Who doesn’t want to save money? Almost no one, but sometimes we fool ourselves into thinking that “saving” is the same as spending, only in smaller increments. Or we think of saving as a punishment without considering what the reward will be down the road.
Of course, we all know the basics of saving: live below your income, create and follow a budget, stash cash away for an emergency fund and your retirement, and make tweaks to your lifestyle to cut costs whenever possible.
“Saving money begins with your mindset,” according to Nerdwallet, the personal finance site. “Saving money doesn’t mean you have to quit spending altogether. It just means you have to prioritize some financial goals over others.”
Here are some easy money-savings tips to consider.
1. Set your mindset. How do you think about money? The personal finance site Mint.com suggests tracking your thoughts whenever you make a financial decision. Does it feel good to spend money if it’s “shopping therapy”? Does it hurt to pay for something that you feel you might not need or is overpriced? According to a recent TD Ameritrade Millennials and Money Survey, 80% of millennials said that saving, as opposed to spending, made them feel secure, and, as a result, happy.
2. Set financial goals. This is where the cause-and-effect piece kicks in. Do you want to buy a new car? A house? Fund a kid’s college education? Be financially comfortable in retirement? Barring a mega lottery win, you need to save now to do those things down the road. Remember the magic of compound interest—your savings nut keeps growing with interest accumulating annually on the principal.
3. Budget, budget, budget. This can’t be said enough: Put together a budget. It’s not necessarily an exhilarating experience, but it’s certainly an indispensable one. You will know where your money goes, where you want it to go, and where it isn’t going. Start with charting each and every monthly expense, from food and shelter to transportation, insurance and health costs, taxes, entertainment, exercise and beauty routines, and gifting. You’ll see how quickly that biweekly mani-pedi and daily $4 latte add up. It’ll also help you balance your real needs against your discretionary wants.
4. Set up an emergency fund and retirement fund. For emergency fund savings, conventional wisdom has long recommended you have enough put aside to cover three to six months of expenses for an unexpected financial crisis or should your income disappear. Some financial professionals are now pushing that to longer periods, anywhere from six months to a full year. If it’s doable, 12 months could be a really smart move. But it’s tough, especially if you’re putting money aside for retirement and paying off big-ticket debts like school loans or a mortgage. Remember that having an emergency fund is a short-term priority and a retirement fund is a long-term priority. The key word here is priority, as in important, significant, meaningful, and consequential.
5. Make saving money habitual. Set time aside—preferably every week, but at the least, every month—to review your financial status. According to Entrepreneur magazine, millionaires spend an average of 8.4 hours a month—or more than two hours per week—managing their money. That underscores the importance of knowing where money is going and how you can allocate more to the future “you” you want to enjoy.
6. Recognize real and easy ways to save money. Buying something half off that costs $100 isn’t “saving” $50. It’s still spending $50. Think about lost opportunity costs—what you’re not going to get because you spent that $50 on a sale item. Do the math, too, to see how simple it can be to save on things like dining out, cutting the cable cord, making coffee at home, turning to the public library for reading materials, and working out at the local park district or community gym.