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Saving money is key to building financial stability, weathering emergencies and putting money toward long-term goals, such as owning a home one day. But all that said, when money's tight, the idea of saving can sound intimidating—if not downright impossible.
There are many good ways to approach saving money, and the right approach depends on your specific situation. The key is to find tweaks that can help you afford your lifestyle while building up your savings. Often, that comes down to some key money moves, like getting out of debt, rethinking the things you splurge on and slightly reducing expenses—then funneling the cash you save into savings. Here are the five best ways to save money now.
1. Set a Budget
Successful savers tend to have one thing in common: They use a budget to manage spending. Creating a budget is key to figuring out how much you can afford to save each month, and to knowing how much you can spend without derailing your efforts.
Be sure to build savings directly into your budget, the same way you treat your fixed expenses like rent or mortgage payments, loan payments and bills. If you're not sure how much you should be saving, some experts suggest putting at least 5% of your take-home pay into a short-term savings account and another 15% into retirement savings.
2. Eliminate Debt
If you're shouldering debt, especially high-interest credit card or personal loan debt, make a plan to pay it down ASAP.
While directing extra money from your income to paying off debt can make cash feel even tighter in the moment, you'll save a lot of money on costly interest in the long term. The money you save can go into your emergency savings or get funneled into your retirement accounts to go even further toward building financial stability in your future.
How should you pay off debt? Here are some best practices for getting out of debt:
- Take inventory of your debt. Write down all your debts. Record the outstanding balance, interest rate, minimum monthly payment and due date.
- Set clear priorities. If you have multiple debts, decide which one you'll target first. You could consider the debt snowball strategy, which prioritizes eliminating the smallest balance first. You'll save more money overall with the debt avalanche method, which prioritizes paying off your highest-interest debt first. In either case, you'll need to continue paying the minimum due each month on all other debts to avoid late fees and penalties.
- Consider a balance transfer card. If you have a good credit score, you might be able to qualify for a new balance transfer credit card offer with a low or 0% introductory interest rate. That can help you save on interest while you aggressively pay down debt.
- Consider a debt consolidation loan. Consolidating your credit card debt could help you save money on interest and get a better handle on your monthly expenses. You'll have just one payment to make each month, rather than several.
3. Challenge Yourself
Gamifying your savings efforts can make it more fun, and easier to stay motivated. You could start by setting some goals that you find challenging and motivating, such as saving $3,000 in an emergency fund by the end of the year.
Aim to be specific in the goals you set. For instance, you might challenge yourself to save $20,000 for a down payment on a house in just three years. Even if you don't quite nail that goal, saving anything more than you are now is a win.
Consider trying a savings challenge such as a 52-week money challenge or a no-spend challenge. Inviting other people in your household or your friends to join a challenge with you can help increase accountability and support.
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4. Splurge Small
Trying to completely cut fun spending out of your budget is a recipe for savings exhaustion, and can actually make it more difficult to stick with your goals. Instead, build splurges you can afford directly into your budget. That way, you won't burn out, and you'll be able to spend less, save more and still have the things that make you happy.
The key is to find small swaps. If you love getting your nails done, plan an at-home pedicure night. If you love going out to the movies, try planning an elaborate in-home movie night, complete with snacks. If a daily latte is burning a hole in your budget, try brewing your daily cup at home, then turn the coffee shop visit into a special weekly ritual—order a large, and savor it.
These small things won't make you rich, but they can coalesce to free up funds. Even putting an extra $20 a week into your emergency savings can help you increase stability.
5. Cook at Home
Grabbing breakfast on the go, dining out for lunch and then ordering takeout in the evening—it adds up. Getting into the habit of making all your meals at home and saving dining out for special occasions can instantly help your cash flow.
If you're currently pretty reliant on your favorite food delivery app, kicking the habit may take some initial work. Try making a list of your favorite meals, and focus on recipes with basic, affordable ingredients: frozen vegetables, fruit, oats, rice, pasta and lean proteins. Find quick weeknight recipes that excite you.
If you're overwhelmed by the idea of adding cooking into your evening routine, consider meal prepping on the weekends. It's cost-effective, and reheating the meals you prepare will actually take you less time than hitting up the drive-thru on the way home. By the same token, save money each day by packing brown bag work lunches, rather than grabbing a bite out on your lunch break.
Slow and Steady Wins the Race
When it comes to saving money, incremental changes go a long way. For example, you might kick a takeout habit by switching to a frozen pizza habit. Once you've slashed your dining out spending, you can focus on saving even more by cooking from scratch. Whatever your budget kryptonite, overcome it by taking things one step at a time.
The same applies to improving your credit: Be consistent and celebrate small victories. Increasing your score can help you save substantial money on interest when you need to borrow, and it can also help you save on auto insurance. Start monitoring your credit for free through Experian to see where you stand now and watch how good credit habits help you improve over time.
While you're at it, consider trying Experian Boost®ø, a feature that allows you to get credit for the bills you already pay, including eligible rent, phone and streaming payments. If you qualify for a boost, you could see an instant increase to your credit score.