Having money to pay bills is one thing, but we all want to be able to buy those cute shoes, go on vacation, or save for retirement. For those that are overwhelmed by the question how to save money, this is a practical guide for daily and long term saving habits.
Since you likely have a checking account, one of the first ways to save money is to set up a savings account. Many banks allow you to open a savings account without having to maintain minimum balances. Many banks also have interest bearing savings accounts that let you earn on money that is sitting in the account. Who wouldn’t want to earn a few more dollars without doing anything? There are also some banks that allow you to round up purchases with the difference going directly to the savings account. For instance, you purchase something for $23.47, a bank with this feature would round up the purchase to $24.00 and the $0.53 would be placed in your savings account. It’s a small gesture, but it can add up depending on your spending habits. Saving money takes discipline and getting used to giving up small amounts will get you into the habit of saving larger amounts.
Another way to save money is to do a review of your bank statements on a regular basis. Pay attention to any recurring charges, especially subscriptions. Evaluate whether you use the subscription enough to make the charge a benefit. If not, cancel the subscription. That can save you money each month which will add up. If you have the ability, you can even take the total of all the cancelled monthly subscriptions and put it into your savings account. That way the money is being maximized. During the review of your bank statements, pay attention to how often you eat out, or buy a coffee. Consider cutting back on some of those expenses as well. While budgeting is not a fun thing to do, it is a helpful tool in saving money and gives you more control over where your money goes.
Some other ways to save on purchases is to buy brand name at the grocery store. When it comes to the packaged goods, the store brand has the same ingredients as the name brand, but for significantly less. And although most of us throw away the “junk” advertising mailers, there are sometimes coupons in there. The most expensive items at the grocery store are paper products, cleaning supplies and over the counter medicine. Generally, you can find coupons for those items in that junk mail. Clip them and bring them when you go shopping. Also pay attention to your grocery store sales. Look out for items on sale, as well as “Buy one, get one” items. Stock up when those sales come around. When it comes to store savings, think about getting a Target Red Card if that is your store of choice. Although they have a credit card, the Red Card is also just a savings card that you link to your bank account in order to pay. Every time you use your Red Card to pay, you save 5%. This can add up quite a bit depending on your spending habits. Target also has an app that will have additional discounts on certain items that change from week to week. For instance, there might be a 10% sale on milk, combined with the Red Card, that’s 15% savings just on that gallon of milk. Walmart also has an app that allows you to scan your Walmart receipt, which is then compared to prices at competitors for the items you purchased. If Walmart finds the same item for a lower price, it gives you back the difference! It’ll stay in your Walmart account that you can then let grow or use on your next visit as a “gift card”.
How to Save Money from Salary
While the above guide will help you save money on a daily or monthly basis, there are also some long-term options available by saving money directly from your salary. If you receive direct deposit from your employer, many employers offer the option of directing how much of the paycheck is deposited and where. For instance, you can direct 95% of your paycheck to be deposited into your checking account, and 5% deposited into your savings account. You can then get accustomed to the 95% to budget for bills and purchases during the week or month. Another way to save money from your salary is to enroll in your employer’s 401k plan if available. This is retirement money and it is a pre-tax contribution, which then also
reduces your taxable income and reduce the taxes you pay. While you will get to choose how much you want to contribute, 4%-5% is the common choice. Hopefully the employer also matches your contribution, usually up to 5%. There is a maximum yearly contribution allowed to your 401k and in 2019 it is $19,000.
Another way to save money from your salary is to contribute to a Health Savings Account (HSA) if your employer offers it. HSA is usually offered on the High Deductible, Low Premium insurance plans. Some plans contribute a set amount once a year, other plans offer you a choice on how much you want to set aside. The money in an HSA is not considered income and is not taxed. Use the HSA for out of pocket medical expenses such as corrective lenses, out of pocket dental or medical costs, or an unexpected ER visit. In general, the HSA rollover year to year, so any unused amount is added to the next year’s contribution. Using an HSA can prevent you from dipping into your savings or checking account
for medical expenses.
Saving money takes time and discipline. Whether you follow one or all of the above tips, you will be well on your way to saving money and developing healthy daily and long term money habits.