1. Create a Budget
Read it: How to Budget Money: Budgeting 101
The first place to start when trying to save money is to assess how much you really have and where that money is going. Consider using the 50/20/30 rule to create a budget. The 50/20/30 rule states that fifty percent of your income should go to essentials like rent and food, twenty percent should go savings, and thirty percent should go to personal expenses like entertainment.
2.Find ways you can cut your spending
If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back. Identify nonessentials 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.
3.Cut down on groceries.
Most people—after they do a budget—are shocked to find out how much they’re actually spending at the grocery store each month. And if you’re the average American family of four (with two kids 5 and under), you’re probably spending around $929. Yikes! It’s so easy to walk through those aisles, grabbing a bag of Oreos here and a few bags of chips there, and then top it off with the fun goodies at the register. But those little purchases (aka budget busters) add up quite a bit and end up blowing the budget every single month.
4.Build an Emergency Fund
Some experts recommend setting aside six months worth of living expenses in case of emergencies. This helps you avoid going into debt if you ever lose your job or have to pay unforeseen medical expenses.
5.Use the 30 Day Rule
When you want to make a large purchase, think on it first. Write down what it is and how much it costs, and if after 30 days you still feel it’s necessary, purchase it.
6.Set savings goals
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) - Vacation
- Down payment for a car
Long-term (4+ years)
- Down payment on a home or a
remodeling project - Your child’s education
- Retirement
If you’re saving for retirement or your child’s education, consider putting that money into an investment account such as an IRA or 529 plan. While investments come with risks and can lose money, they also create the opportunity for growth when the market grows, and could be appropriate if you plan for an event far in advance. See step No. 6 for more details.
7.Save money automatically.
Did you know that you can save money without thinking about it? Yup—you can set up your bank account to automatically transfer funds from your checking account into a savings account every month. If that sounds scary to you, you can also set up your direct deposit to automatically transfer 10% of each paycheck into your savings account.
8.Avoid Debt
Pay off your cards every month to keep your debt from piling up. If possible, avoid going into debt in the first place by spending within your limits and keeping your credit card at home. With a savings built up, you won’t have to put unexpected expenses on a card.
9.Buy Used
Local thrift stores and online auction sites like eBay offer everything from clothes to electronics at stellar discounts. You can get slightly used high quality items at a fraction of the cost of their newer counterparts.
