Saving money can feel like an impossible task, especially when you’re living paycheck to paycheck. But with some minor changes, anyone can start socking away extra cash. Saving just a little at a time allows your money to grow through the power of compound interest. Before you know it, you’ll have a nice nest egg established.
How to Start Saving Money:
Take Inventory of Your Spending Habits
The first step is to understand where your money is going each month. Track your spending for 1-2 months using an app or spreadsheet. It will reveal waste and show you where to cut back.
Once you see the numbers, you can set a realistic saving goal. Financial experts recommend saving 10-15% of your income, but any amount is a good start.
Automate Your Savings
The easiest way to save is by making it automatic.
“Set it and forget it is the mantra when it comes to saving money,” says blogger Konger. “Automate transfers from your checking account to a savings account each pay period.”
Having the money removed before you see it makes saving painless.
Pay Yourself First
Treat savings like any other monthly bill.”
Pay yourself first by transferring money to your savings account right when you get paid, just like you would a bill,” suggests Konger, a financially responsible adult i.e me.
It ensures you save what you can before money gets spent elsewhere. Make it the very first “bill” you pay.
Trim Your Monthly Expenses
Analyze your spending report and look for areas to cut back. Small changes add up over time.
Subscriptions: Audit your subscriptions and cancel the ones you use sparingly. Forgotten subscriptions can drain $50-$100 a month.
Dining out: Dining is often the biggest budget buster. Cook more meals at home and go out just 1-2 times a month.
Morning coffee: Make coffee at home instead of buying it. A cup of $3-5 can save $100 or more each month.
Happy hours: Limit happy hour splurges to 2-3 times a month. Having friends over is usually cheaper (and more fun!).
Downsize Your Home
Housing is most people’s biggest expense. Downsizing to a smaller home can free up hundreds per month.
If buying a new home isn’t feasible, renting out extra rooms can provide rental income.
Shop Smart
You can save money on everyday shopping with just a little effort.
- Make a list: Stick to a grocery list to avoid impulse purchases. Meal plan for the week before shopping.
- Buy generic: Opt for store-brand items instead of name brands. The quality is usually the same.
- Use coupons: Only grocery shop with coupons in hand. You can save 20% or more.
- Buy in bulk: Bulk bins can be 30-50% cheaper per ounce for non-perishables.
- Shop sales: Check the weekly ad for what’s on sale. Stock up on deeply discounted items.
Use Cash-Back Apps
Cash-back apps give you money back for purchases you’d make anyway. It takes just seconds to snap photos of receipts.
Popular options like Ibotta, Rakuten, and Dosh can earn you $100+ yearly in cash back.”
Develop Your Talents
Monetizing a hobby or skill can generate extra income you can save. Ideas include:
- Teaching music lessons
- Selling handmade crafts online
- Doing freelance writing or design
- Babysitting or pet-sitting
Have a Garage Sale
Hosting a garage or yard sale allows you to declutter and earn cash. Advertise it for free on Nextdoor, Craigslist, or Facebook.
Save Your Tax Refund
When tax refund season arrives, resist the urge to splurge. Save your refund instead.
Say No to Debt
Avoid taking on new debt whenever possible. Debt repayments eat into the money you could save.
Turn Windfalls Into Savings
Use unexpected money like bonuses, gifts, and inheritance to grow your savings faster. Make it a rule that 100% of windfalls get saved.”
Get a Side Gig
Adding a side gig can save hundreds of extra monthly dollars. Ideas include:
- Driving for a rideshare app
- Tutoring students
- Doing freelance writing, design or programming
- Starting a dropshipping business
Move Somewhere Cheaper
Relocating can dramatically cut expenses if you live in a High Cost Of Living area. You can bank the savings.”
Delay Major Purchases
Put off large discretionary buys like new cars or home renovations. Keep making do with what you have and save the money instead.
Make It a Family Affair
Get the whole family involved in saving money. Have monthly family meetings to set savings goals and find new ways to save.
Make Saving Fun
Find ways to gamify your savings to stay motivated. Some ideas:
- Name your savings accounts based on goals
- Track savings % in a spreadsheet
- Celebrate milestones like pizza when you hit $1,000
- Have contests for who can save the most
Common Mistakes People Make When Trying to Save Money:
- Buying Cheap, Low-Quality Items: Opting for the cheapest option can lead to more expenses in the long run if the item needs frequent replacement or repair. Even if it’s more expensive upfront, investing in quality can be more cost-effective over time.
- Ignoring Small Expenses: Small, recurring expenses can add up. People often need to pay more attention to daily coffee purchases, subscription services, or eating out, not realizing their significant impact on their overall budget.
- Failing to Budget Effectively: With a clear budget, treasury spending and savings goals take a lot of work. Some people either don’t budget or create an unrealistic budget that’s hard to stick to.
- Impulse Buying: Impulse purchases, especially during sales, can derail saving efforts. Just because an item is on sale doesn’t mean it’s necessary or a wise investment.
- Neglecting Emergency Funds: Focusing solely on saving for specific goals and neglecting to build an emergency fund can be problematic. Unexpected expenses can force reliance on credit, leading to debt.
- Overestimating Savings From Deals: Getting swayed by deals and discounts, thinking they’re saving money when spending more than intended on items they wouldn’t have bought otherwise.
- Not Comparing Prices: Please shop around or compare prices to avoid missing out on better deals elsewhere.
- Paying Unnecessary Fees: Overlooking small fees like ATM charges, late payment fees, or banking fees can add up significantly over time.
- Cutting Costs Too Aggressively: Overly aggressive cost-cutting, like eliminating all leisure activities or unduly restricting food budgets, can be unsustainable and lead to burnout.
- Not Reviewing and Adjusting Budgets: Financial situations and budgets change. Not regularly reviewing and adjusting budgets can lead to inefficiencies in saving strategies.
- Underestimating the Power of Compound Interest: Not investing or saving in accounts that yield compound interest can result in missed opportunities for money to grow over time.
The Bottom Line:
In conclusion, building a nest egg is a process that requires both discipline and strategy. You can gradually accumulate savings by understanding your spending habits, automating savings, cutting unnecessary expenses, and making smart financial choices. Remember to avoid common pitfalls like impulse buying, neglecting small expenses, and underestimating the power of compound interest.
Incorporate saving into your daily life, whether through a garage sale, a side gig, or simply making coffee at home. Engaging your family in the process and making saving an enjoyable challenge can turn financial management into a positive and rewarding experience. Your efforts will pay off with persistence and mindfulness, leading to a more secure and financially stable future.
