Our Essential Tips for Saving Money: How to Build Your Savings Wisely in 2023Saving Money
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Planning out your finances this year doesn’t have to be a chore. Use our essential tips for saving money and see your wallet grow in 2023.
Regardless of the current state of your savings account, our essential tips for saving money can help those trying to recover from a taxing year or help those just starting to build their accounts.
While there is no get-rich-quick formula that can instantly make you financially independent, there are strategies that you can employ right now that will build savings.
Getting organized and taking a methodical approach will help build up your savings account quickly.
Following these tips for saving money can set you on the right path despite how much debt you have or how much is currently in your savings account.
How to Build Savings
1. Organize Your Finances
Now that you’ve committed to build savings for whatever the future may hold, the first of the tips for saving money is to see where your finances currently stand.
Gather all of your finances in one place.
For all of your electronic bills, place them in a folder so that they are easily accessible.
For bill that come through the post, which you should try to opt out of if you want to save a tree, place them in one location in the home.
You should then make a checklist of bills that you are expecting in case you accidentally forget to file one away.
Once you have sorted through your bills and know what your expenditures are, then it’s time to choose an accounting program to help maintain your organization.
There are a multitude of personal finance software out there, that range from free with basic features to expensive which will offer a variety of tools to manage your investments.
One tool that we recommend is an app called Personal Capital.
Personal Capital is a a free net worth and investment tracking website and app.
It’s an excellent tool that will help to manage your passive income sources.
Personal Capital comes with an easy to use interface and updates your account balances in real time.
2. Construct a Manageable Budget
After you’ve organized your regular expenses, it’s time to determine how much you spend on miscellaneous products.
For the first month you start to formulate saving money ideas, everytime you make a purchase, make sure you take the receipt.
At the end of the month, gather up all of the receipts and separate them into different categories.
Make a pile for groceries, entertainment , gas, and restaurants.
You can even look into one of the online banking apps that will sort your purchases for you.
This will give you a more accurate idea where your money is being spent.
You’ll also want to take stock of your current credit rating to make sure you start on the right footing.
Credit Sesame is a fantastic tool and is 100% free.
Credit Sesame will monitor your credit and give you access to a free identity theft insurance policy with $50,000 worth of coverage.
The platform allows you to analyze and track your credit score, and will help you to begin eliminating your debt.
3. Create Budgeting Tactics
Learning how to build savings takes more than knowing where your money is going, it also takes knowing how to hold on to it.
There are many options that can be used to save your wealth.
There is the tried and true piggy bank method.
You can setup a separate savings account.
You may even look into putting money into a different form of investment.
After finding places to stash your cash, try creating separate pools on which you draw money in order to pay for your bills.
This could be something as simple as having a few envelopes with the words “Bills”, “Food”, and “Fun” written on them.
Just make sure that when the envelope is empty, don’t take cash from the other envelopes.
If you want to take your envelope saving system to the next level, check out Mvelopes.
Mvelopes is a personal financing software that digitizes your envelope budgeting method in order to manage your bills.
According to the Mvelopes site, you can even recover up to 10% of your income that gets lost in your miscellaneous spending.
It’s a user-friendly app that allows you to view all of your accounts and transactions in real-time.
4. Review Your Spending Habits
Now that you know what you can start cutting back on, depending on the sacrifices you’re willing to make will determine how fast you can build savings.
Here is where you want to establish your needs from your wants.
If you find that your commute to work is costing you half a days wage to get there, then you may have to consider taking public transportation or riding a bike.
If you noticed that you have Netflix, Hulu, HBO, and see a movie at the theater every week, you may want to look into free activities.
Do you have a magazine subscription? Why not look to blogs to get your periodicals.
You may have even noticed that you only watch one hour of cable television a week, but spend ten or more hours on Youtube. It may be time to switch to an Internet-only package.
It’s possible that you have had a cell phone for the last 20 years, so it may be time get rid of that landline.
To help organize your spending habits, look into Chime.
Chime comes with a variety of features that will help any savers.
You can separate on your phone, a spending account from a savings account, as well as a round-up feature that will round-up a purchase to the nearest dollar and put it directly into a savings account.
Chime is an FDIC insured mobile-only bank, which passes on some of the savings to you from not having the overhead of a brick and mortar site.
Chime accounts have no maintenance fees or overdraft fees.
5. Seek Out Better Banking Terms
It’s time to look at your banking situation.
Whether you have multiple banking accounts with multiple features or you’re going to the local checks-for-cash store and giving away 10% of your income, you may want to consider the other options out there.
With many banks developing an online presence and other online-only banking institutions springing up, there are new options available every day.
You may look into accounts that offer credit cards to provide reward points.
If you find that you pay for most of your purchases in cash, you may find an institution that has the most branches and ATMs scattered around your spending route.
You want to find a bank that offers low fees and high interest rates.
If you can’t find a suitable traditional bank, then it might be time to switch to an online bank.
One of the ways an online bank offers better rates is because they don’t need to maintain the overhead of a traditional bank. Just make sure the one you choose is insured and backed by the Federal Deposit Insurance Corp (FDIC).
While you’re looking into better banks, you may find what you’re looking for in Long Game.
Long Game is an app that gamifies your financial experience.
It’s a banking app the will reward you for saving, and is covered by the FDIC.
To use Long Game, you deposit funds into your fee-free account with them and then earn interest on it.
Long Game will then reward you with coins on the amount you have saved with them.
The coins issued to you can be used to play various games that actually gives you a cash prize.
The listed top prize is a whooping $1,000,000.
In order to have access to the games, you don’t need to spend money, you just need to save money.
6. Set Up an Automatic Savings Account
After you’ve sorted out your banking situation, then it’s time to set up an automatic savings account.
Determine how much you want to set aside, then you can set it and forget it.
As a standard, most people have been taught to set aside 10% of their wage every month.
You may also find it necessary to set aside a further percentage if you have an expense that you are working towards.
If you have the grand European trip scheduled next year, then you need to calculate how much you want to have towards the trip.
If the trip is in 10 months and you want to allocate $5,000 for the travel, then you will need to save $500 every month to reach the goal.
To help resist the temptation of spending that trip money, the best bet is to have it transferred to an account automatically at the end of each month.
There are times that you will have to spend money despite your best efforts.
If you’re going to spend money you might as well do it in the most cost-effective way.
One way is to get paid for the normal shopping that you do with an app called Acorns.
Acorns works through dividends.
The way that this works is when you put money into a stock that pays out in dividends, you are essentially acquiring a portion of that company, and your investment is rewarded with a part of their profits.
Acorns is effective for the novice investor because it allows for a hands-off approach.
A customized portfolio is generated for you after you input your information and projected financial goals, and regardless of how the market behaves, at the end of every quarter you have dividends deposited into your account.
There is also the added benefit as stated above, that if you shop with certain brands through the Acorns app, you’ll get an extra deposit into your dividends stock at no charge.
7. Establish an Emergency Fund
It’s always a good plan to have an emergency fund.
Even if you are considered low-income, if you have even a meager emergency fund set aside, you can be considered in a better position financially than a medium-income family without savings.
This emergency account can be a separate account or even just another envelope, but you need to maintain this account in case any unforeseen incidents occur.
As with your other savings account, this should also be tied to an automatic transfer.
The purpose of the emergency fund is to save in case of unexpected auto maintenance or a more serious endeavor such as medical bills.
If you don’t run into any of these instances, then just allow the emergency fund to grow.
This is one of the most essential tips for saving money.
To feel secure with your emergency fund, then you should try and set aside 6-months of living expense in the account.
8. Set a Savings Goal
Tips for saving money won’t really help unless you have a goal you’re saving towards.
If you just have a bank account with direct deposit, it can be easy to use the cash and overspend because you think you can cover it next month.
This is why you need to set either one or multiple saving goals.
You might be setting aside funds for a home, car, or traveling.
After you have your goals in mind, then you will want to give yourself milestones to reach.
Planning an around-the-world-trip next summer? Then you can easily determine the benchmark to reach.
You can have more abstract goals, such as saving for retirement.
For these goals, you still want to have a milestone to keep you on track, but it may take some guess work, such as if you want to retire by 65, then by 35 you might think you need to have $50,000 specifically in that fund.
Now that you have made a timeline for your goals, it’s time to monitor your progress.
At the end of every month, take a tally of where all of your accounts are standing.
If you have multiple goals, then you may need to make some adjustments, if you have some investments underperforming and some overperforming, you will need to shift the funds around.
9. Investigate Retirement Plans
When it comes to saving money ideas, a retirement plan should be at the top of your list.
It’s very difficult for a person to lead a comfortable retirement life by having saved only their wages.
You want to try and take advantage of one of the many retirement plans out there as soon as possible.
Retirement plans utilize compound interest to turn a meager saving into a healthy chunk of change.
There are many plans that can be used towards a retirement plan, each use a different method on how to build savings.
The most common one is a workplace 401(k) plan.
401(k) plans generally come with the benefit of direct deposit. There are even some companies that will match the funding you set aside.
If your company doesn’t offer a 401(k) plan, then look into an Individual Retirement Account (IRA).
These retirement plans can be tailored to your needs and what you expect your future to look like.
Some insurance companies will allow you to pay the tax either now or when there is a withdrawal made in the future.
Be aware that if you choose a standard IRA (not a Roth IRA) then your heirs may be subjected to estate or inheritance tax.
Through compound interest, a $500 account balance with an IRA that you put in $80 every month will yield you $48,256.20 at 3% over 30 years.
Just make sure that you read the contract’s terms and conditions because structuring the best 401(k) can be a trick and tedious ordeal.
Thankfully there is a company called Blooom that can help you out.
Blooom is giving everyone the opportunity to access a financial manager who specializes in 401(k)s.
It doesn’t matter what state your current retirement investment situation stands. They aim to assist everyone who either is already involved in a scheme or just thinking about getting in the game.
The advice that Blooom gives is designed to be impartial and to get you the best results.
Blooom offers a simple and affordable service that will address any and all of your concerns when structuring a retirement plan.
10. Use Credit Cards Wisely
Many people are either too scared of credit cards or not scared enough.
As long as you educate yourself on the many variables involved with credit card spending, then you can save yourself a lot of headache and a lot of debt.
The first step in using your credit card wisely, is to always keep track of your spending,
You always want to find yourself in a position to pay off the debt on the first of the month.
When you receive your cards statement, make sure that you can pay, as the name suggest, the minimum monthly payment due.
If you miss even a few payment dates, the extra interest charges and the late payment fees can be staggering.
You should treat this bill as you do the others. Make sure to pay them monthly and set up an automatic payment that will at least cover the minimum due.
If you are having a hard time paying even the minimum amount, look at switching the debt of your current account to a card with a lower interest rate.
You also want to lower your credit limit to a level that you can handle. It’s easy to be tempted by big ticket items, if you know that you have the credit to cover the purchase.
One added benefit of using a credit card over a debit card, is that you can choose one that provides a reward program.
When you receive the bill at the beginning of the month, pay it off completely, and enjoy the benefits of having accumulated the air miles, cashback or discounts just for using your card.
Keep in mind that you want a card that will offer benefits for your lifestyle, and check to see the fees and terms attached to the card.
If you’re not coming out net profitable at the end of the day, then it’s best to skip the card.
11. Explore Investing
So far we’ve explored many ways to save money, but if you really want to build savings then you have to do more than store it.
If you hide all of your money under the mattress, you don’t have to worry about a thief stealing it, because inflation will do it for them.
After you’ve set up your emergency fund, retirement fund, and personal savings account, it’s time to look into investing it into something with a high(er) yield.
The stock market can be a confusing subject for many people, but the barrier to entry is becoming thinner as technology progresses.
Before you open an account you need to decide if you are looking into a short-term investment that will let you access your money sooner or if you want a higher return but having your money tied up for years.
If you’re looking into short-term investments, you might be steering toward a money market account, a certificate of deposit (CD), or short-term bonds.
If you want take control of your financial future, you may want to invest in learning about options trading for short-term high yield returns.
For a more hands-off approach, you can search for a mutual fund or savings bond that fits your needs, but you’ll have even less (than usual) control of how your money can perform for you.
After exploring the various options in which to grow your money through investment, you will want to explore ways to inject money into a scheme.
12. Set Up a Side Hustle
Sometimes learning how to build savings really just means learning how to bring in more money.
If you’ve properly set up your savings goals, then you should have milestones that you’re working towards.
All of these tips for saving money can be the biggest inspiration to move you towards financial freedom, but if you’re not bringing in enough money, sometimes that can stop you from saving completely.
Most people, if they believe it or not, have some talent or skill they can monetize.
This can be anything from being an illustrator to building furniture from pallet wood.
You can approach these skills from two angles, you can either freelance your talent out, or set up workshops and teach.
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.