Top Money-Saving Tips

Once the credit card bill, the mortgage (or rent), the car, groceries, and a host of other regular but necessary items are paid for, it can often seem like there is little left over to save. Whether you’re saving long-term for retirement or short-term for vacation, a little planning can go a long way when it comes to saving money.

It doesn’t matter how much money you make if you aren’t saving enough. While meeting short-term goals—like going on vacation or buying a new car or a second home—might be easy for the wealthy, they’ll feel it in the long run if they elevate these purchases over building savings.

Americans find it difficult to save, though. According to Mint.com, only 32% of Americans bother to track their monthly spending and income. Often, when they receive unexpected or a lump sum of money, they’ll spend it, rather than save it. For instance, most people receiving tax refunds plan to spend the money, and small inheritances are almost always used up, according to Mint.com.

Large inheritances, too, for that matter. Although two-thirds of baby boomers will inherit a total of $7.6 trillion in their lifetimes, they’ll lose 70% of that legacy. By the time the third generation passes away, 9 out of 10 family fortunes will be gone.

Whether you have a little money or a lot, here are some tips for saving money:

6. Set a splurge budget

Whether you make enough for a last-minute weekend vacation or just want to buy a pair of expensive shoes, keeping a separate account for splurges will help. By setting aside money specifically for those impulse buys, you can purchase a new tablet without busting your budget.

Everyone slips up and makes an impulse purchase, but the trick is to budget them in ahead of time, so when you actually make them, they don’t affect your long-term plan or your current savings.

5. Keep accounts separate

If you’re going to follow the idea of keeping a splurge account, try to keep it separate from your savings and checking accounts. If possible, keep them in separate banks. However, it’s not just splurge accounts that should be kept separate.

LearnVest recommends dividing savings into sub-accounts with specific purposes. You can have an emergency fund separate from your vacation fund or your home renovation fund. This is beneficial to prevent you from spending money for the wrong reasons.

Even separate accounts at the same bank can be tempting, though. Most people find it far too easy to transfer the money between accounts with the hopeful promise that they’ll simply replace the money next month. While it’s still easy to transfer money between banks, the fact that these transfers come with fees is often enough to make people think twice about how badly they really want to borrow money from their emergency account to finance their shopping addiction.

4. Make saving automatic

One of the benefits of being enrolled in an employer-sponsored 401(k) is that the money goes directly into your account before you receive your paycheck. You can’t spend money you don’t have.

Automatic savings are easy and painless and lets you save without the risk of deciding to spend the money on something you don’t really need. This is the same concept as setting up a trailing stop on your investments. These automatic features that you set up well in advance, while you’re thinking clearly, take emotions and impulses out of the equation and don’t let you sabotage yourself.

NerdWallet points out that the trick to solid savings is consistency, and automatic savings do all the work for you.

3. Pay with cash

Credit cards make it easy to spend money without thinking about it. When spending cold hard cash, though, people become more aware of how much they’re spending. When the money is gone, it’s gone.

People who go on an all-cash diet tend to save more than those who are racking up the credit card charges. There’s no opportunity for an impulse buy if you need $80 worth of groceries and you only have $85 in your wallet.

According to NerdWallet, the bigger the denomination and the newer the cash, the better. Two studies in the Journal of Consumer Research found that people are less likely to spend larger bills and that dirty money is spent faster than crisp, new bills.

2. Track spending

There’s no way to know just how much money you could be saving unless you track your spending and see what could be reduced. Perhaps you didn’t realize just how much your coffee addition was costing over the course of a month.

Be aware of how much you are spending and budget for all of it. See where you can cut something out. There are plenty of apps and websites that can help you breakdown your monthly spending into easy-to-track categories.

Take advantage of them (particularly the free ones).

1. Make and stick to a budget

A budget is the roadmap that will keep you on track. This is the linchpin. People with budgets are financially disciplined, and those are the people who are most likely to feel financially secure and happy.

Some people find a simple excel spreadsheet the easiest way to set and track a budget. However, there are also plenty of websites and apps that do it as well.

The first step to making your budget is to evaluate your financial situation. Do you have bad debt, like high-interest credit cards or loans? Focus on getting debt free first, then. Do you have major expenditures expected in the next few years? Starting saving now for that wedding ring, new house, baby, etc. Getting ahead of it will help you when the time comes.

Figure out how much of your paycheck needs to go to the mortgage, how much should be put toward paying down debt, how much goes to necessities like healthcare and food, and split the remainder between discretionary spending and savings. See the below graphs from NerdWallet:

This all can seem like a daunting task, and, true, it’s not easy. Even more difficult is actually sticking to the budget, though. Don’t be afraid to adjust the budget if you realize you didn’t realistically allocate enough for discretionary spending. Don’t go on “an unsustainable cost-cutting frenzy.” The more realistic the budget, the more likely you’ll stick to it.