Budgeting Financial Planning Saving Money 12 Easy Ways To Save Money Saving money can be easy when you find a method that suits your life By DeShena Woodard Updated on October 13, 2022 Reviewed by Somer G. Anderson Reviewed by Somer G. Anderson Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. learn about our financial review board Fact checked by David Rubin In This Article View All In This Article Establish a Budget Treat Savings Like a Bill Calculate Your Purchases by Work Hours Set Up Savings Automatically Budget Your Savings Using Cash Envelopes Take Advantage of Company Matches Eat Out Less Photo: The Balance / Getty Images For many people, saving money doesn’t come naturally. It may even seem like a daunting or impossible task depending on your level of disposable income. However, like other chores, the most challenging part about saving money is knowing how to start. Saving money can be a breeze when you find the method that works best for you. Learn some simple and effective money-saving tips that can help get you off to a great start toward reaching your savings goals. Key Takeaways The first step to saving money is creating a budget.Creating realistic savings goals limits burnout and leads to more savings in the long run.Other simple methods of saving money include downloading budgeting apps, waiting 24 hours before making a big purchase, and treating your savings contributions like a bill.Making your savings automatic will ensure you always find money to save. Establish a Budget The first step to saving money is understanding where your money is going each month. “You can't start effectively saving money until you have a well-defined monthly budget,” finance writer Chris Panteli told The Balance in an email interview. A budget puts you in control of your money. The trick is finding the one that’s right for you. A proper budget should contain at least your monthly income, your fixed expenses, and an allocation of funds toward entertainment. There are many free budgeting tools and apps that can help you stay on track. Treat Savings Like a Bill After your budget is set, a sure-fire way to save money is to treat your savings like a bill, said financial analyst Sophia Jones to The Balance in an email interview. “Whenever you get your pay, take out savings first and put it somewhere else, maybe in a high-yielding bank account. By doing so, you train yourself to consistently save, and practice living within your means while still having savings,” Jones said. Calculate Your Purchases by Work Hours Instead of Cost Thinking like a saver means thinking about the true cost of the things you buy and how many hours you will need to work to afford them. Start by taking the dollar amount of the item and dividing it by your hourly pay. Note If you’re paid a salary and aren’t sure of your hourly rate, divide your annual salary by the number of weeks you work per year, then again by the number of hours you work each week. If you make $70,000 per year, your hourly rate is around $33.65 ($70,000 / 52 = $1,346 per week / 40 = $33.65 per hour). For example, if you want to purchase a $48 shirt and you earn $12 per hour, ask yourself if buying it is worth the four hours you’ll have to work to pay for it. Try the 24-Hour Rule This is an easy and effective trick to help you save. When you see an item you think you need or want, don’t buy it right away. Instead, set a “24-hour” rule. Maybe you’ll buy it after all, or maybe you won’t. But at least you can give yourself more time to think it through. One way to enforce the 24-hour rule when online shopping is to disconnect your debit or credit card from your browser or phone. Sometimes putting a little friction between you and that “Check Out” button is all it takes to cut down on impulse purchases. Set Up Savings Automatically “Habits work best when they happen in the background,” Catch CEO Kristen Anderson told The Balance via an email interview. Using smart defaults such as directing a percentage of your paycheck to a separate savings account will have you hitting your savings goals in no time. Start Small Anything is doable when it’s done in baby steps. Corey Noyes, a financial advisor at Balanced Capital, said, “Too many people stretch themselves too thin when they first try to save.” This can lead to frustration, discouragement, and eventually giving up your savings goals. The key is to “choose a manageable amount that doesn't cause you stress and set it on autopilot,” Noyes said. Budget Your Savings Using Cash Envelopes According to a 2021 study by the MIT Sloan School of Management, people spend more money when they use a credit card rather than cash. However, if your spending habits prevent you from saving money, you can try using the envelope-budgeting method. After creating your monthly budget, use cash to separate your savings and each of your other expenses into envelopes. Once the envelopes are empty, you’re done for the month, and your savings are intact. Open a Spend-and-Save Account A spend-and-save account works by automatically helping you save the spare change left after making a purchase. It rounds up each debit-card transaction to the nearest dollar, then deposits the difference into your savings. Of course, to reach larger saving goals, you’ll need to supplement a spend-and-save account with a regimented budget, but you might be surprised how quickly your spare change piles up. Take Advantage of Company Matches Many companies offer employee incentives by matching a certain percentage of the money you save in retirement plans such as your 401(k). This means that for every dollar you save, they will give you an extra dollar, hence the match. So if you’re not taking advantage of your employer match, you are leaving free money on the table. Note The IRS allows 401(k) participants to take a penalty-free loan from their 401(k) plan of up to $50,000 when buying their first home. Pretend Your Windfalls Don’t Exist When you need an easy way to save money, setting aside a windfall of extra cash needs to be a “no brainer.” Whether the money comes from a work bonus, bingo winnings, or tax refund, commit to adding it to your savings and pretend like it doesn’t exist. Shop on Wednesdays Why is Wednesday unique? “When most grocery shops start their new bargains on Wednesdays, customers typically get early access to the latest deals and special offers,” financial analyst Steve Wilson told The Balance in an email interview. “Additionally, shops occasionally accept coupons from the prior week,” Wilson added. Commit To Eating Out One Day Less Each Week If you enjoy eating out, you don’t have to give it up. Instead, just commit to cutting back. For example, suppose you spend at least $15 per day eating out five days a week. That quickly adds up to $300 a month. However, if you cut back even one day a week, you’ve just found $60 a month to add to your savings. The Bottom Line There are many benefits to saving money, and the reasons for saving are different for everyone. While consistently putting money aside can be a challenging habit to start, the trick is finding a few saving methods that resonate with you and your lifestyle. Frequently Asked Questions (FAQs) Why is it important to save money? Saving money is more than important—it’s a necessity. Your savings can give you peace of mind by helping you avoid turning to credit cards or accumulating debt when unexpected expenses pop up. Saving money can also allow you to achieve financial and personal goals such as buying a house. On top of that, saving money can help you grow your money through the power of compound interest. How much money should I save each month? The popular 50/30/20 budgeting method suggests using 20% of your income as a guideline for savings. Initially, you can allocate that money toward your emergency fund until you save three to six months' worth of expenses. After that, you can begin putting the money toward other financial goals. How much do I need to save to buy a house? When you’re preparing to buy a house, it's a good idea to save around 25% of the purchase price in cash to cover a down payment, closing charges, and relocation expenses. For example, if you buy a property for $300,000, you may end up paying more than $75,000 to cover the down payment and all of the various closing costs. That said, if you are a first-time homebuyer, you can buy a home with a down payment as low as 3.5% of the home’s value. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IRS. “Retirement Topics - Plan Loans.” Department of Housing and Urban Development. “Let FHA Loans Help You.”