When it comes to Americans' savings habits, the facts speak for themselves: Roughly 69% of U.S. adults have less than $1,000 in the bank, which is nowhere close to what the typical worker needs to have on hand for emergencies. If you're looking to ramp up your savings, here are a few simple, painless tricks to employ.
1. Create a budget
Despite the fact that it's one of the most effective savings tools out there, only 41% of Americans actually follow some sort of budget. If you're not one of them, then it's time to start mapping out your expenses and figuring out where your money is going. From there, you can identify different ways to save.
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Creating a budget is especially important if you tend to use a lot of cash, because if that's the case, then there's really no record of your spending. Once you've estimated how much money you need to allocate toward various expense categories, you can better scrutinize that spending and see where you might cut corners. If, for example, you come to realize that you're blowing $100 on a month on taxi rides, you might think about walking home more often and putting that money into savings instead. If you're not sure how to get started on your budget, my colleague Jordan Wathen has a useful budgeting guide that can help.
2. Stop eating out
It's estimated that the typical American household spends close to $2,800 per year on restaurants and takeout. But while there's certainly a convenience factor associated with having someone else prepare your food, there's also a cost involved. In fact, the typical food establishment charges a 300% markup on meals, so if you're spending $2,800 a year on food outside the home, it means you're paying over $1,800 more than necessary. If you were to cut that spending in half, you'd have close to an additional $1,000 to bank.
3. Lower your credit card interest rate
The average American household has $5,700 in credit card debt. If you're carrying a sizable balance, you're probably spending tons of money each year on interest charges alone -- so if you can't knock out that balance quickly, your next best bet is to see about lowering your interest rate and saving a bit of money that way.
In a recent CreditCards.com survey, 69% of consumers managed to snag a lower credit card interest rate simply by reaching out to their issuers and asking. If you're a long-term customer whose account is in good standing (meaning, you're making your minimum payments on time), there's a good chance your credit card company will comply -- if anything, so that it can continue collecting those interest payments.
4. Stop paying for services you aren't using
It's one thing to spend money on the things you actually need and use, but how much cash are you wasting on services you rarely utilize? It's estimated that only 18% of gym members, for example, use the health club facilities they pay for consistently, so if you're holding onto a membership you don't really need, now's the time to cut that expense. The same holds true for the video-streaming service you tend to forget you have, or even the cable plan you might easily get away with downgrading.
Imagine you're currently spending $40 a month for unlimited gym access. If you were to pocket that money and run outdoors instead, you'd have $480 a year to pad your savings account.
5. Do your own home maintenance
The typical homeowner spends 1% to 4% of his or her home's value on annual maintenance, and while you shouldn't skimp on upkeep, you can lower your costs by doing some of that work yourself. Imagine you're currently paying a lawn service $900 per season to cut your grass. If you invest in a $500 mower and take over that task, you'll save $400 your first year, and $900 annually for as long as that equipment keeps functioning. The same holds true for other common maintenance items, so it pays to take a look at what you're spending and see which jobs you're capable of doing yourself. It's one thing to hire a gutter cleaner because of the hazards involved, but if it's work that doesn't pose a safety risk, like pressure-washing your patio, you'll save money if you avoid outsourcing it.
Saving money often boils down to being mindful of what you're spending and making a modest effort to change your ways. None of the above suggestions require a major lifestyle adjustment. Rather, they're small modifications that, collectively, can pay off in a very big way. If you're serious about saving more money, it will pay to give them a try.
FAQs
50 - Consider allocating no more than 50 percent of take-home pay to essential expenses. 15 - Try to save 15 percent of pretax income (including employer contributions) for retirement. 5 - Save for the unexpected by keeping 5 percent of take-home pay in short-term savings for unplanned expenses.
How can I save an insane amount of money? ›
Other Ways to Save Money
- Adjust your tax withholdings. ...
- Check your insurance rates. ...
- Stuff your cash envelopes. ...
- Stay out of “that store.” ...
- Use cash-back apps and coupons. ...
- Learn the power of no (or not now). ...
- Say goodbye to debt. ...
- Set a savings goal.
Save early and consistently, and create a budget to manage spending effectively. Pay off high-interest debts first and consider consolidation or refinancing for better terms. Regularly check accounts, apply the 24-hour rule to avoid impulse buys, and use expert resources to learn how to be better with money.
What is a good rule of thumb for how much you should save? ›
At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
What is the 5 dollar trick? ›
All it requires is that you save every $5 bill you get as change. If you're paying for something at the register with cash and the cashier hands you a $5 bill, put it directly into your savings account and pretend it's not even there. Five dollars can add up quickly.
What is the rule of 5 savings? ›
How about this instead - the 50/15/5 rule? It's our simple rule of thumb for saving and spending: aiming to allocate no more than 50% of take-home pay to essential expenses, 15% of pre-tax income to retirement savings, and 5% of take-home pay to short term savings.
What are the 5 steps to save money? ›
5 simple steps to start saving
- Set one specific goal. Rather than socking away money into a savings account, set specific goals for your savings. ...
- Budget for savings. Just because you decide to save doesn't mean it's going to happen. ...
- Make saving automatic. ...
- Keep separate accounts. ...
- Monitor & watch it grow.
The premise of the 30-day savings rule is straightforward: When faced with the temptation of an impulse purchase, wait 30 days before committing to the buy. During this time, take the opportunity to evaluate the necessity and impact of the purchase on your overall financial goals.
How to aggressively save money? ›
Is Aggressive Saving the Way to Save Money for You?
- Reduce expenses to realize your aggressive savings plan. ...
- Immediately save your additional income so you don't spend it all. ...
- Start looking for ways to earn additional income on a regular basis. ...
- Save in a Saving Pocket. ...
- Save by locking money in a Locked Pocket.
Make a budget and make saving a necessary expense. Try out different budgeting methods until you find one you can stick to. Cut down on spending. Use budgeting apps to find out where you're money is going and look for places where you can cut back.
The 10% rule of investing states that you must save 10% of your income in order to maintain a comfortable lifestyle during retirement. This strategy, of course, isn't meant for everyone as it doesn't account for age, needs, lifestyle, and location.
How to save money quickly? ›
Canceling unnecessary subscriptions and automating your savings are a couple of simple ways to save money quickly. Switching banks, opening a short-term CD, and signing up for rewards programs can also help you save money. Making a budget and eliminating a spending habit each day can help lead to long-term savings.
What is the thumb rule for saving? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
What is the savings goal by age? ›
By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary. Ranges increase with age to account for a wide variety of incomes and situations.
What is the 80 20 rule in saving money? ›
The rule requires that you divide after-tax income into two categories: savings and everything else. As long as 20% of your income is used to pay yourself first, you're free to spend the remaining 80% on needs and wants. That's it; no expense categories, no tracking your individual dollars.
What is the 5 10 15 money saving challenge? ›
Each time you save shade each circle of any 5, 10, 15 dollar, to save the full 1070 in your own time. Saving can be hard but with this you can make it a fun challenge. Safe enough a week to add to the savings pot. Get healthier with your finances and savings.
What is the 15 saving rule? ›
Key takeaways
Budget. Does anyone like that word? How about this instead—the 50/15/5 rule? It's our simple guideline for saving and spending: Aim to allocate no more than 50% of take-home pay to essential expenses, save 15% of pretax income for retirement savings, and keep 5% of take-home pay for short-term savings.
What is the 50 25 25 rule in saving? ›
Originally, the 50/25/25 method designates 50% of your paycheck (weekly, biweekly, monthly, etc.) to your bills (rent, phone, car), 25% of your paycheck to your long-term savings account and the last 25% to leisurely spending (ordering out, shopping, etc.).
What is the 50 30 20 savings method? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
