We’ve all heard the advice to build an emergency fund, create a nest egg for retirement and sock away money for your children’s college fund.
You do that, and your future is assured — hopefully. But how do you actually save money? It’s easy to say, “I’m going to save money,” but that’s an empty promise without a plan.
The secret to saving money, really, is to adopt several money-saving strategies — and actually carry them out. Easier said than done, but if you’re looking to pad your savings, try these expert-backed strategies.
1. Pay Yourself First
You hear this a lot from financial advisors and money coaches, and for good reason.
“It can be incredibly difficult to save money when you are struggling to make ends meet, obviously. The way to be successful is to set a savings amount and consider it a bill, the same as any other bill like electricity or rent,” says Elizabeth Windisch, a certified financial planner at Aspen Wealth Management in Denver.
You have to consider what you put into savings as equally important as that electricity or rent payment, she says, “because you will need money to live off later, or an emergency will arrive.”
She suggests putting away what you can, whether it’s $50 a month or $5, before you pay, or around the time you pay, the other critical bills.
“Small amounts add up, and small amounts can be incrementally increased over time,” Windisch says.
[Related:How to Save $15 a Day]
2. Automate Your Savings
Again, you hear this a lot, too — because it’s a money-saving strategy that works. William Cafero is a financial advisor at Wealth Enhancement Group in New York City, and like many financial advisors, he strongly suggests anyone interested in saving money automates the habit.
“The most effective way to save is to redirect your direct deposit,” Cafero says. “Instead of having to go into your checking account, where the money tends to disappear by the next payroll, have it sent to an investment or savings account.”
This way, every month or every week — whatever feels right — you’ve got money going into a high-yield interest account.
[Related:How to Automate Your Savings — And Why It’s a Good Idea]
3. Make a Game Out of Saving
Jacqueline Gilchrist, who manages the personal finance website Mom Money Map, suggests employing a no-spend challenge.
“A no-spend challenge is when you don’t spend money for a certain period of time. It could be a weekend, a week or a month. You can set rules to spend only on essentials or other allowances,” she says.
“It forces you to be creative with what you have and learn new skills to avoid paying for a solution,” Gilchrist says. “When you feel like you have no money to save, doing a no-spend challenge can possibly open your eyes to more ways to save.”
4. Modify Your Income Tax Withholding
If you receive a sizable tax refund every year, Elio Alfonso, an associate professor of accounting at the University of Tampa, suggests adjusting your withholding allowances, or how much your employer keeps from each paycheck to cover your taxes
[Related:How to Adjust Your Tax Withholding]
“Basically, you are giving the IRS an interest-free loan during the year for absolutely no reason,” Alfonso says. “You should have more of that money in your bank account earning interest and working for you.”
If you opt to withhold less from your paycheck, just make sure that you put some of that money aside from each pay period to go into savings.
5. Tweak Your Retirement Accounts
It isn’t enough to regularly put money toward your retirement. You should also be looking at your retirement accounts at least once a year to see if you can improve how you’re saving for the future. For instance, do you have an employer-sponsored retirement plan?
6. Pay Off High-Interest Debt
It’s hard to save if you’re shoveling most of your money into interest.
“Pay off all high-interest debt such as credit card debt immediately. The high-interest charges are destructive to wealth accumulation,” says Barry Spencer, a co-founder of Wealth With No Regrets, a financial planning firm in Alpharetta, Georgia.
Mortgage debt, on the other hand, is usually low-interest, and it appreciates in value over time, Spencer points out. So don’t worry about getting your house paid off early.
7. Use Your Credit Cards Responsibly
Credit cards can put you into debt, but the same cards can help you save money.
“Make sure you are aware of what benefits your credit cards offer,” says Trae Bodge, a New York City-based lifestyle journalist and shopping consultant who runs the blog TrueTrae.
For example, if you have a cash back card that rewards you when you fill up your gas tank, make sure you use it at the pump. If you have another card that offers cash back for your groceries, make sure you use that at the supermarket.
“These benefits can really add up,” Bodge says. “If you find that your credit cards don’t offer these benefits, switch to ones that do.”
As long as you don’t carry a balance, you could save money every month using your credit cards.
8. Identify Areas Where You Can Scale Back
“Take a look at your monthly expenses and see if there are any areas where you can reduce your spending,” says Joshua Zimmelman, president of Westwood Tax & Consulting LLC, in Long Island, New York.
“For example, replace expensive dinners out with more home-cooked meals or cancel your cable in exchange for cheaperstreaming services like Hulu or Netflix,” he says.
Alternatively, you could also negotiate your cable bill or switch insurance providers and go with a cheaper option.
“There are probably a lot of spending cuts you can make that will barely affect your day-to-day life but could save you hundreds of dollars a year,” Zimmelman says.
9. Don’t Scale Back on Little Things — Scale Back on One Big Thing
So if you’re thinking that Zimmelman’s advice might be sound, but you really like having cable and streaming services, and you don’t want to make a lot of spending cuts, try making a significant cut.
James Beckett is a New York City-based financial coach and runs a personal finance website called MoneyStocker.com, and he suggests that people consider keeping their lattes, their Netflix subscription and their gym membership and everything else the same. “Just make one big adjustment.”
For instance, Beckett says that if you have an expensive car, and the payments and insurance is weighing you down, you might want to sell that and get a reliable used car and with any extra money, pay debt off or put it into savings. Or forego the expensive summer vacation for a cheap destination nearby or downsize your house to something smaller and pocket the savings.
10. Pay Your Bills On Time
“Don’t waste money on late fees and penalties. Avoid late fees and interest charges on your credit cards, loans and other bills by always paying in full and on time,” Zimmelman says.
If you’re struggling to pay bills, you can get accustomed to a routine where you’re always paying bills late — and seeing that you paid at all is a victory. But take a look at how much you’re spending on late fees. For instance, late fees on credit cards can set you back as much as $40 (if you’re repeatedly late). If you paid your credit card late every month, aside from paying higher interest rates than you otherwise would on revolving debt, you could potentially spend $480 every year in late fees.
If you’re also paying your utility bill late, your cell phone bill late… well, you can see how it all starts to add up.
11. Analyze Your Grocery Habits
Maybe you shop once every two weeks. But maybe you go every other day or so because you like to stay stocked with fruits and vegetables. Assuming you go at least once a week, that’s 52 times a year that you’re spending money, and maybe it’s not a fixed amount.
Your mortgage or rent payment may be hard to meet every month if it’s your biggest bill, but at least you know it’s staying the same. With inflation, it’s easy to spend far more than you expect.
Mary Vallieu, a money coach in Holly Springs, North Carolina, suggests her clients shop without a list and buy their groceries online.
“Buying the foods that are in-season and on sale and menu planning around those sale items will save you more than using a list. Ordering online can help prevent those endcap and checkout lane impulse buys too! Be sure to pick up the groceries instead of having them delivered to save on tips and delivery fees,” she says.
However you shop, the point is that the more you strategize about how you can save at the supermarket, rather than just doing it on the fly, the more money you’ll have left every month to put into a saving account.
12. Invest Your Raise
If you receive a raise in the near future, put that extra money into a savings or retirement account.
Too often, “people move into a bigger apartment or buy a more expensive car to reward themselves for receiving the raise. What happens is they are unable to improve their financial condition because they spend everything they make,” says Robert Johnson, a professor of finance at the Heider College of Business at Creighton University in Omaha, Nebraska.
“People would be well-advised to pay heed to Warren Buffett’s sage words: ‘Do not save what is left after spending; instead spend what is left after saving,'” Johnson says.
13. Use Technology to Save
Johnson advises downloading the right financial apps to optimize savings.
“One popular app is called Acorn. You tie Acorn to your debit card, and it rounds the purchase up to the nearest dollar, effectively allowing you to invest your spare change,” Johnson says.
Here’s how it works: If you buy a latte that costs $4.44 and use your debit card, $5 will be taken out of your account — $4.44 goes to the coffeehouse and 56 cents goes into your investment account.
“This allows you to save money as you make everyday purchases and you don’t have to make the decision to invest the money,” he says.
14. Think About Your Financial Future
If there’s a secret to saving money, this one may be one of the most important one: Treat yourself every once in awhile, by all means but remember how overspending now will affect you later.
“One of the biggest behavioral biases that humans succumb to is the bias toward immediate gratification over delayed gratification,” Johnson says.
“That is, our present selves tend to win over our future selves. It is very difficult for many people to imagine their future self and give up that vacation or new car today in lieu of having money to retire on in the distant future,” he adds.
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How to Save Money: 14 Expert-Backed Ways originally appeared on usnews.com
Update 10/09/23: This story was published at an earlier date and has been updated with new information.
