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In most cases, it’s necessary to take a long-term approach to savings. It takes time to build up a sizeable amount when you are putting aside a little each month. It takes dedication and willpower, which is why many people struggle to save.
If you are committed to saving money this year, start with a round number like $5,000. It is a reasonable and achievable amount with some dedication and planning.
Key Takeaways
Saving money is not just a good idea; it's a smart financial strategy that can provide you with security and peace of mind. Here's why saving is so important:
A lot of people want to save money but aren’t sure how they can start doing so. The good news is, there are lots of things you can do. First, though, you need to make a savings plan and figure out what your numbers mean.
It’s important to come up with some goals for your savings, so you’ve got a plan to work toward. This will help you stay motivated and make it easier to tell whether you are saving effectively or not. A savings plan should track all of your income and your expenditures and should document how much money you expect to save and when.
Once you’ve got a savings plan, you can work on things like automating the savings process, but you need to get all the numbers down first and work out how much you want to save. So many websites and vendors can help you do this outside of a rudimentary Excel spreadsheet. Mobile apps like Habtica will even gamify — or turn a mundane task into a game — your savings plan.
It’s very important to understand your numbers as well as write them down. You need to recognize what savings goals are feasible given your income and expenses as it stands.
Review your incoming funds and your outgoing bills, then calculate (with some breathing room) how much you can afford to save each month. A good understanding of what your numbers mean will help you establish this.
Before we get into the annual savings goal, let us look at some shorter timelines. For these scenarios, you will have to hustle a little harder and put aside more cash.
To save $5,000 in three months, you'll need to save approximately $1,667 per month. Here's a breakdown of how much you'll need to save each week:
This means you should aim to save around $416.75 per week to reach your goal of $5,000 in three months. Now, for all those W-2 earners out there, here is a per-paycheck breakdown:
If you're paid bi-weekly, you'll receive 6 paychecks over three months. To save $5,000 in three months, you'll need to save approximately $834 per paycheck. Here's a breakdown:
OK, if you have half the year, you have a little more time to save but it will still be a grind to reach your goal. You'll need to save approximately $834 per month. Here's a breakdown of how much you'll need to save:
This means you should aim to save around $208.50 per week to reach your goal of $5,000 in six months. Same as above, if you are getting a bi-weekly paycheck, here's a shortcut to the math:
To save $5,000 in six months, you'll need to save approximately $417 per paycheck:
If you need a little extra boost, here are some ideas on how to save money and how much you could net over a month (you may not be able to do all of these in one month, but you can stack as many as you can):
|
Ways to Save Money |
Average Monthly Savings |
Details |
|
Meal Prep |
$79 |
By preparing meals at home in bulk, you can save on dining out costs and take advantage of bulk purchase discounts. |
|
Cut Back on Coffee |
$32 |
Brew coffee at home instead of buying it from coffee shops. |
|
Use Public Transportation |
$57 |
Use buses, trains, or other forms of public transit instead of driving to save on fuel and parking costs. |
|
DIY Home Maintenance |
$120 |
Learn to perform basic home maintenance tasks like painting, plumbing, and minor repairs instead of hiring professionals. |
|
Energy-Efficient Lighting |
$15 |
Replace incandescent light bulbs with energy-efficient LED bulbs to save on electricity costs. |
|
Buy Generic Brands |
$34 |
Purchase generic or store brands instead of name brands for groceries and household items. |
|
Use Coupons and Discounts |
$28 |
Use coupons, promo codes, and take advantage of discounts when shopping for goods and services. |
|
Cancel Cable TV |
$75 |
Cut the cord and switch to streaming services or digital antenna for TV entertainment. |
|
Brown Bag Lunch |
$60 |
Bring lunch from home instead of buying it at work or school. |
|
Reduce Utility Usage |
$40 |
Turn off lights when not in use, unplug electronics, and adjust thermostat settings to save on electricity and heating/cooling costs. |
|
Sell Unused Items |
$30 |
Declutter your home and sell items you no longer need or use. |
|
Carpooling |
$46 |
Share rides with coworkers, friends, or neighbors to save on fuel and vehicle maintenance costs. |
|
Use Cashback Apps |
$20 |
Use cashback apps when shopping online or in-store to earn rewards on purchases. |
|
Total |
$636 |
|
Now, let’s start with the budgeting tips so you can begin eliminating unnecessary expenditures and putting money aside. Each month, you need to save $416.67 but round it up to $417, and here are 13 ways to do it:
Food makes up a large portion of costs for many families, and cutting costs on your grocery bills is key to managing your outgoings. Of course, you still want to make sure you’re getting plenty of nutrition from your food, but the good news is that you can do both.
Lentils, beans, and pulses are often great options for getting your protein, and they are a lot cheaper than meat. You can also swap pricey snacks like chips and soda for vegetables such as carrots and cucumber. This will help take some of the expense out of your grocery trips.
Let’s stick with food for a minute since it is such an important part of the family budget. Buying food in bulk can be a great way to cut down on your costs. Many things are cheaper when you buy them in larger quantities. This tip can be particularly useful for dried goods, canned food, or anything that will last well. If you’ve got the space to stockpile, you can save significant amounts of money by buying in bigger quantities.
Similarly, buying food directly can cut your costs. If you’re able to buy it from the producer, rather than from a grocery store, this will often be cheaper because you’re removing the middleman. Always compare prices, though, because that saving won’t always be there.
Eating out is a very expensive way to enjoy food, and while it’s nice to have a treat occasionally if you don’t eat out, you’re immediately reducing how much money you spend. You can save a lot by cooking at home instead.
If you don’t want to cook every night, consider batch cooking as a solution. This will give you food in your freezer that you can heat up on days when you don’t want to cook, which may reduce the temptation to eat out.
Recreational expenses include things like the cost of going to the cinema, attending evening classes, playing casino games, and going to amusement parks or other concerts. Essentially, these are usually trips out or leisure activities that you don’t need to spend money on.
Reducing expenses in this area can be a good way to reduce your costs, as many of these are pricey. You don’t have to cut all of them; taking away a few less important ones will give you additional money to put into a savings account.
A part-time job is a great way to increase your income each month, and this can then be funneled straight into a savings account. A part-time job won’t be right for everyone, but taking on some additional work is a reliable way to give yourself more money.
Even if you already have a full-time job, you may be able to get a job with flexible hours that can be fitted around your current commitments. If you find that your savings plan doesn’t give you enough money to set aside, a part-time job could seriously change this.
Rent is another enormous portion of what most people spend their money on in a month, and if you have an opportunity to reduce this cost, you’ll significantly boost your savings capacity. A roommate is a very effective way to do this, letting you cut your expenses quickly and effectively.
Another option could be to move to a cheaper place, although this is a more drastic approach. However, if you’re already thinking of moving, this might be worth considering.
Many people respond to an increase in income by spending more money, but this isn’t a good approach. Instead, you should put the extra money aside and keep your expenditure the same if you can.
If you get a raise, you should adjust your savings plan to filter as much of the raise as possible into your savings account — many people aim for 75%. This is a very effective way to elevate your savings quickly, especially if the raise is large. You can also take this approach with other payouts, such as bonuses.
Obviously, going out to dinner can add up quickly with a dessert and tip included, but takeout is not that much cheaper. Let’s be frank, any meal you eat out is likely going to run you more than a homecooked meal.
It can be tempting to go grab some food after a long day at work, but limiting takeout orders will put money into your bank account.
Subscription services can add up fast, and a lot of people end up subscribing to things that they never use. When you make your savings plan, it’s a good idea to list all of your subscriptions and put a mark next to any that you aren’t using. Next, put a mark next to any that you are using but you’re not particularly attached to.
Most subscription services are nice-to-have things, rather than necessities, so if you want to create an aggressive savings plan, eliminating subscriptions is a great way to give yourself more money every month. Things like magazines, streaming services, cloud services, and more are often unneeded, so think carefully about which ones you can cut. You could also look at swapping them for cheaper services if you prefer or experimenting with "pausing" subscriptions that offer this option.
A $5 jar is a great way to save money, especially if you handle quite a lot of cash regularly. If you’ve got spare $5 notes, being able to drop them into a jar is a great way to make sure you save them, rather than spending them on things you don’t really need.
Because $5 is a relatively small amount of money, it’s very easy to spend it without really thinking about it, especially if you’ve got the cash on hand. By putting your $5 notes aside instead, you can save money surprisingly fast.
It’s also important to be aware that you can adjust this approach to suit your needs – it doesn’t have to be $5. You can create a $1 jar or even just a jar for nickels and dimes. These won’t add up as fast, but they can still be an effective way to save money. If you save $5 a day for a year, you’ll have almost $2,000 set aside.
DIY work can also be a way to reduce your costs; instead of having to call somebody in when something in your house needs repairing, you can do it yourself. There are tons of resources online that can help you with almost any DIY project you decide to undertake; YouTube and blogs will give you lots of information and guidance.
This can massively reduce your costs, although you should make sure you’re capable of a task before you take it on, and leave critical jobs such as plumbing and electrics to the experts.
A lot of people are paying unnecessary amounts of money for their cell phone plans, and it’s well worth seeing if you can cut your costs in this area. Check whether there are benefits you’re not using that you could stop paying for, and discuss your options with your service provider.
Using a store app for groceries is a great way to save money and get rewarded for the purchases you make. You can get loyalty apps for most grocery stores these days; load a few up on your smartphone and you’ll soon find you’re saving money every time you shop!
Using the tips above, you can quickly boost your savings plan and start increasing the amount of money you’re putting into your safety net. It’s possible to save as much as $5,000 a year or even more if you get rid of unnecessary expenses, so why not make a start today?
Browse through the Blog to read articles and tips on managing debt, improving your credit and saving more money!
