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How to Save Money: 6 Step-by-Step Ways to Bank Cash Every Month

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Take a moment. Think about being your best self — living your best life.

What do you really want to do with your life? Raise a happy family? Travel the world? Buy a nice house? Start your own business?

Reality check: To accomplish any of those things, you’re going to need to save money.

Unfortunately, Americans are bad at saving money, and we’re getting worse. Thanks to rising costs, stagnant salaries and student loan debt, we’re saving less than ever.

Table of Contents 

Step 1: Develop Savings Goals and Strategies
Step 2: Pick Budgeting and Debt Repayment Methods
Step 3: Choose a Financial Institution and Accounts
Step 4: Automate Your Finances
Step 5: Establish a Budget-Conscious Lifestyle
Step 6: Make More Money

Here Are Our Best Tips to Save Money

Are you ready to actually start saving? What you’re reading is a step-by-step guide on how to do it — how to come up with savings strategies, choose a budgeting method, pick the right financial institution, automate your finances and live a budget-conscious lifestyle.

Pour yourself a cup of coffee and buckle up. It’s time to get serious about this.

Step 1: Develop Savings Goals and Strategies

 The Penny Hoarder created vision boards to inspire saving for retirement and a vacation on Monday, September 24, 2018.
Chris Zuppa/The Penny Hoarder

You’re probably asking yourself, “How much should I save?”

Your first move is to set specific savings goals for yourself — emphasis on specific. Naming your goals will make them more real to you. It’ll help you resist the temptation to spend your money on other stuff.

Think Long Term and Short Term

What exactly do you want to save money for? How much will you need to save? And what do you need to save for first? Think short- and long-term:

  • Short-term: Save for a real vacation or nice holiday gifts. But first, save enough to have a decent emergency fund — three to six months’ worth of living expenses, in case you run into an unexpected car-repair bill or lose your job, for example.
  • Long-term: This involves big-picture thinking. Here, you’re saving for things like your children’s college fund or for your retirement plan.

Analyze Your Income

How much can you realistically save for these goals, now that you’re making them a priority?

Write down your income and expenses — all of your expenses, from utility bills to your Netflix subscription. Don’t forget your student loans or credit card debt. You need to know what you’re spending in every budget category. Pay special attention to what you’re spending on non-essentials, such as eating out.

An easy way to automate this process is to use Trim, a little bot that’ll keep track of all your transactions.

Connect your checking account, credit card and savings account for a big-picture look at your spending habits. Then, take a closer look by checking out each of your transactions. Set alerts that’ll let you know when bills are due, when you’ve hit a spending cap or when you’ve (hopefully not) overdrafted. This will help you stick with your savings plan.

Check in on Your Credit

Do your own credit check. Keeping tabs on your credit score and your credit reports can help guide you to a financially healthier life — especially if you use a free credit-monitoring service like Credit Sesame. It gives you personalized suggestions for improving your credit.

The better your credit, the better off you’ll be when you’re getting a home or car loan. Credit Sesame can estimate how big a mortgage you might qualify for, for example.

Step 2: Pick Budgeting and Debt Repayment Methods

A person creates three different envelopes for savings, fun and expenses. This is part of the envelope method
Tina Russell

It’s time to start making a monthly budget and sticking to it — especially if you have debt.

This way, you can put savings right into your budget. It’s never an afterthought.

Here are five different budgeting methods. We can’t tell you which one to choose. Be honest with yourself, and choose the one you think is most likely to work for you. This is how you save money on a tight budget.

The 50/30/20 Rule

This one was popularized by U.S. Sen. Elizabeth Warren, a bankruptcy expert, and her business-executive daughter Amelia Warren Tyagi.

Split your income into three spending categories: 50% goes to essential bills and monthly expenses, 20% toward financial goals and 30% to personal spending (all the stuff you like to spend money on but don’t really need). Put the money earmarked for your financial goals into a separate savings account.

Good for: People who worry they won’t have a life if they’re on a budget. Here’s our complete guide to 50/30/20 budgeting.

Envelope Budgeting

So-called envelope budgeting is traditionally a cash-only budget. Every month, you use cash for different categories of spending, and you keep that cash for each category in separate envelopes — labeled for groceries, housing, phone, etc.

Prefer plastic? Here’s our review of Mvelopes, an app that lets you digitize this method.

Good for: People who know they need help with self-control. If there’s nothing left in one envelope toward the end of the month, there’s no more money to spend on that category, period.

Zero-Based Budget

Here’s how you draw up this budget: Your income minus your expenses (including savings) equals zero. This way, you have to justify every expense.

Good for: People who need a simple, straightforward method that accounts for every dollar. Here’s our guide to the zero-based budget.

Debt Avalanche

This debt-repayment method helps you budget when you have debt. Pay off your debts with the highest interest rates first — most likely your credit cards.Doing that can save you a lot of money over time.

Good for: People with a lot of credit card debt. Credit cards generally charge you higher interest than other lenders do. Learn more about the debt avalanche method here.

Debt Snowball

Money management guru Dave Ramsey champions the debt snowball method of debt repayment. Pay off your debts with the smallest balances first. This allows you to eliminate debts from your list faster, which can motivate you to keep going.

Good for: People who owe a lot of different kinds of debts — credit cards, student loans, etc. — and who need motivation. Here’s how to use the debt snowball method to eliminate debt.

Author: Admin

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