out unnecessary expenses (like subscriptions, restaurants, drinks), and build a spreadsheet (or use an app) to track everything you spend.
- Do a no-spend challenge. Try a no-spend challenge for a week, where you only buy absolute essentials and no afternoon lattes, snacks, online shopping, or anything else.
- Automate your savings. If you’re bent on saving $1,000 this month, you could use an app to transfer a predefined amount of money from your checking account to your savings every day or every week.
- Sell items you don’t use. Find clothes, gadgets, or anything else that you no longer use and sell it on a marketplace of your choice. You can use Facebook Marketplace, eBay, Amazon, or any other platform.
- Pick up a side gig. Try finding a freelance gig on Upwork or Fiverr, look up dog-walking or babysitting. This may turn out to be a permanent side gig, so it has even more potential than just the $1,000.
- Cut back on daily habits. If you’re someone who buys a cup of coffee every day or smokes a pack of cigarettes, cutting back on these things will contribute quite significantly to your savings goals. And your health, as well.
- Use coupons and cashback apps. You can save extra on groceries by leveraging coupons and apps like Ibotta, Honey, or Rakuten to get cashback deals and discounts.
Follow these money-saving tips and you will save that $1,000 in no time.
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 the notion of high and quick returns will also create a high risk of losing your savings.
So, cutting on expenses and automating transfers from your checking account to your savings is the safest way to save large sums of money. Depending on your income and the percentage of money 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 dedicate to your savings goals, or for larger purchases.
The last 20% is crucial and should not be missed unless you have a lot of high-interest debt. Interest rates on your credit card 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 70/20/10 rule allocates 70% of your income to living expenses, such as housing and food, 20% goes to debt or a savings account, and 10% goes to investments.
- 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 done 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
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.
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.
FAQ
How can I build an emergency fund?
Start by setting a savings goal, for example 3 to 6 months’ worth of living expenses. Make a small, consistent direct deposit each month from your checking account to a separate savings account and automate the process if possible to ensure regular transfers.
What is Rule 72 in savings?
Rule 72 is a formula to calculate how long it will take for your money to double based on a fixed interest rate. Divide 72 by your annual interest rate to determine the approximate number of years required for your investment to double.
What is the 100-day envelope challenge?
The 100-day envelope challenge is a savings method where you label 100 envelopes with numbers from 1 to 100. Each day, you randomly pick an envelope and put the corresponding amount of money inside, with the goal of saving $5,050 over 100 days. However, it would be more efficient to transfer the amount to a high-yield savings account so your money grows in value.
