It is easy to say you will save money, until reality sets in.
You get paid Friday! And then there is the mortgage or rent, groceries, electricity, insurance, gas, subscriptions, school fees, and the occasional surprise purchase. Before you know it, another payday is coming up and there is not as much money left as you thought.
If this rings a bell, you are certainly not alone.
The good news is saving is not just for people who make a lot of money. You do not need to wait until you get a raise, pay off all your debt, or have thousands of dollars left over every month.
Start with what you have today.
You can build an emergency cushion, achieve important financial objectives, reduce your dependence on debt, and eventually create wealth, even if you are saving lesser amounts of money consistently.
In this guide, we will discuss why saving money is important, how much you should be saving, where to keep your savings, and 15 practical ways to save money today.
Why is it so important to save money?
Saving is not just watching your bank account number increase.
Savings give you choices.
Without savings, even a small, unexpected expense can derail your budget. Savings are the financial cushion between an inconvenience and a monetary crisis.
Here are some of the top reasons to make saving a priority.
1. Savings Help to Manage Emergencies
Cars break down.
Devices stop working.
Medical expenses have come up.
You may find your hours of work are cut without warning.
You cannot foresee every financial emergency, but you can prepare for it.
An emergency fund is money you have available for unexpected, necessary expenses.
If anything goes wrong, you may be able to pay the bill from savings rather than rushing out for a credit card or personal loan.
Do not be put off by recommendations that you need several months of expenses right away if you are starting from zero.
Begin with small steps.
Your first targets might be:
$250 → $500 → $1000 → 1 month of living expenses → 3 months → 6 months
The most important thing is to begin.
2. Savings Can Prevent You from Going into Debt
One of the hidden benefits of saving is that it can save you from future debt.
Example: Your car needs a $900 repair.
That $900 could go on a credit card, no savings. If you do not pay off the balance quickly, interest can make the repair more expensive.
An emergency fund means you may be able to pay the bill, then slowly rebuild your savings.
That is why saving money and paying down debt do not have to be mutually exclusive goals.
Building at least a starter emergency fund while paying down high-interest debt can provide valuable protection for many households.
3. Turning Dreams into Reality with Saving Turns
You need money to do most big financial things.
You might want to:
- Buy your first home!
- Change your car.
- Plan a family holiday.
- Open a business.
- Educating the fund
- Relocating to another city
- Redesigning your house
- Retirement is good.
The difference between saying, “Someday I’d like to do that,” versus creating a realistic financial plan, often boils down to a dedicated savings strategy.
For instance, rather than saying:
“I want to save for a holiday,”
What about this?
“I want to save $3,000 for our vacation in 12 months.”
Now the goal can be quantified:
$$3000/12 = $250/month
Now your dream has a number and a deadline.
4. Savings Provide Financial Breathing Room
There is something powerful about knowing you have money available should your circumstances change.
Savings give you more breathing space in terms of making big decisions, where not every decision is dictated by your next paycheck.
That could mean being able to move, taking time off between jobs, paying for an unexpected family expense, pursue further training, or simply sleeping better knowing that one surprise bill will not derail your monthly budget.
This is one of the most neglected benefits of saving.
You are not just gathering dollars.
You are buying financial flexibility.
5. Investing relies on saving
Saving and investing have different goals.
And money you might need soon enough generally should not be exposed to unnecessary investment risk. Emergency savings, for example, need to be liquid.
Once you have a good amount of cash reserves and short-term financial needs met, some of that money you are putting away for long-term goals can be invested.
Investing can allow you to benefit from compounding over many years.
The sooner you start, the more potential time you have for your money to grow.
But investment carries risk and returns are never guaranteed. That is why it is so important to know the purpose and timeline of your money.
Learn Where Your Money Goes Before You Save More
You cannot fix a financial problem you cannot see.
Do not establish an aggressive savings goal until you have taken a month to review your finances.
Start with your monthly take-home pay.
Then make a list of your expenses.
Divide them into categories like:
Fixed Expenses (constant)
The ones that tend to be consistent:
- Housing (mortgage or rent)
- Auto loans
- Insurance
- Minimal loan payments
- Internet
- Childcare Variable costs
Variable Expenses
These can change from month to month:
- Grocery items
- Natural gas
- Eating places
- Entertainment (movies, TV shows, books, video games, music, etc.)
- Clothes
- Personal service
- Household spending
Irregular Expenses
These are easy to forget because they do not happen every month:
- Vehicle Registration
- Annual Subscriptions
- Holiday spending
- Presents/Gifts
- Maintenance on the home
- Costs for school expenses
- Insurance costs
- Vacation costs
Monthly bills are easy to plan for, but many budgets fail because people forget about bills that happen quarterly or yearly.
Break down big annual expenses into 12 and start saving a little each month.
Such a fund is often called a sinking fund.
15 Easy Ways to Start Saving Money Today
You do not have to change your entire life to become a better saver. Start with a few strategies that are practical for your household.
1. Define a Specific Savings Goal
“Save more money” is a terrible financial goal.
Give your money a mission.
For instance:
Goal: Create a $3,000 emergency fund
Deadline: 12 months
Goal for month: $250
Or: “
Goal: $6000 for a car
Deadline: 2 years
Monthly goal: 250 dollars
By setting specific goals, you can more easily track your progress.
2. Pay Yourself First
Most people do it like this:
Income → Bills → Spending → Save the rest.
The problem is, often there is nothing left.
Try to reverse the process:
Income -> Bills -> Savings -> Spending
As soon as you get paid, put aside your planned savings.
Treat savings like a bill you owe yourself in the future.
3. Make Your Savings Automatic
One of the easiest ways to increase savings is to eliminate the need to make the same decision each payday.
Set up an automatic transfer from checking to savings a few days after your paycheck is deposited.
Even small transfers count.
Saving $25 per week amounts to $1,300 over 52 weeks, before interest.
If $25 is too high, start at $5 or $10.
The habit is more important than the perfect amount to start with.
- Find a Budgeting Method that Works for You
A common starting point is the 50/30/20 budget:
- 50% Needs
- 30% Likes
- 20% Additional debt repayment and savings
But do not take these percentages as gospel.
Depending on housing costs, family size, debt, location and income, different percentages can be more realistic.
Zero-based budgeting is another alternative, where every dollar coming in has a purpose.
The best budget is not the one that looks perfect on paper.
It is the one you can follow.
5. Set Up Separate Savings Buckets
Having all your savings on one account can make it difficult to keep track of what the money is for.
Think about creating individual savings buckets for:
- Emergency savings
- Holiday
- Home repairs
- Automobile maintenance
- Christmas Day
- Education
- First payment
- Business Costs
Some banks let you create multiple savings buckets or subaccounts.
This can help you see your progress more easily.
6. Apply the 24-Hour Rule to Impulse Purchases
Online shopping makes it all too easy to go from a passing thought to purchase.
Wait 24 hours or more before purchasing a nonessential item.
If you are planning to spend a lot of money on something, wait a few days.
Ask yourself this:
Do I need to have this?
Is there already something that does the same thing?
Do I need this item, or should I save the money toward my financial goal?
You might be surprised at how many “must-have” purchases become unnecessary after a little time.
7. Review Your Subscriptions
Streaming services, apps, memberships, software, cloud storage and more… these repeating bills can slowly chip away at your budget.
Review your bank and credit card statements and make a list of all your subscriptions.
Cancel whatever you do not use much.
$15 a month does not seem like a lot, but it adds up to $180 a year.
Look at five similar expenses and you could redirect hundreds of dollars into savings.
8. Make a meal plan before you go shopping
Food is one of the biggest flexible expenses for many families.
Before going shopping:
- See what you have already.
- Plan meals based on those ingredients.
- Check out the weekly store specials.
- Make a shopping list.
- Purchase from the list.
- Eat your leftovers to cut down on food waste.
Meal planning is more than just choosing what to eat for dinner.
It is a financial strategy.
- Automate savings when your income increases
Got a raise?
Instead of immediately increasing your lifestyle by the entire amount, increase your automatic savings or retirement contribution.
The same idea goes for:
- Extra pay
- Tax refunds
- Extra hours
- Income from side hustles
- Cash presents
You can use a portion of the extra money and save a portion of the extra money for your financial future.
10. Negotiate recurring invoices
Current bills are not necessarily set in stone.
Compare or negotiate expenses periodically such as:
- Car insurance
- Insurance on the home or renter
- Cell phone service
- Internet
- Some subscriptions
Saving $30 a month equals $360 a year.
Redirect that money immediately so it is not just wasted in another category of spending.
11. Establish Sinking Funds to cover anticipated expenses
Not all major expenses are emergencies.
Christmas comes but once a year.
Cars require service.
Homes require repair.
The insurance bill is due.
Create sinking funds, rather than being surprised by predictable expenses.
If you think you are going to spend $1,200 on holiday expenses, saving $100 a month over the course of the year can make December a lot easier on your budget.
12. No spending day
Try to pick one or two days each week where you make a conscious effort to spend nothing but your necessary bills.
Pack lunch from home.
Make your own coffee.
Watch something you already pay for.
Take a walk instead of shopping.
A no-spend day is not about deprivation. It is an effortless way to raise awareness about habitual spending.
13. Keep Your Windfalls:
Money that is unexpected tends to disappear.
Decide how much you will save before you get a tax refund, bonus, rebate, or other windfall.
For example:
50% discount
Debt repayment 30%
20 percent fun
Your percentages may be different. The idea is to make that decision before the cash rolls.
14. Increase Your Income When Cutting Expenses Is Not Enough
You can only cut so much.
If you have already cut out unnecessary spending and still cannot get to your financial targets, think about boosting your income.
Selections are:
- Freelancer
- Consultant
- Selling digital products
- Working on weekends
- Coaching
- Bookkeeping
- Animals sitting
- Sell off any belongings you no longer need.
- Selling a skill on the Internet
Even an extra $200 to $500 a month can impact a savings goal if you intentionally put that money toward it.
15. Monthly Review of Financial Progress
Do not make a budget in January and then forget about it.
Monthly Money Check Ins Schedule.
Review:
- Your income
- How much did you pay?
- How much have you saved?
- Debt balances
- Deposit balances
- Anticipated costs
- Take the next step in your financial objectives.
Your budget should evolve as your life evolves.
Where to Keep Your Money?
Where you keep money should mostly be a matter of when and for what you need it.
High Interest Savings Account
If you are saving for emergencies or short-term goals, a high-yield savings account may be right for you, depending on your goals.
This type of account can offer liquidity and a potentially more competitive interest rate than many traditional savings accounts.
Before you decide, shop around for rates, fees, minimum-balance requirements, withdrawal options, deposit insurance and more.
Money Market Deposit Acct.
Money market deposit accounts may offer competitive interest rates and easy access to your cash.
Again, compare fees, balance requirements, accessibility, and deposit-insurance coverage.
Certificates of Deposit
A certificate of deposit, or CD, can be helpful if you know you will not need some savings until a certain date.
You may receive a stated rate of interest in return for leaving your money on deposit for an agreed period.
But there can be early withdrawal penalties, so CDs are not the best choice for money you might need to access quickly.
Retirement Accounts
Retirement savings long term is a whole different class of thing.
If your employer offers a retirement plan with matching contributions, understand how the match works and consider taking full advantage of it when it makes sense for your financial situation.
A Simple Savings Plan You Can Kick Off This Month
Do you feel overwhelmed?
Begin here.
Week 1: Know Your Figures
Calculate your net income and check your last 30-60 days of expenses.
Week 2: Get $50-$100.
Cancel unused subscriptions, cut frivolous purchases, plan meals, or negotiate a bill.
Week 3: Automate It (more)
Automate the transfer of your savings.
Week 4: Set your first goal.
Choose one goal and assign a dollar amount and deadline.
Do it again next month.
It does not to be complete financial overhaul overnight.
Small improvements in finances, if they happen consistently, can add up to tremendous changes over time.
The Ultimate Financial Planner Makes Saving Easier
Much easier to save when you can see where your money is going and what you are working toward.
That is why I created the Ultimate Financial Planner – Editable Canva Edition.
Rather than maintaining your budget, savings goals, financial plans, and money information in different notebooks and spreadsheets, you can have your financial life all in one place.
The planner provides 105 pages of financial-planning resources, including full PDF edition and editable Canva templates.
It is hyperlinked for easy tablet use and comes in four printable paper sizes, with dollar and currency neutral options.
Use it to become more intentional with:
- Budget preparation
- Expenses tracking
- Financial goal setting
- Household saving
- Organize your finances.
Check your financial progress https://savingsforwealth.com/shop/
You do not need a complicated financial system. Sometimes you just need a system to keep track.
Products on Amazon to help you build better money habits.
If you are someone who prefers to put pen to paper or just want some extra tools to help you get your financial life in order, these products will improve your savings routine.
1. Cash Envelope Budget Binder
If you tend to overspend with debit or credit cards, a cash-envelope budget binder might be a clever idea.
You can make physical categories for groceries, entertainment, personal spending, and other variable expenses.
2. Fireproof Document Bag.
If you are organizing your financial affairs, consider gathering important financial and household papers in a safe place. A fire-resistant document organizer can be helpful for keeping copies of insurance information, property documents, financial records, and other important paperwork.
3. Books on Personal Finance
Learning about budgeting, investing, debt, and money psychology can also help you build stronger financial habits.
Affiliate disclosure: This post may contain affiliate links. If you purchase something through one of those links, I may receive a small commission at no additional cost for you. I do not recommend products unless I believe they might be useful to my readers.
What should you put away each month?
No universal percentage.
The usual goal is to save 20% of your take-home pay, but the right number for you depends on your income, debt, housing costs, family responsibilities, and financial objectives.
If you cannot do 20% do not let that stop you.
Begin with:
1%, 3%, 5%, $10 per week, $25 per paycheck—or whatever you can consistently afford.
Then builds up gradually.
Better to be consistent than to try for an unrealistic percent saved and quit after two months.
Saving Mistakes to Avoid
Keep an eye out for some common mistakes as you pursue your goals.
Waiting to make more.
Having more money in your pocket does not mean you are saving. Income tends to increase spending unless you form good financial habits.
Saving the rest of the bits.
Automating savings at payday or the beginning of the month can work better.
Having an abundance of spendable money.
Keep your day-to-day spend money separate from your savings and you may be able to resist temptation.
Investing in your emergency fund.
Putting Your Emergency Money to Work Emergency money should be liquid and accessible, and not subject to large market swings.
Trying to change everything all at once.
Extreme budgets are hard to keep. Permanent changes tend to be more effective.
Small progress is missing.
Your first $500 counts.
So is your first $1K. Every milestone takes you that much closer to financial security.
Conclusions: Start Saving with What You Have
You do not have to be rich to start saving.
Saving is one of the habits that can make you wealthy.
Begin with a small one.
Keep Track of Your Money. Make one goal. One transfer, automate. Cut out an unnecessary expense. Make an additional meal at home.
Then keep going on.
“Those little decisions can add up to something meaningful a year from now.”
Most importantly, do not compare your financial journey’s beginning with someone else’s middle.
Your savings plan needs to work for your income, your household, your priorities, and your future.
It does not have to be 5 years ago to begin saving.
The only time you can handle is today.
Frequently Asked Questions About Saving Money
How can I save money if I am living paycheck to paycheck?
Start by writing down all your expenses and finding an exceedingly small amount you can put away on a regular basis. Even $5 or $10 a week makes the habit. At the same time, look for ways to cut on-going expenses or increase income.
Paying off debt vs saving: what to do first?
That depends on the type of debt, how expensive it is, what your emergency savings are, and your overall financial picture. This means for many people building a small emergency cushion and then going after the debt that is at a high interest rate.
How much do I need in an emergency fund?
A common long-term goal is to have several months of necessary living expenses in savings, but you do not have to accumulate that all at once. Start with a smaller milestone like $500 or $1,000 and work up from there, depending on your situation.
Where to keep emergency savings?
In general, emergency savings should be safe, liquid and readily accessible. An insured savings or money market deposit account might be something you want to consider. View current terms before you open an account.
How to set up automatic savings
Around payday, set up an automatic transfer from your checking account to a savings account for this purpose. Begin with an amount you know you can maintain and then build it up slowly.
Is it worth saving $100 a month?
Yes. Saving $100 per month amounts to $1,200 in contributions per year and $6,000 in five years, before considering interest. More importantly you are creating a habit that you can continue to increase as your finances improve.
