You just realized you went another month without putting any money into savings. You know you need to save, but you'sre unsure where to start or you don't think you have extra money to save.
Everyone is on their own financial journey, but one thing every person needs is a strategy for saving money. Of course, all experts will tell you to start early. Kyle McCann, owner and financial advisor with Vantage Wealth Planning in Reno, NV, says the earlier you start saving, the less you'll have to save for retirement. "If you start saving in your 20s versus your 40s, the percentage of income you have to save on an annual basis is less than half," explains McCann.
Many people aren't saving, though. According to the Federal Reserve's Report on the Economic Well-Being of U.S. Households in 2018, 39 percent of Americans say they could not afford to pay for a $400 emergency expense.
So, to help you get started, we're jumping straight to some big ways you can save money, earn extra money, and set yourself a realistic budget that you can stick to.
First things first, set a budget
Setting a budget gives you guidelines to your spending and accountability. When it comes to saving money only you can do it, so if you don’t hold yourself accountable, who will?
So how exactly do you set a budget?
Step 1: Calculate your expenses
Step 2: Determine your income
Step 3: Set your savings and spending goals
Step 4: Record your spending
Step 5: Be realistic
Your budgeting goal should be to follow the 50/30/20 rule. With this strategy you spend roughly 50 percent of your income on necessities, 30 percent on wants, and 20 percent on savings and paying down debt.
"Setting your savings target as a percentage amount and not a dollar amount allows your savings to fluctuate as your income fluctuates," explains McCann. "By using a percentage, your savings increases as your income increases."
Not everyone makes enough money to abide by the 50/30/20 rule. If you're spending more than you're bringing in, it's time to take a close look at your spending and decide where you can make cuts.
Eric Gaddy, financial advisor and founder of RetireEarly365.com, says that it can be difficult to live within your means, but it's important to recognize a want versus a need.
We live in an instant gratification world and when we're armed with credit cards, it means that we don't have to wait to purchase something we really want right now. Learn the difference between a need and a want. You might want a new 60-inch screen TV but do you really need it, especially if you have to charge it to a credit card you can’t pay off within 30 days," says Gaddy.
He advises new savers to use tech tools. "Creating a budget and tracking your money has never been easier with free apps and programs you can use to track your expenses," he says. "Most people will have a general idea of their larger monthly expenses, but there's always a black hole where money disappears each month that without tracking expenses will end up being an unknown."
How to start saving money today
Understand your finances
You can't start saving money until you see the whole picture of your financial situation. Sit down and list all of your monthly expenses. Don't forget to include small spends like coffee, grabbing drinks with a friend, or buying pet food. Look at several months of expenses to get an accurate picture of your spending. Another good method for tracking your spending is to start a spending diary. Buy a small notebook and write down every penny you spend each day as you spend it.
Find ways to save
They're not going to make you rich, but making small changes like brewing your own coffee, adjusting your heating and cooling when you’re not home, and bargain shopping can add up over time.
Opt for higher deductibles
Whether it be car insurance, health insurance, or home insurance, they all include a deductible. Higher deductibles mean lower premiums. For example, increasing your deductible for car insurance between $200 and $500 can decrease your premium up to 15 percent, according to the Insurance Information Institute.
Bundle, bundle, bundle
You can save between 5 percent and 25 percent on your insurance premiums by bundling your home, auto, and life insurance policies.
Pick insurance companies with discounts
Many car insurance companies will offer safe driving, good student, policy bundling, low mileage, and loyalty discounts.
Switch to a high-yield savings account
If your money has been sitting in a bank that yields less than 1 percent interest, you're missing out on some free cash. Moving your savings account to an online bank can make you hundreds of dollars a year. Plus, you can still have a checking account that will also pay interest.
Online Bank APY Minimum Deposit American Express Personal Savings 1.90% No minimum Barclays 1.90% No minimum Marcus Goldman Sachs 1.90% No minimum Citizens Access 1.85% No minimum Discover 1.80% No minimum Bank5 Connect 1.85% $100 Axos 1.30% $250 Ally 1.80% No minimum CIBC (Citibank) 2.05% No minimum Synchrony 1.90% No minimum
Consolidate credit card debt
You shouldn't allow yourself to get into debt to begin with, but if you're drowning in credit card bills, look into consolidating your debt into one card. It may seem counterintuitive to open a new credit card when you're trying to pay cards off, but some companies offer a 0% introductory balance transfer from other cards, in which case you'll only have one card to pay off. Note that most cards charge a balance transfer fee of about 3 percent of the amount you're transferring, so be sure to factor that into your decision.
Use finance apps to track, save, and earn money
The internet is a powerful place and there are a variety of apps designed to help non-savers start saving without having to do much. There are even apps that will make you money based on your purchases. Apps like Mint and Acorns make it easy to budget your money, while shopping apps like Ibotta and Paribus allow you to earn money from your spending.
Divide your paychecks
Ask your employer to split your paycheck between your savings and checking accounts. You can select any amount of money to go into each, and you'll receive automatic savings each time you get paid without having to think about it. McCann suggests automating whatever you can.
"Automating makes it as simple as possible to save. The easier it is, the more likely people are to do it," says McCann.
If your employer doesn't offer direct deposit, set up an automatic withdrawal from your checking to your savings each month.
Gaddy suggests that young couples or individuals start investing with mutual funds. "If you are looking for growth, I'd suggest a low-cost S&P 500 index mutual fund," says Gaddy. "With a mutual fund, it's going to give diversification, and with an S&P 500 index fund, you'll have familiarity with most of the companies you’re investing in."
What about investing for retirement? Gaddy thinks a Roth IRA is the best option. “With a Roth IRA, you're putting after-tax money into a retirement account so when you withdraw it after age 59 ½, your earnings on your Roth are completely tax-free. With that said, a huge benefit to a Roth IRA is that you can withdraw your contributions at any time [without penalty and taxes]."
Don't give up the things that make you happy
McCann stresses that you should always pay yourself first. "It may sound redundant, but it allows you to spend guilt-free. The first check you write every month should be to yourself, whether it be to a 401(k) or IRA. Once you've met your monthly savings goal, you can spend however you want -- that is, have fun with your money."
By buckling down on your spending and using the tips in this article to start saving money, even a spender can become a saver.
Sara East is a freelance writer and content marketing professional based in Reno, NV. She specializes in content on insurance, mortgage, business, and travel.