1. Set the Financial Goal
Consider putting at least 20% of your take-home pay toward important payments or contributions.
2. Look at your Fixed Costs
These are bills and expenses that don’t vary much from month to month, like rent or mortgage payments, utilities and car payments. We also include subscriptions, such as gym memberships and Netflix accounts, in fixed costs because you’re committed to paying them on a monthly basis.
3. Look at your Flexible Spending
Consider budgeting no more than 20% of your take-home pay toward flexible spending. These are day-to-day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas. Some weeks you might eat out more, while others you may buy more groceries to cook at home. Changing spending on these items can help put 10% of this category into savings.
4. Save your loose change.
5. Never purchase expensive items on impulse.
6. Stack and review receipts at the end of the month, and you will clearly be able to see where your money is going.
7. Pay attention to your health. Practice preventative dental care, since a good cleaning routine helps prevent fillings, and dental work which are expensive and no fun.
8. Use envelopes. Most people don’t track what they spend and may not realize when expenses add up to more than their budget can handle. To keep track of what you spend, put what you think you should spend for the month on transportation, food, entertainment, etc., into envelopes. This will help you avoid buying things you don’t need, and what’s left over can go into saving.
9. Take advantage of discounts and/or incentive programs provided through coupons and your employer.
10. Save an amount equal to whatever is spent on nonessential indulgences.
11. Use the hourly wage test. When shopping, take the amount the item costs and divide it into your hourly wage. If it’s a $50 pair of shoes and you make $10 an hour, ask yourself, are those shoes really worth five long hours of work? This helps keep things in perspective.
12. Save money by buying items online, in bulk. Some companies even offer free shipping on large orders. Clearance items are sometimes available, and good savings can be found on non-perishable groceries and diapers.
13. Assess your communications costs. As Internet and wireless use grows, many consumers are overpaying for unneeded communications capacity. For example, if you have a cell phone and two phone lines — one for your computer — consider receiving personal calls on your cell phone so you can give up one of the phone lines.
14. Weatherproof your home. We can caulk holes and cracks that let warm air escape in the winter and cold air escape in the summer.
15. Keep your car engine tuned and its tires inflated to their proper pressure. Doing both can save you up to $100 a year in gas.
16. Shop around for auto and homeowners’ insurance: Before renewing your existing policies each year, check out the rates of competing companies (see the website of your state insurance department). Their annual premiums may well be several hundred dollars lower.
17. Avoid bouncing checks or overdraft fees each month. The $20-30 you save by not bouncing a check each month
18. Substitute coffee for expensive coffee drinks. The $2 a day you could well save by buying a coffee rather than a cappuccino or latte would allow you, over the course of a year, to completely fund a $500 emergency fund.
19. Bring lunch to work. If buying lunch at work costs $5, but making lunch at home costs only $2.50, then in a year, you could afford to create a $500 emergency fund and still have money left over.
20. Eat out one fewer time each month. If it costs you $25 to eat out, but only $5 to eat in, then the $20 you save each month allows you to almost completely fund a $500 emergency savings account.
21. Shop for food with a list and stick to it. People who do food shopping with a list, and buy little else, spend much less money than those who decide what to buy when they get to the food market. The annual savings could easily be hundreds of dollars.