- Although inflation can make saving money more difficult, savvy savers can still find ways to cut their expenses.
- Budgeting and saving go hand in hand.
- To save effectively, have goals, a monthly budget and a plan to stay on track.
With inflation at a 40-year high, rising prices in the housing market and wages that struggle to keep pace with increased costs, knowing how to save money each month can be a challenge. Although saving isn’t as easy as it may have been, brushing up on a few money-saving ideas and tips can help you put more money away while staying on track with bills and necessary purchases.
14 ways to save money
There are several ways to save money even in a tight economy. Some approaches rely on planning ahead to keep costs down, whereas others are a matter of knowing which financial tool to use at the right time. This article touches on each of these 14 tactics below:
- Set specific savings goals
- Create a monthly budget and stick to it
- Bring a shopping list to the store
- Opt for using cash for everyday purchases
- Know when to use a debit card or a credit card
- Review your subscriptions
- Switch your cell phone plan
- Reduce your electric bill
- Reduce your basic living costs
- Make the most out of your savings account
- Save unexpected or extra money
- Pay off your debts
- Set aside money for an emergency fund
- Contribute to a retirement savings plan
1. Set specific savings goals
Building savings during a difficult economic period can be made tougher without a financial goal in mind. If you can tether your savings efforts to a specific goal, such as a down payment on a new car or building your emergency fund, you can help motivate yourself to stay on track. Plus, if you have a specific number in mind for your goal, you can adjust your savings efforts to match it. This can help right-size the amount you want to set aside.
2. Create a monthly budget and stick to it
Once you have specific financial goals in mind, it makes sense to develop a budget to follow through on them. A monthly budget can help you better understand how your personal finance decisions affect your overall cash flow. By creating and sticking to a budget, you can track spending habits and potentially limit the number of impulse buys you make per month. A budget can help you avoid splurge purchases and track how much income you can put into savings every month. Consider using a budgeting app or the tools built into the online banking platform offered by your bank.
3. Bring a shopping list to the store
Shopping lists are great at helping us remember what we need to buy, as well as helping us limit impulse purchases. Many retailers, including your local grocery store, are designed to make one-off or impulse purchases easy. Although one or two impulse purchases may not seem like a lot of money on their own, they can add up over time.
A shopping list with specific items can help you save money by staying on track with what you buy. You can, of course, still go off-list if you see something on sale or are otherwise experienced with staying diligent most of the time. Think of your shopping list as an extension of your budget: what you put on your list should be determined by your budgeting, keeping your budgeting on track in the process.
4. Opt for using cash for everyday purchases
Using a credit card to pay can be a convenient way to complete a transaction. For some, credit cards may also make it easier to overspend or deviate from a budget. So consider using cash when possible.
When you pay in cash, you’re better able to see the actual financial impact of your purchases in real-time. Credit cards, by contrast, may make overspending easier because they're not physical currency. If you bring cash with you to the store, you’re physically limited by how much you have on hand. This can help you stick to your budget and stay honest with your shopping list.
5. Know when to use a debit card or a credit card
Using cash isn’t always feasible, of course. There are some transactions, either online or in cashless stores, that require a card. Using your debit card when cash isn’t an option can help you be more cognizant of your spending. A credit card can enable you to overspend since you’re charged once a month; debit cards, however, require you to have the funds on hand for the transaction to go through.
Depending on your bank checking account, your card might be declined at the point of purchase if you don’t have enough funds. Alternatively, you might see the transaction go through if you have overdraft protection. These protections may come at a cost, though, by way of fees.
When making online purchases, keep in mind that credit cards will generally have stronger fraud protections than debit cards. Using credit and debit cards in an informed way can help you stay on budget and protect your finances from fraudsters.
6. Review your subscriptions
Subscription services, such as streaming services or publications, can eat away at your cash — often without you realizing it. Services that charge you monthly may go unnoticed, particularly if monthly fees are low. Over time, these small expenses can add up.
If you subscribe to publications, services or entertainment platforms you don’t use often, you should consider canceling them. This can be an easy way to free up cash every month, particularly if you aren’t missing what they have to offer or have stopped using them. If you’re not sure canceling is the right option, consider downgrading your subscription to a less expensive option.
There are a few ways you can identify and cancel subscriptions you no longer need. The first is by reviewing your bank or credit card statements. Some apps can help you keep track of and cancel subscriptions, but these may come with fees.
7. Switch your cell phone plan
Cell phone service is an essential expense for most of us, although you don’t always have to pay a high price for good service. Some of the country’s largest networks are also the most expensive: these companies reinvest in new cell towers and other costs that make their way onto your monthly bill. Others may tout unparalleled service, charging you a premium in the process.
If you want to lower your cell phone bill, there are a few options to consider. First, check with your provider to determine whether a lower-tier plan is available. Expensive unlimited data plans may not be ideal for people who only use a few gigabytes of data every month.
Next, consider switching providers: big cellular providers build cell towers and other infrastructure improvements that might be factored into your bill. Smaller providers lease space and services from bigger providers, which may mean smaller bills for you.
Last, consider using secure Wi-Fi whenever possible. Safe Wi-Fi networks provide speed and flexibility with what you download and how much data you use. If you know you’ll usually be in areas where secure Wi-Fi is available, you may not need to buy a plan with a high data cap.
8. Reduce your electric bill
Some electricity costs are unavoidable, but cutting back can go a long way in many places. Keeping your thermostat lower in the winter and higher in the summer can result in lower monthly bills. Smart meters can help you regulate when and how much air conditioning and heating you use as well.
Many power companies and state governments offer incentives for going green. Your utility company may offer free or low-cost energy audits, which can help you create a more energy-efficient home. Others may incentivize you to install solar panels on your roof by way of credits, subsidies or solar financing options.
Lastly, you can always opt to turn off appliances when not in use. Smart sockets can help you set timers that turn off appliances, lights and other energy-consuming appliances.
9. Reduce your basic living costs
We may take living costs for granted: after all, studies have shown that “lifestyle creep” is a common phenomenon for many. It’s easy to spend more when you have more money. This doesn’t work as well when internal and external factors require you to scale back on life’s essentials.
There are ways to keep your basic living costs in control, however, especially if luxuries are hidden away within what might otherwise appear to be an unavoidable cost of living expense.
Examine where you live if you’re looking to cut back on living costs. High-priced neighborhoods and cities may charge you a premium you could avoid by moving farther away. Be aware that this might also require you to spend more in other places, such as a monthly train ticket or gas for your car.
If you own a home, car or both, you may want to refinance these loans at a lower rate. If you’re paying more than the average interest rate on a mortgage or auto loan, refinancing may save you money over time, while reducing your monthly payments. Take a close look at your insurance policies as well, as you may be overpaying for your coverage. Many providers offer a discount for bundling home and car insurance, which can save you money every month.
10. Make the most of your savings account
Understanding the nuances of different types of bank accounts can help you save money in the long run. Money market accounts offer high interest rates, usually in exchange for limited monthly transactions. A more conventional savings bank account could come with a lower interest rate but more flexibility with withdrawals and deposits. A certificate of deposit (CD) account can earn you even more interest, but most restrict you from withdrawing money for a certain period of time.
When you link a checking and savings account, you can make it easier to factor savings into your budget. Recurring automatic transfers can give you the peace of mind that you're making payments on time, while saving towards your goals.
Some employers may even let you divide your direct deposit payments into two or more accounts. With this method, you can determine how much to put in savings right from your paycheck.
11. Save unexpected or extra money
If you’re fortunate enough to come into unexpected money, be it from a bonus at work, tax refund or inheritance, it’s crucial to consider putting it aside as savings. Putting extra cash into savings, rather than a spending spree, can help you save more money in the long run. The more you put in, the more you’ll benefit from compounding interest. Putting any money you aren’t expecting — and therefore do not need to use to pay expenses — into savings can boost your overall savings efforts.
12. Pay off your debts
Although it might sound self-evident that paying off your debts can help you save money, there’s more to it than you might expect. Some forms of debt, such as credit card debt, are prone to higher interest rates than others, like student loans. Depending on your situation, you might choose to pay off high-interest debt first or to pay off your smallest debts first. Both strategies have their own benefits and drawbacks. Either way, strategically tackling monthly payments on your debt can free you up to save money in the long run.
13. Set aside money for an emergency fund
Emergency funds are essential since they can help you pay for critical goods and services when you might otherwise have to take on debt to afford them. An emergency fund supplies you with a financial cushion should something unforeseen happen; a general rule is to have enough to cover three to six months' worth of expenses. With an emergency fund, you can earn interest on your balance while taking comfort in your financial strength in the face of a crisis.
14. Contribute to a retirement savings plan
Retirement savings plans, such as an individual retirement account (IRA) or 401(k), can provide you with tax-advantaged ways of saving for retirement. Depending on the kind of retirement plan you choose, you can opt to either pay taxes on your contributions up-front or when you start to withdraw funds from these plans in retirement.
Early withdrawals from retirement plans can come with financial penalties, so it's important to understand all your options before withdrawing funds.
Employers might offer common plans, such as a 401(k) or 403(b) for certain public or nonprofit employers. Employer plans generally allow you to make contributions from pre-tax dollars directly from your paycheck. Your employer may even "match" your contributions up to a certain percentage of your paycheck.
(401)k accounts use pretax income for long-term investments. Since your investment dollars aren’t taxed as income when you invest, you pay tax on what you withdraw instead. Roth IRAs, on the other hand, use post-tax income for investment funds. In this scenario, you’ve already paid taxes on the money you've saved.
Ready to save?
Saving for the future may not be easy, especially during economic uncertainty, but it’s an essential part of any successful personal finance plan. The more you save, the more prepared you can be when the unexpected happens. Whether you’re new to saving or looking to adapt in the face of economic headwinds, it’s important to know your options.
These tips on how to save money are only the beginning. Reach out to a financial professional for more information about personal banking solutions and other tools to keep your savings on track.