Barbara O’Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension
Like dieting, saving money is hard to start, even harder to maintain, and requires patience and discipline. When you achieve your financial goals, however, the results are so worth it. Below are 12 time-tested ways to save. Every small step makes a difference.
- Pay Yourself First: Treat savings like an important household bill (e.g., loan payment). Set aside a part of each paycheck, even if it is only a small amount, and leave it there. Save automatically where possible.
- Collect Coins: Put loose change into a can or jar. When the container is full, deposit the money into a savings account. Set aside $1 a day, plus loose change, and you should have about $50 a month, or $600 a year, saved. Save $2 a day, plus loose change, and you should have about $1,000.
- Complete a Savings Challenge: Pick a Savings Challenge that matches your time frame and savings goal such as the 30 Day $100 Savings Challenge or the 50 Week $2,500 Savings Challenge. Savings challenges gradually ramp up savings deposits over time and provide motivation and structure.
- Continue to Pay a Loan or Bill: Make payments to savings or investment accounts with money that is freed up when loan payments end or an expense, such as childcare, ends. The rationale behind this savings method is that you are already accustomed to the payment so "redirecting" it will not pinch your cash flow.
- Break Costly Habits: Track your spending for a month or two and pick a few places where spending can be cut back or cut out to "find" money to save. For example, brown bagging lunch two or three days per week could save hundreds of dollars over the course of a year.
- Bank a Windfall: Save all or part of large, infrequent expected or unexpected sums of money. Examples of common financial windfalls include tax refunds, inheritances, settlements, awards and prizes, retroactive pay increases, and year-end bonuses at work.
- Crash Save: Decide that, for a month or two, you will buy only absolute necessities and save any money that remains after paying bills. At the end of the crash savings time period, treat yourself and buy the item(s) that you were saving for. Then resume your "normal" spending habits or set a new crash savings goal.
- Start a "Club" Savings Plan: Start a structured savings plan to save money over the course of a year for holiday or vacation expenses. Some banks and many credit unions still offer them. Unlike "coupon books" of years ago, weekly savings deposits are often transferred electronically from a checking to savings.
- Save Your "Extra" Paychecks: Mark your paydays each year on a calendar. If you are paid bi-weekly, in two months of the year, you will receive three paychecks. If you are paid weekly, there will be four months with five paychecks. Anticipate these months in advance and plan to save part of the "extra" paycheck.
- Save Excess Expense Reimbursement Money: Review your employer's reimbursement policy. If you get a fixed sum for business travel expenses, instead of having to collect receipts, and spend less than the per diem amount, save the difference. Ditto for mileage reimbursement for using a personal car for business.
- Reinvest Interest and Dividends Automatically: Arrange to have dividends and capital gains on mutual funds reinvested to purchase additional shares rather than receiving a check for a small amount and spending it. This is a painless way to increase investment account value over time.
- Participate in a Tax-Deferred Retirement Plan: Reduce your salary via payroll deduction to save for retirement and aim to take maximum advantage of employer matching. Money contributed to a 401(k), 403(b), or similar retirement savings plan and earnings on these funds grow tax-deferred until withdrawal.