Saving money doesn’t happen by accident. Rather, it takes effort, practice, and the mastery of some money-saving skills to help you get there.
These skills can help you track your money, save more, and spend less – and who doesn’t want that? Keep in mind that this isn’t a comprehensive list. As you master each of these skills, you may realize that there are more that can help you further improve your financial picture.
Create a budget
A budget is the foundation of any successful savings plan. Start by tracking your income and expenses to gain a clear understanding of where your money is going. Categorize your expenses into fixed (such as rent or mortgage payments) and variable (such as dining out or entertainment). This will allow you to identify areas where you can cut back and make adjustments to prioritize your savings goals. You can either utilize an app, such as Mint, or a physical budget planner notebook.
Differentiate between needs and wants
To make sound financial decisions, it’s important to distinguish between essential expenses (needs) and non-essential expenses (wants). Prioritize your spending by covering your needs first, such as housing, utilities, and groceries. This will help you avoid unnecessary purchases and allocate more funds towards savings.
Set savings goals
One of the best ways to save money is to set a goal. Start by thinking about what you might want to save for—both in the short term (one to three years) and the long term (four or more years). Then estimate how much money you’ll need and how long it might take you to save it.
Common short-term goals: Emergency fund (three to nine months of living expenses), vacation or down payment for a car
Common long-term goals: Down payment on a home or a remodeling project, your child’s education or retirement
Set a small, achievable short-term goal for something that’s fun and goes beyond your monthly budget, such as a new smartphone or holiday gifts. Reaching smaller goals—and enjoying the reward you’ve saved for—can give you a psychological boost, making the payoff of saving more immediate and reinforces the habit.
Determine your financial priorities
After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings. For example, if you know you’re going to need to replace your car in the near future, you could start putting away money for one now. But be sure to remember long-term goals—it’s important that planning for retirement doesn’t take a back seat to shorter-term needs. Learning how to prioritize your savings goals can give you a clear idea of how to allocate your savings.
Take up a side hustle
If you want to seriously boost your monthly savings, it’s worth considering taking up a side hustle. This could mean anything from working a few evening shifts at a bar or restaurant after your office job, securing a few freelance gigs, becoming a virtual assistant or perhaps even pet sitting.
If you can afford to do so, it can be particularly motivating to put all the money generated from your side hustles straight into your savings account. However, be wary of burning out. Your mental health is more important than trying to achieve any savings goal!
The Bottom Line
There are many benefits to saving money, and the reasons for saving are different for everyone. While consistently putting money aside can be a challenging habit to start, the trick is finding a few saving methods that resonate with you and your lifestyle.