Sometimes the hardest thing about saving money is getting started. This guide provides the best ways to save money, can help you step-by-step to develop a simple and realistic strategy so that you can save for all your short-term and long-term savings goals.
1. Record your expenses
The first step in starting to save money is determining how much you spend and Keep track of all your expenses. So that means every cup of coffee, household item, and cash tip.
Once you have the information, organize the numbers by categories, such as gasoline, grocery shopping, and mortgage, and get the total for each. Use your bank and credit card statements to make sure everything is correct but you didn’t forget anything.
Get a free-spending monitor to help you get started. Choosing a digital program or an app can help automate part of this task. Because Bank of America customers can use the Spending and Budgeting tool, which automatically categorizes their transactions to make budgeting easier on the mobile app or online.
2. Budget for savings
Once you know how much you spend in a month, you can start to organize the expenses you recorded and establish a budget that you can live with. Your budget should give you an idea of how your costs compare to your income to plan for your expenses and limit overspending. Be sure to consider the expenses that occur regularly, but not every month, such as car maintenance.
Include a savings category, and try to save 10-15 percent of your income.
3. Find Ways to cut your expenses
If your expenses are so high that you can’t save as you’d like, it may be time to cut back. Identify nonessential categories that you can spend less on, like entertainment and eating out. Find ways to save on your monthly fixed expenses like television and cell phone expenses, too.
Here are some ideas to cut down on everyday expenses:
- Use resources such as community event listings to find free or low-cost events to reduce entertainment expenses
- Cancel unused subscriptions and memberships, especially ones that renew automatically
- Aim to eat out only once a month and go to places in the category of “cheap meals.”
- Give yourself some “time to reflect” – When you’re tempted to make a nonessential purchase, wait a few days. Will you be glad you didn’t, or be ready to save up to do it
4. Set savings goals
One of the best ways to save money is to set a goal. Start by thinking about what you might want to save for. Maybe you’re getting married, planning a vacation, or saving for retirement. Then decide how much money you will need and how long it can take to keep it.
Here are some examples of short-term and long-term goals:
Short term (1 to 3 years)
- Emergency fund (3-9 months to pay for daily living expenses, just in case)
- Down payment for a car
Long-term (4+ years)
- Down payment to buy a home or re modeling project
- Your children’s education
If you are saving for retirement or your children’s education, consider putting that money in an investment account, such as an Individual Retirement Account (IRA) or a 529 plan. Although investments come with risks and can lose money, too, They present the opportunity to grow when the market rises and could be convenient if you plan for an event well in advance. See step no. 6 for details.
Set a small, achievable and short-term goal for something fun, and big enough that you won’t have the cash to pay for, like a new smartphone or holiday gifts. Reaching smaller goals and enjoying the nice reward you’ve saved can give you a psychological boost so that makes the rewarding feeling of holding more immediate and strengthens the habit.
5. Decide what your priorities are
After your expenses and income, your goals are likely to have the biggest impact on how you distribute your savings. Make sure you have long-term goals in mind, and It is important that planning for retirement does not take a back seat after short-term needs.
Learn how to prioritize your savings goals to have a clear idea of where to start saving. For example, if you know that you will need to replace your car in the near future, this would be a goal that you can start saving for now.
6. Choose the right tools
If you’re saving for short-term goals, consider using these FDIC-insured deposit accounts:
- Savings account
- Certificate of Deposit (CD), which freezes your money for a fixed period of time at a rate that is generally higher than savings accounts
For long-term goals, consider:
- FDIC-insured Individual Retirement Accounts (IRAs), which are tax-efficient savings accounts
- Securities, such as stocks or mutual funds. These investment products are available through investment accounts with a broker-dealer. But remember that securities are not FDIC insured, and are not deposits or any other bank obligations, and are not guaranteed by a bank. They are subject to investment risks, but including the possible loss of your capital.
You don’t have to choose just one account. Take a careful look at all of your options and consider things like minimum balances, fees, and interest rates, so you can choose the products that will best help you save for your goals.
7. Make automatic savings
Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money, and even split your direct deposit so that a portion of each paycheck goes directly to your savings account.
8. Watch your savings grow
Review your budget and see your progress each month. Not only will this help you stick to your personal savings plan, but it will also help you quickly identify and correct any problems. Knowing how to save money can motivate you and to find more ways to save and reach your goals faster.