How To Save Money: 10 Simple Money-Saving Tips
Dan Rafter6-minute read
PUBLISHED: February 26, 2023
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You might be motivated to start saving money for any number of reasons. Perhaps you need to come up with a lump sum for a down payment on a new house or car, or maybe you’re interested in building up an emergency fund to cover unexpected bills.
While saving money can present some challenges, the good news is that it’s entirely doable. It all starts with setting achievable goals, sticking to a budget and being willing to change some of your spending habits in an effort to save.
Let’s explore some of the best and most practical money-saving tips for financial success.
Create A Household Budget
Open A Separate Savings Account
Set Up A Direct Deposit Into Your Savings Account
Use The PowerCash Method
Follow The 52-Week Rule
Monitor Your Subscriptions
Plan Your Meals For The Week
Take Advantage Of Credit Card Rewards Points
Prioritize Your Purchase
Consider Cutting Your Biggest Expenses
Pay Off Credit Card Debt Today!
10 Simple Ways To Save Money
You’ve decided you’re ready to start saving money – whether it’s for a big purchase or simply to have more cash set aside for everyday expenses. Now, it’s time to decide on the method that works best for you.
Let’s walk through some simple, easy ways to save money, and how you can incorporate them into your everyday routine.
1. Create A Household Budget
Often, the first step to saving money is creating a realistic budget that outlines your recurring monthly expenses. This can help you identify how much money you need to set aside for certain payments each month, and how much cash you have left over.
A budget should list your monthly income and expenses, and the difference between the two will help you determine how much money you can realistically save. Your budget should include fixed expenses like your mortgage payment, car payment, internet and cell phone bills, student loans and other monthly debt payments.
It should also feature variable costs – payments that fluctuate each month. These would include the costs associated with your utility bill, transportation, dining out, groceries and clothes shopping.
“Different from simply tracking your spend, using a budget can be a great way to allocate not just your everyday expenses, but also your savings and investment goals”, says Kimberly Hamilton, Senior Manager of Financial Education at Rocket MoneySM. “Instead of viewing a budget as something that’s restrictive, think of it as a tool to plan your financial life.”
Using Rocket Money, you can easily set up a budget including any custom categories you might want or need to manage your money in a way that feels right for you.
2. Open A Separate Savings Account
Nicholas Vizzi, a certified financial planner and private wealth advisor with Ameriprise Financial, says that when you start saving for a goal, you should create a savings account dedicated to achieving that goal – even though it can be tempting to take money out of the account for other expenses or transfer it into your checking account.
Let’s say you’re trying to save money for a down payment on a house. It can be easier to do this if you create a separate account to put the money into. Otherwise, you run the risk of accidentally spending the money you’re supposed to be saving for a down payment.
“Keeping your savings in a separate account earmarked for the down payment can help you avoid dipping into the account to pay for another expense that pops up,” Vizzi says. Similarly, you can set up and name a custom savings account within Rocket Money using the Smart Savings feature, separate from your everyday checking or savings account, but still accessible when you need it and viewable within Rocket Money at any time.
You may also want to consider keeping your savings in a high-yield savings account so that you earn money as you continue to save. “These types of accounts typically offer higher APY rates than your regular savings accounts. High-yield savings accounts grow your money by just sitting there!” recommends Denisse Sanchez, Certified Financial Education Instructor and Customer Experience Specialist at Rocket Money.
3. Use Direct Deposits
Monica Lam, owner of the financial blog LuckyMojito.com, says the best way to meet a savings goal is to automate the deposits into your savings account.
This means setting up an automatic withdrawal from your paycheck and having that money automatically deposited into a separate savings account that’s reserved for meeting your goal.
Let’s say you want to save $20,000 for an emergency fund or $10,000 for a new car. Once you create a monthly budget and determine how much you need to save each month to meet that goal, set up a direct deposit system with your bank account. That way, the money you want to save is automatically taken from every paycheck and deposited into the proper account.
“As time goes on, gradually increase how much you put into that account,” Lam said. “Let’s say you start by contributing $100 every pay period. Then, try increasing this amount to $200 a pay period and grow your savings from there.”
4. Use The PowerCash Method
Todd Christensen, education manager with the nonprofit debt relief agency Money Fit by DRS, says you can boost your savings with what he calls the PowerCash method.
Using your monthly budget, determine how much your household spends on groceries, gasoline, gifts, travel, entertainment and dining out each month. Then multiply that amount by 10%. This amount is what Christensen calls your household’s PowerCash.
Every time payday rolls around, transfer that amount to your savings account. This will accelerate your monthly savings without causing too much pain, Christensen said.
“You will hardly notice a difference living on 90% of your groceries, gift-giving, entertainment and other expenses,” Christensen said. “But you will notice the fast-growing funds in your savings.”
5. Pay Yourself First
One easy way to save more is to use the “Pay Yourself First” method where you prioritize your savings contributions and financial goals as soon as possible after you're paid, using what you have left for variable expenses.
“You might be surprised by how much this simple trick can save you over time.” says Hamilton, “By taking care of your savings earlier on in your payroll cycle, you’ll be much less likely to spend those funds than you would if you planned to make a savings transfer with whatever is leftover at the end of the month.”
While the Pay Yourself First method can be helpful, make sure not to overextend yourself when first testing it out. Always make sure the amount you transfer over leaves you with enough to pay your fixed expenses and any minimum debt payments. Beyond that, you can always transfer money back if you find yourself short later in the month – though that’s hopefully not the case!
6. Cancel Unwanted Subscriptions And Lower Your Bills
How many streaming services or subscriptions do you pay for each month? With so many platforms available – for TV shows and movies, music, online shopping and more – it can be easy to lose track of them all.
These subscription fees can add up even if they’re all under $10 a month. That’s why it’s important to review your monthly subscriptions periodically to see if you need or use them all. You can easily do this using Rocket Money to review your recurring subscriptions – their team will even cancel unwanted subscriptions for you at the push of a button. Cancelling one service that costs $10 a month could save you $120 a year.
Not only can Rocket Money help you stay on top of your monthly subscription payments, it can also help you determine where you can cut spending and cancel unwanted subscriptions.
Another source of savings can come from lowering your bills. According to Sanchez, the bill negotiation team has “successfully completed over 600,000 bill negotiations and has saved Rocket Money members an average of $145 a year.”
Canceling unwanted subscriptions and lowering your bills will help you cut your costs. You can then redirect these savings to your financial goals.
7. Plan Your Meals For The Week
One of the areas where most consumers overspend is groceries. Sometimes you don’t feel like preparing a meal with the food you purchased, and it seems easier to order takeout from a local restaurant. Other times, your perishables have expired or you’re throwing away leftovers.
Beverly Friedmann, content manager with the consumer reviews website ReviewingThis, says you can save money by planning out your weekly food purchases – as long as you stick to a budget.
She also recommends preparing meals ahead of time to take to work for lunch or as easy weeknight dinners. This can be a way to cut down on takeout meals, which can add up to big dollars each month.
“By planning and budgeting for food for the upcoming week and not exceeding a set amount, you can successfully save quite a bit of money,” Friedmann says. “Try not to succumb to the temptation to dine out at restaurants or order takeout food when you have groceries at home.”
8. Take Advantage Of Credit Card Rewards Points
Do you have a credit card that generates cash back or rewards points?
Friedmann recommends using this card on any purchases you were planning to make anyway. The rewards points or cash-back bonuses can help you save on everything from groceries to plane tickets to hotel stays.
Make sure, though, to use your card wisely.
Pay off your balance in full each month so you aren’t forced to pay interest on your credit card payments. Avoid making late credit card payments or trying to generate rewards points by buying items you wouldn’t normally purchase.
9. Prioritize Your Purchases
One of the easiest ways to boost your savings is to ask yourself before every purchase if the money you’re spending could be better used for a down payment on a house, a chunk of change to help you buy your next car, or a boost to your emergency fund.
Nick Disney, owner of real estate company Sell My San Antonio House, says that when you ask this question, it becomes far easier to stow away money.
When you decide not to buy a $5 latte, move that money into your savings account. Don’t need another T-shirt? Move that $15 to your savings.
“Make it a game to see what you really need and what you don’t,” Disney says. “These small additions to your savings will really start to add up.”
10. Consider Cutting Your Biggest Expenses
Peter Koch, founder of the Dollar Sanity blog, recommends looking at your largest expenses, like your rent, mortgage or car payment, if you truly want to truly save big. These are typically your biggest expenses with the opportunity to provide the biggest bang for your buck.
You might consider selling an expensive car and replacing it with a cheaper one, or refinancing your mortgage to a lower interest rate to save on monthly payments.
“If you want to save big, you will have to cut the biggest expenses,” Koch says. While small expenses add up, you can reach your goals quicker if you’re able to adjust larger amounts.
FAQs On Saving Money
Do you have more questions about how to save money? Here are some frequently asked questions with answers that can help you cover all your bases.
What percentage of my income should I save?
Generally speaking, you should aim to put about 15% — 20% of every paycheck into a savings account. This rule goes hand in hand with what’s known as the 50/30/20 technique for budgeting money.
According to the rule, 50% of your paycheck should go toward your needs, which may include housing expenses, utilities, groceries, transportation and child care expenses. Then, you put 30% toward your wants, which can encompass shopping, vacations, entertainment and hobbies.
The remaining 20% of your paycheck then goes into a savings account or making additional payments on debt. You might also consider putting this percentage toward a 401(k) or investing it.
How can I save money on a tight budget?
If you want to save money on a tight budget, it’s important to stay on top of your monthly income and spending. Prioritize your recurring fixed expenses and “needs” before cutting out any unnecessary or extraneous expenses. You can also set up balance alerts using Rocket Money to get notified in the event your checking or savings account runs low.
Once you’ve outlined a budget, you can establish a method for saving money – like automating a transfer from your paycheck into a savings account, creating a weekly budget for groceries and so on.
The Bottom Line
Typically, the hardest part about saving money is getting started. Establishing a budget and sticking to it can be a challenge, but not impossible. Even small changes to your spending habits – like going out to dinner less frequently, cancelling a subscription or simply putting a few dollars here and there into your savings account – can result in big savings down the line.
Are you looking for more ways to track your monthly spending or lower your bills? Sign up for a Rocket Money account to learn more.
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