Saving money isn't easy unless you have a plan and stick to it. Setting savings goals and doing an honest inventory of your spending habits are essential steps toward saving more money.
1. Set Savings Goals
Whether you'd like to find yourself with extra cash at the end of the month, save up a down payment or create an emergency fund, defining a goal for your savings plan is the very first step.
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The Consumer Financial Protection Bureau (CFPB) promotes using SMART savings goals: specific, measurable, attainable and relevant. The savings goals you set must align with your financial situation. By setting SMART financial goals that are a good fit for your personal finances, you are more likely to keep up with the plan and succeed.
2. Track Spending Habits
Sometimes what seems like an occasional splurge looks much more like ritual overspending when you get it down on paper. This is a scary step for many savers and spenders, but it can also be enlightening and uncover opportunities to save a decent amount of money right off the bat.
Check out the CFPB's spending tracker that you can use as a guide to classify essential and nonessential expense categories. Take a month and track your expenditures weekly. Include payments toward student loans and credit card debt. Note when you are using a credit card or debit card over cash.
3. Identify and Trim Spending Habits
Once you have the evidence in front of you, look for areas where you can make almost immediate improvements. Daily habits, such as being a loyal customer of a coffee mega-chain or going out to lunch, are nonessential expenses that add up fast. If you start brewing your own coffee and brown bag lunch five days a week, that's a lot of money you didn't have to work very hard to save.
This doesn't mean that you have to trim out all the fun and joy in your daily life. Having a budget for fun is still important. But you may also be surprised at how many low-budget fun things you can find to do: Visit the library instead of the bookstore, drop the gym during months you can walk or run outside and cook dinner with a friend instead of going out.
With the money you save, you might decide to set aside a percentage for a weekly coffee or monthly dinner out. The rest goes into your savings account, of course.
Once you've trimmed expenses and identified your savings goal, a budget is a tool you can't save without.
4. Evaluate and Cut Down Monthly Bills
There are some expenses you just can't get around: shelter, food, health care, utilities and insurance. But you may be able to trim down some of these bills.
Grocery store items add up quickly, especially with inflation reaching 8.6 percent. Average grocery store food costs are up 10.1 percent over last year. A 2020 U.S. Department of Agriculture report stated that Americans spent 8.6 percent of their disposable income on food. Inflation puts that expenditure beyond 10 percent. Setting a food budget, making a grocery list and using coupons and a money-saving grocery app can help trim this significant expense.
Look for ways to save on home energy costs including upgrading to energy-efficient appliances if your budget allows. The U.S. Department of Energy shares more energy- and cost-saving tips on its website.
Investigate your cell phone bill and data plan, and if a contract doesn't bind you, price-compare against other carriers and look for special offers. Subscriptions and streaming services are other areas that hide monthly expenses. Trim down your channels or move to the free versions.
It's also good to get out your insurance policies and review your coverage. Check with your agent and ensure that you are getting any bundle discounts or home and car insurance policy credits coming to you. Ask your agent to determine if any adjustment to your policy or deductible can reduce your monthly premium.
While it may be a difficult time to refinance a home loan or negotiate interest rates on credit cards now that the Fed has hiked interest rates, it doesn't hurt to ask. Visit your credit card's website to ensure that you take advantage of available cash-back offers. Discuss your debts with a trusted financial advisor to learn whether any refinancing options might benefit you in the short- and long-term.
5. Make a Budget and Use Technology
Once you've trimmed expenses and identified your savings goal, a budget is key to start saving. A banking or budgeting app like Mint, or even the online banking app from your financial institution, can come in handy with bill payment, direct deposit, automatic transfer and other features. Apps and online banking working together make it easier to pay bills on time and set up ways to save.
If you find yourself getting hit with late payment fees or insufficient funds on your checking account, it's definitely time to tackle this with technology. Not only do these fees drain lots of money when you're trying to save it, but they can also hit your credit report and impact your credit score.