You’ve decided that you want to start saving more money. Excellent idea. Maybe you’re thinking about a specific goal, like a car or a down payment on a house. Or, you just want to set money aside for emergencies – always a good plan.
Unless you get a big raise, or a windfall, finding the extra money to save can be a challenge, or worse, a problem easily ignored. It doesn’t have to be. There are plenty of ways to cut back on daily expenses so that you can save more. You just have to pay attention to your spending, and get creative about reducing it in certain areas.
First, how much should you be saving?
The short answer is, save as much as you can afford. Obviously this is different for everyone, but a good rule of thumb is to save 20% of your income. It may sound like a lot, but there are a lot of things to save for. Everything from your short-term vacation fund to retirement and all things in between.
Read on for some tips on how to find those extra dollars each month to put toward your savings.
Cut the impulse spending
Making purchases online, using credit, is the simplest thing in the world. Targeted advertising makes it even easier to shop for things you love that you might not need. You don’t even have to look for products anymore. The products find you.
Before you hit the “buy” button on your next purchase, take a five-minute pause, and ask yourself, do I really need this?
Add up the little things
If you’re spending money on takeout and coffee every day, you have a huge opportunity to cut back and save more. It probably doesn’t seem like a lot individually, but the Starbucks coffees can add up. A coffee per day, alone, is over $1,000 per year. Food delivery costs (that’s on top of the cost of the food), are roughly $5 a shot. If you’re ordering in two nights a week, that’s another $520 per year.
Reduce your cable and subscription costs
In recent years, many of us have chosen to save money on cable costs by using online video services like Amazon Prime or Netflix instead. It's a good option if you don’t watch a lot of TV, and it could save you about $70 a month.
But pay attention to how many of those streaming services you subscribe to. A lot of them offer the first 30 or 60 days for free, and then you’re on the hook every month, whether you’re consuming the content or not. Many of these services are banking on you “forgetting” or neglecting to cancel, and that $12 or $14 per month adds up.
Save every time you spend
Auto-save is another cool money-saving service from Meridian. Every time you make a debit purchase, you can set an amount up to $5 to go directly to your savings account. Set it and forget it. Learn more about auto-save
Follow the 50: 30: 20 rule
Here’s the high-level explanation: spend no more than 50% of your income on needs, a maximum of 30% on wants, and save the remaining 20%.
To go a bit deeper, your needs (50%) are things you can’t live without, like housing, food, transportation, phone, internet, healthcare and other monthly household bills.
Dining out (that includes ordering in), shopping, travel and entertainment fall squarely into the wants (30%) category.
Finally, what you’re saving for depends on your goals, but at a high level, your savings (20%) should be going to things your “future self” will thank you for. This includes retirement, an emergency fund, debt repayment, and investing.
Learn more about saving
How to save money
How to set up an emergency savings fund
Money and mindfulness
Save faster with pre-authorized contributions
