Whether you want to set aside money for a rainy day or are saving with an end goal in mind, getting started is often the most difficult step. Both short- and long-term savings goals require discipline, forethought, and a good strategy for putting your money aside. We take a look at some of the best ways to save money below.
Add it to your budget
Once you prioritize saving money, the next step is to work the savings into your monthly budget. Take a look at what you spend each month and use a spreadsheet to organize your expenses. Compare what you spend to your income and determine if any areas need to be adjusted. For example, if you’re overspending on dining out, consider ways you can decrease the amount you spend eating out each month. Once you have the basics organized, see where you have room to add in savings. Most people aim to save between 10 and 15 percent of their income.
Cut your spending
The easiest way to give yourself a raise is to cut your spending. Sometimes, you might find that you face exorbitant expenses, making it difficult to set aside money each month. If you created the budget we explained above, it can be easier to identify what your money is going toward each month — and where you might have room to cut back.
Start by discerning between necessary costs and nonessentials, which include expenses related to entertainment, leisure shopping, and dining out. Check for overspending in any of those categories and see where you might tighten your belt. You may even be able to reduce essential expenses by working with your providers to find the best deal. Consider reaching out to your cell phone provider or cable provider to see if you qualify for any special offers.
Pick the right way to save
Once you nail down how to save money, you’ll need to determine where to save your money. There are several savings vehicles available, each with different pros and cons. Consider the following:
- Savings account — this is a Federal Deposit Insurance Corporation (FDIC) insured deposit account that usually offers a low amount of interest.
- Certificate of deposit (CD) — A CD allows you to put away a set amount of money for a fixed period of time while earning interest that is usually higher than what savings accounts offer. This type of account may be ideal for both short- and long-term savings goals as CDs are available for a variety of time periods.
- Individual retirement account (IRA) — these are FDIC-insured, tax-efficient savings accounts that are ideal for long-term savings.
- Securities — These may include mutual funds or stocks and you can invest through a broker-dealer. These are not FDIC-insured nor are they guaranteed by a bank, so there is some risk involved.
It may make sense to consider a couple of the options above, depending on your individual savings goals.
There are plenty of ways to save money, and the best options for you will depend entirely on your unique situation and goals. Do your homework and research the savings options above to determine which may work best to help you reach your financial objectives.