15 Realistic Steps to Start Saving Money
Published on August 16, 2024 | 7 Minute read
Melanie
Ortiz Reyes
Content Specialist
When living expenses are high, and income feels stretched, saving money can seem impossible. However, with the right strategies, you can start saving effectively, no matter your financial situation. Let’s dive in.
1. Set Achievable Goals
Before diving into saving, identify what you're saving for. Setting clear, achievable goals gives you a reason to save and helps you stay motivated.
PrimeStreet Pro Tip: Write down your goals and assign a timeline to each. For example, "Save $1,000 for an emergency fund in 6 months." Breaking down your goals into smaller, more manageable targets makes the process less overwhelming and more achievable.
2. Track Your Spending
Understanding where your money goes is the foundation of saving. Tracking your spending helps you identify areas where you can cut back and save more. Many people are surprised by how much they spend on non-essential items like dining out, subscriptions, or impulse purchases.
PrimeStreet Pro Tip: Use a budgeting app like YNAB (You Need A Budget), or even a simple spreadsheet to track every dollar you spend for a month. Categorize your expenses and see where adjustments can be made.
3. Create a Realistic Budget
A budget is your roadmap to savings. Once you’ve tracked your spending, create a budget that aligns with your financial goals. Make sure it’s realistic. Remember, if it’s too restrictive, you’re less likely to stick with it. Include categories for necessities (housing, groceries, utilities), savings, and discretionary spending.
PrimeStreet Pro Tip: Follow the 50/30/20 rule: allocate 50% of your income to needs, 30% to wants, and 20% to savings. Adjust these percentages based on your personal financial situation.
4. Automate Your Savings
Automating your savings is one of the easiest and most effective ways to ensure you consistently set aside money. By setting up automatic transfers from your checking account to your savings account, you remove the temptation to spend that money.
PrimeStreet Pro Tip: Schedule a recurring transfer for the day after payday. Start with a small, manageable amount, like $25 or $50 per paycheck. We recommend gradually increasing it as you become more comfortable with your budget.
5. Cut Unnecessary Expenses
Identify and eliminate or reduce unnecessary expenses to free up more money for savings. This could mean canceling unused subscriptions, cutting back on dining out or switching to a cheaper phone plan.
PrimeStreet Pro Tip: Conduct a subscription audit. Cancel any services you don’t use regularly. You can also try negotiating with service providers for lower rates or switching to more affordable alternatives. For example, lots of streaming services offer a more budget-friendly alternative if you’re okay with watching ads during your movies and shows.
6. Build an Emergency Fund
An emergency fund is a highly important part of financial stability. It helps you cover unexpected expenses without derailing your financial progress. Aim to save at least three to six months' worth of living expenses.
PrimeStreet Pro Tip: Start small. Aim for $500 to $1,000 initially. Once you reach this milestone, gradually increase your funds. A good idea is to keep this money in a high-yield savings account where it’s easily accessible but still earning interest.
7. Pay Off High-Interest Debt
High-interest debt, like credit card balances, can quickly erode your savings. Focus on paying down these debts as part of your savings strategy. The less you owe, the more you can save.
PrimeStreet Pro Tip: Use the debt snowball or avalanche method. The snowball method involves paying off your smallest debts first to build momentum, while the avalanche method focuses on paying off debts with the highest interest rates first.
8. Take Advantage of Employer Benefits
If your employer offers benefits like a 401(k) match, health savings account (HSA), or flexible spending account (FSA), take full advantage. These benefits can help you save money on taxes and contribute to long-term savings goals.
PrimeStreet Pro Tip: If you’re not already enrolled in your company’s retirement plan, do so. Contribute enough to get the full employer match. This is essentially free money that boosts your savings.
9. Practice Mindful Spending
Mindful spending involves being conscious of where your money is going and ensuring it aligns with your values and goals. This doesn’t mean never spending on things you enjoy, but rather being intentional about your purchases.
PrimeStreet Pro Tip: Implement a 24-hour rule for non-essential purchases. If you see something you want to buy, wait 24 hours before purchasing it. This helps curb impulse buying and ensures you’re spending money on things that truly matter to you.
10. Start Small with Savings Challenges
Savings challenges can make the process of saving money fun and engaging. Starting small with challenges like the 52-week savings challenge or a no-spend month can jumpstart your savings habit.
PrimeStreet Pro Tip: Try the 52-week challenge where you save an increasing amount each week. You can start with $1 in week one, $2 in week two, and so on. By the end of the year, you’ll have saved $1,378!
11. Boost Your Income
Increasing your income is another effective way to save more money. Consider taking on a side hustle, freelancing, or monetizing a hobby. Even a small increase in income can greatly impact your ability to save.
PrimeStreet Pro Tip: Explore gig economy jobs like driving for a rideshare service, freelancing online, or selling handmade goods. Use the extra income specifically for savings or debt repayment.
12. Reevaluate Your Financial Plan Regularly
Life circumstances change, and so should your financial plan. Regularly reviewing and adjusting your budget, savings goals, and spending habits ensures that your plan remains relevant and effective.
PrimeStreet Pro Tip: Set a monthly or even a quarterly “financial check-in” with yourself. Assess your progress, celebrate your wins, and make necessary adjustments to stay on track.
13. Educate Yourself on Personal Finance
The more you know about personal finance, the better equipped you’ll be to make smart money decisions. Invest time in learning about budgeting, saving, investing, and debt management. There are numerous resources available, from books and podcasts to online courses.
PrimeStreet Pro Tip: Set a goal to read one personal finance book per month or subscribe to a finance podcast. Some popular recommendations include "The Total Money Makeover" by Dave Ramsey and "You Are a Badass at Making Money" by Jen Sincero.
14. Avoid Lifestyle Inflation
As your income increases, it’s tempting to upgrade your lifestyle accordingly. However, this can prevent you from saving more. Instead of spending more when you earn more, try to maintain your current lifestyle and funnel the extra income into savings.
PrimeStreet Pro Tip: When you get a raise or bonus, commit to saving at least half of it. This way, you reward yourself for your hard work while still prioritizing your financial future.
15. Celebrate Your Milestones
Saving money is hard work, and it’s important to recognize and celebrate your achievements along the way. Celebrating milestones keeps you motivated and reinforces positive financial habits.
PrimeStreet Pro Tip: Set milestones within your savings goals, such as saving your first $500 or paying off a credit card. When you reach a milestone, treat yourself to something small, like a nice meal or a movie night to celebrate your progress.
Starting to save money doesn’t have to be overwhelming. By setting clear goals, creating a budget, and implementing practical saving strategies, you can build a strong financial foundation. Remember, the key is consistency! Even small amounts can grow into significant savings over time.