Adapted from Better Money Habits®
Sometimes the hardest thing about saving money is just getting started.
It can be difficult to figure out simple ways to save money and how to use your savings to pursue your financial goals. This step-by-step guide to money-saving habits can help you develop a realistic savings plan.
1. Record your expenses
The first step to saving money is to figure out how much you spend. Keep track of all your expenses — that means every coffee, newspaper and snack you buy. Ideally, you can account for every penny. Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Consider using your credit card or bank statements to help you with this. If you bank online, you may be able to filter your statements to easily break down your spending.
2. Make a budget
A great way to build good savings habits is to treat savings as a regular expense, just like groceries or the phone bill.
Once you have an idea of what you spend in a month, you can begin to organize your recorded expenses into a workable budget. Your budget should outline how your expenses measure up to your income — so you can plan your spending and limit overspending. In addition to your monthly expenses, be sure to factor in expenses that occur regularly but not every month, such as car maintenance.
3. Plan on saving money
Now that you’ve made a budget, create a savings category within it. Try to put away 10–15 percent of your income as savings. If your expenses are so high that you can’t save that much, it might be time to cut back. To do so, identify non-essentials that you can spend less on, such as entertainment and dining out.
4. Choose something to save for
One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for — anything from a down payment for a house to a vacation — then figure out how long it might take you to save for it.
Here are some examples of short- and long-term goals:
Short-term (1–3 years) |
Long-term (4+ years) |
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Emergency fund (3–9 months of living expenses) |
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Vacation |
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Down payment for a car |
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Down payment on a home or a remodeling project |
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Your child’s education1 |
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Retirement1 |
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1 If you’re saving for retirement or your child’s education, consider putting that money into a dedicated investment account such as a 401(k), IRA, or 529 plan. While investments come with risks and can lose money, they also create the opportunity for growth when the market grows and could be appropriate if you plan for an event far in advance. More details in step 6.
5. Decide on your priorities
After your expenses and income, your goals are likely to have the biggest impact on how you save money. Be sure to remember long-term goals — it’s important that planning for your future and retirement doesn’t take a back seat to shorter-term needs. Prioritizing goals can give you a clear idea of where to start saving. For example, if you know you’re going to need to replace your car in the near future, you could start putting the money away for one.
6. Pick the right tools
Short-term savings goals |
Long-term goals |
If your savings goals are based on a shorter time horizon, consider these FDIC-insured deposit accounts:
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Savings account |
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Certificate of deposit (CD), which locks in your money at a specific interest rate for a specific period of time |
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If you have a longer time horizon, consider one of the following:
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401(k)s and/or individual retirement accounts (IRAs), which are tax-efficient retirement accounts |
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529 savings plan, a tax-efficient account to save for education |
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Securities such as stocks or mutual funds; these investment products are available through investment accounts with an employer-sponsored plan and/or a broker‑dealer |
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Remember that securities, such as stocks and mutual funds, are not insured by the FDIC, are not deposits or other obligations of a bank and are not guaranteed by a bank, and are subject to investment risks, including the possible loss of principal investment.
7. Make saving automatic
Automated transfers are a great way to save money since you don’t have to think about it and it generally reduces the temptation to spend the money instead. Almost all banks offer automated transfers between your checking and savings accounts. You can choose when, how much and where to transfer money to, or even split your direct deposit between your checking and savings accounts.
8. Watch your progress
Check your progress every month. Not only will this help you stick to your personal savings plan but it also helps you identify and fix problems quickly. These simple ways to save money may even inspire you to save more and potentially hit your goals faster.
Learn more and take action