While the act of putting away some money every once in a while in order to save for the long run sounds simple, we find that it is harder to practice in reality. Research shows that one in five Americans barely save money, and those who do manage to save aren’t putting away a lot of money.
The research goes on to claim that over half of the individuals could end up struggling in retirement. However, with a few simple steps, such as combining long-term and short-term strategies, you could be on your way to streamlining your savings and avoiding financial worries in the future.
Why is saving money important?
All expenses require planning, be it small or large, expected or unexpected. Because the future is so unpredictable, there is no telling what you may need later. However, what you can do is start saving money today, in the hopes that you can build enough corpus to allow you to maintain a comfortable lifestyle.
This does not imply that your savings are only intended for retirement. You could also save for milestones such as your kid’s education, a house of your own, or even a luxury trip to the Bahamas. Habits don’t change overnight, but with time and consistency, you could start saving money today in order to build wealth to meet your financial goals.
20 Tips to Save Money:
1. Create a budget
This is where money management always starts – by creating a budget.
To keep track of your budget, you can either keep a journal or use digital spreadsheets on your computer or smartphone. It is easy to overestimate what you can afford if you think of your salary as the amount for expenditure. Remember to deduct your taxes, your 401(k), social security, etc., to come up with your net income. Then, track your expenses.
Next, list all your fixed expenses such as rent and utility bills, where a cutback is impossible. Additionally, list your variable costs: ones that often change, such as grocery and entertainment, that can provide you with an opportunity for penny-pinching.
The idea is to figure out a way to track your expenses to feel more in control of your finances, and save money systematically.
2. Automate savings
How often have you been in a place that screams – ‘I need to save money’ and ‘YOLO (You Only Live Once)’? It is quite natural to spend on discretionary items when we have the money in hand. But, what is out of sight is out of mind! We highly recommend automating your savings. The simplest way to do this is having a portion of your paycheck automatically deposited into a savings account, so no matter what, a certain amount automatically goes towards future savings, and does not tempt you into splurging on the latest iPhone.
3. Avoid debt
Never let your debt pile up. Pay off your credit card bills in a timely fashion, and if possible, use cash or debit cards for transactions. When you go shopping, be mindful of leaving your credit card at home, as they only postpone the payment with added pains of interest.
The most suitable proposition is to avoid debt altogether. As Publilius Syrus, one of the greatest Latin writers, said: “Debt is the slavery of the free!”
4. Invest in quality
More often than not, buying cheaper items turns out to be more expensive in the long run. Choose between high quality and inexpensive products wisely. An expensive but quality pair of shoes might last you longer and will need lesser repair and maintenance than a cheap pair you picked off the flea market. Irrespective of your purchase’s ticket-size, whether you are buying a pair of jeans or a home or car, frugality will go a long way in helping you save in the long term.
5. Utilize 401(k) fully
It is a vital strategy to utilize your 401(k) for higher savings through ‘free money’. Most employers match the contributions to your retirement savings up to a percentage of your salary. Consider furnishing enough to max out your employer’s matching benefit. You may also work this out backward – take the maximum annual contribution allowed in your 401(k) and divide it by the number of times you get your paychecks. If this amount is within your budget for a lock-in, you must contribute it to your 401(k) every time so that you can get your employer to pump that much more into your savings.
6. Make use of the sale season
End-of-season sales are bargain shoppers’ dreams come true. It is a fantastic opportunity to make a killing as far as savings are concerned. Seasonal sales are pretty much timed around festivities. Jot down your requirements and plan your significant purchases to coincide with the sale season. For every other purchase, there are flash sales that you can wait for. Waiting can also tell you if you really need to buy the product, or if you can very well do without it.
7. Eat at home
You’ve probably heard this advice too often and tried it as well, but couldn’t stick with it. However, let’s try putting it in numerical perspectives to see how much you can save and if that can motivate you to stay the course.
Did you know that it is five times more expensive to take delivery from restaurants than make a meal at home? Meal kits are cheaper but still cost three times the amount it takes to home-cook from scratch! Most restaurants have approximately a 300% markup in items they serve to make a profit. You can’t blame them; you are paying for both the service and convenience. So, what could cost you up to $13 at restaurants will actually cost you only around $4 if you make it at home!
Moreover, you don’t even have to skimp on it all the time! Just two meals a week can possibly save you up to $1000 in a month and making your $3-morning coffee at home can save you up to $70 a month.
Organizing your pantry and planning your meals may also lead to substantial savings.
As the world goes mobile, it is increasingly common to hear people quip, “I barely have the time to watch TV.” It is a good idea to give up on your cable connection if you don’t watch it. Explore buying your own modem rather than renting it and then bundling your internet and cable services with the same provider to make a sizable saving.
Similarly, newspapers and magazines are also going digital. Make use of such alternatives and save on wasteful expenditure.
Sharing entertainment is a great way to save money. Given that most streaming platforms offer a multi-device installation facility, it might be prudent to share your account with family or friends to economize on entertainment costs. For example, Netflix’s basic plan costs you $9 that permits streaming only in standard definition (SD) and on one screen. In comparison, their premium plan allows you to stream on four different devices simultaneously and costs $16. Sharing this account with four of your folks brings down your cost to a meager $4 while all of you enjoy ultra-high-definition content!
9. Lower utility bills
Someone wise once said, “When I was young, I was scared of the dark. Now when I see my electricity bills, I am scared of the lights.”
Well, it is possible to reign in your utility costs. Use simple tips such as unplugging appliances that are not in use, turning the faucet off when you brush your teeth, fixing leaky ductwork immediately, and purchasing energy-efficient appliances, etc. can save you up to 25% on your annual energy costs.
10. Carpool
Swap rides with colleagues who live in your neighborhood to save money on commuting and fuel, and save the environment too in the process. Enlist parents or friends to help you with school pickup and drop-offs of kids. Your car may last longer too when you carpool!
11. Use cash instead of your credit card
Take a look at your pantry – there is a valuable lesson waiting for you there. What you don’t see, you don’t use. Consider applying this to your shopping sprees. Carry cash and limit your purchases to that amount.
12. Stick to the list
How many times have we gone to the supermarket to buy one item but returned with a bag full of things? Next time, make a list and stick to it. Winging it at the mart might lead you to buy things you may or may not require.
13. Buy ingredients, not brands
When you buy food or medicines, always compare the prices across brands. If you notice, ingredients and compositions printed on the carton are mostly the same, but the retailers tend to pass on the packaging, designing, and other costs on to customers, leading to differential pricing for the same item.
Similarly, with financial products too, you may want to read the terms and conditions of the investment solutions offered to you and compare them with alternatives before you pay up.
14. Utilise no-spend days
Do you know how some cultures have fasting days? They are powerful tools to stay the course. Similarly, consider designating some days as no-spend days. Spend not one penny on those days and every time you feel motivated to pull out your wallet and make some purchase, stop in your tracks and deposit that money into a piggy bank instead. Have a cookout, stay in and watch TV, carry lunch to school/work, carpool, do what you have to, but don’t spend money on that day – just to train yourself in some financial discipline.
15. Install a filter – swap packaged water for filtered water
Another wise advice we came across is switching your packaged drinking water for filtered water. Invest and install a filter at home and carry your water bottle along instead of purchasing the plastic packaged drinking water bottles. Apart from the monetary saving you make, you can also pat yourself on the back for doing your bit for the environment.
16. Utilize your savings account by setting goals
One of the safest places to park the money you don’t immediately need is in a bank savings account that earns you interest. It allows you to grow your money slowly and steadily, compounding over time. Some banks also provide the facility to earmark funds for specific purposes, which can motivate you to save more to attain your goals.
17. Round up your payments
You’ve paid your parking meter, and the change slides out the cash register. What do you do with it? Scoop it up and put it into a cup on the dashboard – a habitual auto-pilot activity. Similarly, when it comes to cashless transactions, we can mirror the habit of rounding up payments as a method to save money. For example, if you spend $3.25 for a cup of coffee, 75 cents is deposited into your savings account to grow with interest over time.
18. Consider refinancing your mortgage
Refinancing your mortgage to a lower interest rate, even by 1%, is an excellent tactic to reduce your overall loan burden. However, it is common malpractice that people also lower their payments accordingly. The ideal way to tackle this debt demon is to continue making the same higher payments as before, while you refinance the loan to a lower rate. That is where actual savings lie – as your loan tenure is reduced, you can attain your financial freedom faster.
19. Spend to save
Sometimes, paying a bit more can help you save more. The simplest practical example is purchasing membership to warehouse clubs such as Costco and Sam’s Club, and online services such as Amazon Prime. Buying a house trumps renting when it comes to saving in the long run. The rent you would’ve paid would become your EMI, and at the end of the journey, you could have a place to call your own! Of course, the down-payment is going to pinch you presently and not so pleasantly.
20. Rent out what you can spare
Earning an additional income is always a great idea. You don’t necessarily have to work hard to make some extra money; make your money work for you instead. Rent out what you can. Have a spare room in your house? Get a flatmate. Rent out your parking space and your equipment such as cameras, gaming consoles, fishing equipment… anything you can afford to spare. However, ensure that the additional income you make goes into your savings or is invested, so that your money may beget money.