Figuring out how to save money consistently doesn’t have to be difficult. One way to do it is to start with small, incremental steps. With small steps, you’re more likely to make savings a permanent and consistent part of your lifestyle.
Quick tips before you get going:
- Start now. There’s no better time to start building your savings than today. Take at least one action step. Get moving in the right direction.
- Any amount will do. It doesn’t matter if you start with a few dollars at first—even if it’s just a couple of twenties a month; what’s important is that you start building a savings habit.
- Repeat. You can never have too much in savings. Once you reach your initial savings goal, there’s no reason for you to stop doing it. Choose a new savings goal and keep this financially healthy habit going.
These simple ideas can help you save consistently and save more money. Put them to the test today.
1. Use cash more often
My mother used to tell me half-jokingly that money has tiny feet to walk away from you when you’re not looking. That’s so true. If you’re used to carrying plastic instead of cash, you’ll find that money doesn’t just walk, it sprints away from you.
There’s no doubt we’re moving towards a cashless society. And it’s hard to ignore the convenience that comes with it. But using credit cards and mobile payment apps has a way of numbing your psychological ‘pain of paying.’
Not only that, but credit cards also defer the pain of paying. They add some separation between your purchases and the time when your monthly statement arrives. This can lead to more spending, higher debt and less savings–exactly the opposite of what you want.
Remind yourself of the pain of paying. Using cash more often will help you reconsider your everyday purchases and avoid overspending. Over time, the money you’ll free up can go directly into your savings account.
2. Track your spending
Life can get so busy sometimes that when you buy a little something here and there you hardly notice it. If left unchecked, these expenses can add up to hundreds of dollars in no time. Identifying and avoiding them can help you save more.
» Find some time to track your monthly expenses. Figure out how much you spend and what you spend it on. Instead of recording every penny as you spend it, gather your credit card and bank statements. They’ll give you an objective picture of your past spending.
» Organize your numbers by category. Create simple categories such as eating out, personal care, entertainment, subscriptions, and so on. Putting each category next to its number will highlight areas of improvement. And it’ll help you be more vigilant to avoid unnecessary purchases.
Seeing how much you spend on each category can also help you identify recurring expenses you don’t need, and uncover non-essential purchases. This information will make it easier to craft a budget to boost your savings.
3. Make a budget
Financial emergencies are part of life and are bound to happen when least expected. It’s best to meet them with money you’ve stashed away in an emergency fund rather than new borrowing.
Making a budget will add discipline to your finances and help you save more of your hard-earned cash consistently. Ease into it by adding up your spending categories and comparing them to your earnings for the month. Label the difference as ‘savings’ and try to hit that number each month for a couple of months, assuming it’s positive.
To increase your monthly savings, or if your savings figure above is negative, come up with a plan to cut back expenses. Look for ways to expand your income too if your spending is outpacing it.
Next, instead of treating your monthly savings amount as simply the difference between you income and expenses, start treating it as an expense itself. That is, treat your savings number as a fixed amount you need to ‘pay to yourself’ each month.
This savings-as-an-expense approach can be very useful when you’re trying to bulk up your savings to meet a particular goal.
4. Set a savings goal
Setting up savings goals can be a powerful way to build consistency. By doing so, you’ll start giving a workout to your ‘savings muscle’ and help you adopt a powerful and financially healthy habit.
A necessary first step toward setting up your goals is to have a chat with yourself (and your partner, if you have one) regarding priorities. Make a list of the things that are important to you that you want to save for.
Start off with small, short term savings goals. They’ll give you faster ‘savings wins’ which will get you hooked in the habit of saving. The excitement of reaching a savings goal can be a compelling incentive that keeps you motivated.
Short term goals
Make your first short term goal something that you really want. A feel-good goal. It should be something relatively inexpensive that you can save for within a few months.
Go for it. You want to associate your savings habit with positive emotions and feelings. So indulge yourself a little if you need some motivation to get started.
Start an emergency fund
An emergency fund can be a life-saver when things don’t go as planned. Once you reach your feel-good goal, figure out the amount of money you want to save for emergencies and set it as your next goal. Having money saved for a rainy-day is a sound financial strategy.
To come up with a target amount, think of the last time you or someone close to you had to face a large, unexpected expense. Are you likely to face that expense? If so, you should aim for at least that much.
Long term goals
Having long term goals helps you keep your financial life in perspective. The temptation to spend will come your way every now and then, and having long term goals can help you stay focused. If you can weather these temptations, after a while, you’ll have a strong savings muscle. Saving consistently will become easier to you.
Some examples of long term savings goals include:
- Making a down payment for a car
- Upgrading appliances
- Paying off student loans
- Paying off credit card debt
- Saving for retirement
5. Automate your savings with your phone
There are several ways your phone can help you save consistently. Start off by adding your bank’s app to your phone’s home screen.
Set up automatic transfers
Most major banks and credit unions offer a mobile app to carry out financial transactions. Take advantage of this freebee to grow your savings.
If you’ve decided to try out the ‘saving-as-an-expense’ approach we discussed in #3, open your bank’s app and set up a recurring transfer from your checking account to your savings account.
With an automatic transfer, you’ll grow your savings consistently and make it easier to figure out when you’ll reach each savings goal.
Use mobile apps to grow your savings
If you want to grow your savings by investing in the market, but don’t know how to get started, check out Acorns. Acorns is an app that rounds up your spare change from everyday purchases and invests it automatically for you. It’s quite easy to use and makes it simple to get started with investing.
Acorns allows you to automatically invest in a low-cost ($1/month), diversified portfolio of exchange-traded funds. You grow your money in one of five portfolios built with the help of a Nobel Laureate economist.
If you’re looking for an easy way to start investing, give Acorns a try. The app is fully automated and provides customer support.
Other apps you may wish to consider which make it easy to invest include Robinhood, Stash and Stockpile.
6. Upgrade your bank account
Saving more is always a prudent idea. It’s even better if your funds are earning you higher competitive yields. Leaving your money in a regular bank account can actually cost you if you consider that there are other institutions where you can earn better yields.
High yield savings accounts
One way to save money consistently is to make your money work harder for you by upgrading your savings to a high yield savings account. These accounts earn you a higher annual percentage yield or APY than traditional savings accounts.
Online banks’ high yield savings accounts offer some of the better rates. They’re able to offer a higher APY since they don’t run the same costs as brick-and-mortar banks do. Also, you can make unlimited deposits and access your money with the same frequency as a typical savings account.
» Related: You can compare higher yielding savings accounts using this simple tool.
7. Put unexpected windfalls to work for you
When you receive a well-deserved salary increase, a bonus or unexpected windfall, you might be tempted to celebrate with a large expenditure. Fight that urge and put the money to work for you immediately. You can do that with a Certificate of Deposit account or CD.
Lock up your money in a CD
Certificates of Deposit offer interest rates that are typically higher than those available with traditional savings accounts. You’ll lock-in the quoted rate for the term of the CD, which can range from 3 to 60 months, though longer terms are available.
By keeping your windfall socked away earning a return, you’ll get rid of any temptation to spend it. You’ll give yourself time to review your savings goals and decide how best to allocate the money when the CD matures. Of course, you can always rollover the CD as necessary.
When you select a term, take into consideration that CD’s have early withdrawal penalties. So choose a CD that matures before you need the money.
8. Save for the long term
Saving is great for your finances, but saving with pre-tax dollars is even better—especially if an employer matches your pre-tax contributions to earn more. You can do this with a 401(k) plan and you can open one even if you’re self-employed.
Open a 401(k)
If your employer sponsors a 401(k) retirement savings plan, and you haven’t signed up for it, you shouldn’t wait.
A 401(k) plan, as defined by the Wall Street Journal, is a retirement savings plan sponsored by an employer. It lets you save and invest a piece of your paycheck before taxes are taken out. And taxes aren’t paid until the money is withdrawn from the account. With a 401(k), you control how your money is invested.
If you’re self-employed, you can open a so-called Solo-401(k) or One-Participant 401(k) Plan. The one-participant 401(k) plan is a traditional 401(k) plan covering you as a business owner with no employees, or you and your spouse. This plan has the same rules and requirements as any other 401(k) plan.
9. Monitor your progress
Monitoring your savings account and watching it grow can be a strong motivator to keep saving. The act of checking on your progress can provide you with positive reinforcement or mind candy. It can encourage you to be persistent and make saving part of your personality.
Give yourself mind candy
If you haven’t yet, download the app of the institution where you keep your savings and add it to your phone’s home screen. By doing so, you’ll be able to track your savings’ progress whenever you feel like it. It’ll provide you with a similar type of mind candy that you get when you check on your social feeds. It can reinforce your savings behavior, helping you sustain it for the long haul.
Set new saving goals
You can never save too much. After reaching your initial savings goal, move on to the next one. There’s no reason for you to stop. Keep this financially healthy habit going.
Saving money consistently doesn’t have to be a challenge. These simple tips can help you save more and make saving part of your lifestyle.
- Use cash more often
- Track your spending
- Make a budget
- Set a savings goal
- Automate your savings with your phone
- Upgrade your bank account
- Put unexpected windfalls to work for you
- Save for the long term
- Monitor your progress