How to Save Money in 10 Practical Steps

Saving money is a top financial goal for most people; however, life often gets in the way because of rising costs and unexpected expenses. Building momentum can feel nearly impossible at times, but with the right money-saving tips, you can create a realistic plan and establish smart habits lasting a lifetime.

In this article, the financial pros at Tower Loan offer cash-saving tips and strategies.

1. Create a Simple Plan

The best way to save money initially is to create a straightforward plan tailored to your unique financial situation.

Track Every Dollar You Have for 30 Days

It might sound tedious at first, but make a point to track every dollar you spend or earn for the next 30 days. You can do this with a simple spreadsheet or a budgeting app. Categorize every item into needs, wants, and goals, keeping an eye out for “money leaks” – small, frequent costs which add up.

Find a Budget You Can Stick to

There are several popular budgeting styles to consider when figuring out how to save money. The 50/30/20 rule divides your money into 50% for needs, 30% for wants, and 20% for savings. You can also adjust those percentages to 60%, 30%, and 10%.

Another idea is zero-based budgeting, which assigns every dollar a job. You can also try the envelope method, which involves allocating cash to each of your spending categories in a physical envelope.

Establish Clear Saving Goals

You’re more likely to be motivated to save money if you know what you’re saving for. Make a list of short-term goals, such as holiday spending or a weekend getaway. Then make a list of long-term goals, such as retirement, college, or a down payment on a house.

2. Automate Your Savings Contributions

The next of our money-saving tips is to automate as much of your savings as possible to make it effortless and painless.

Prioritizing Savings First

Make yourself a priority and pay yourself first (in savings) instead of waiting to see what’s left over at the end of the month. You can set up same-day automatic transfers, split your direct deposits, and name your accounts for what you’re saving for to reinforce your motivation.

Open a High-Yield Savings Account

The best way to save money for some people is to set up a high-yield savings account, which allows you to earn significantly more interest than with a traditional bank. Keep one to three months of savings here for easy access, but move excess funds to investment accounts or Certificate of Deposit (CD) accounts.

3. Pay Down High-Interest Costs

An overlooked approach to saving money is to tackle high-interest debt and reduce interest owed to free up monthly cash.

Make Paying Off Debt a Priority

You can try the avalanche method to pay off highest-interest debts first or the snowball method to knock out the smallest balances before moving to the rest. When possible, make extra payments toward your principal because even just an additional $50 per month can reduce interest over time.

Reduce the Amounts You Own

Among our saving-cash tips are finding ways to reduce your payments without increasing total long-term interest. For example, some student loans offer income-driven repayment plans. Autopay interest rate discounts may be an option for you, as well as responsible refinancing if a new rate and terms save you money.

4. Cut Fixed Bills Where Possible

When you are trying to determine how to save money fast, look for set-it-and-forget-it savings opportunities in your daily life.

Internet, Television, and Phones

You may be able to find savings within the fixed bills for your personal electronics. You could downgrade your internet speed if you don’t use it at full capacity or remove channels from your TV package. You can even contact your service provider to let them know you’ve found comparable plans at lower prices following bill increases, and ask what they can do to retain your business.

Insurance and Utilities

Each year, shop for home and auto insurance policies to see if better rates are available. You may be able to strategically bundle your insurance services or increase your deductibles if you can comfortably cover them.

For utilities, you can save hundreds of dollars annually by installing smart thermostats, LED light bulbs, and insulation to improve your home’s energy efficiency.

Recurring Subscriptions

Subscriptions are easy to forget about if you don’t use them. Cancel or pause subscriptions you don’t actively use, and set calendar reminders for when free trials expire.

5. Smartly Spend Less on Food

You can eat well and enjoy the foods you love while spending less and cutting back on your food budget.

Plan Ahead with Grocery Lists

When developing a plan for how to save money, create a weekly meal plan and check your kitchen for ingredients before shopping. Collect coupons and use store loyalty apps to reduce your grocery spending. Freezer meals and batch cooking can help you make the most of leftovers and reduce waste.

Time Your Restaurant Visits Wisely

Dining out can get pricey, but it’s less so if you time your meals right. Eat out during happy hour specials, split meals with friends and family, and skip buying drinks with your meal. You can also affordably eat out more often by using card rewards and dining programs.

6. Avoid Impulse Purchases

How do you save money? Shop strategically, not impulsively.

Look for Timely Sales

Time big purchases around annual pricing cycles for big-ticket items like mattresses and TVs. Check price-tracking tools and compare prices over time to understand these predictable patterns.

Try the 24-30-Day Rule

For non-essential items, leave them in your online cart for 24 to 30 days. Remove one-click checkout that makes it too easy to buy, and delete shopping apps from your phone.

Buy in Bulk and Secondhand Shop

Buying in bulk often makes sense when you’re purchasing non-perishable items you regularly use and have the storage space for them. High-quality, pre-owned items like clothing and furniture at thrift stores can help you save hundreds annually.

7. Find Transportation Savings That Add Up

Here are some money-saving tips for your personal vehicle, a significant expense for many people.

Lower Your Vehicle Costs

You can lower your vehicle ownership costs by staying current on maintenance and shopping around for insurance. Avoid aggressive driving that wastes fuel, and consider an auto refinancing loan if it reduces total interest.

Reduce Your Fuel Spending

To save money on fuel, combine your errands into single trips and use gas-price apps. Other ways to save money at the pump include avoiding idling and taking advantage of grocery fuel points.  

If you don’t drive often, consider a car-sharing service that may cost less than owning a vehicle.

8. Seek Entertainment on a Budget

You can still go out and have fun while saving money! Here are some ideas for inspiration.

Free and Low-Cost Alternatives

In your community, look for free events, such as park programs and discounted museum days. When you go on outings, bring your own coffee and snacks to avoid impulse spending.

Thoughtful and Affordable Gift-Giving

For loved ones’ birthdays and holidays, rethink your gift-giving strategy with homemade gifts and experience coupons. Plan potluck celebrations to reduce your party food costs.

9. Work on Growing Your Savings Over Time

The best way to save money often involves considering both short- and long-term saving goals simultaneously.

Short-Term vs. Long-Term Savings  

Short-term (zero to three years) goals may involve a high-yield savings account or a CD. Long-term savings goals include 401(k)s, IRAs, and 529 college savings plans.

Take Advantage of Workplace Benefits

If your employer offers 401(k) matching, don’t miss out on this “free money” opportunity. You can also use health savings accounts for tax savings and set up automatic contribution increases each year.

10. Easy Saving Steps You Can Do Today

Try not to feel overwhelmed with how to save money, even if you’re starting from scratch. Here are some money-saving tips you can start on today.

• Open a high-yield savings account
• Cancel an underutilized subscription
• Call your phone or internet provider to negotiate a better rate
• Set up auto-transfers for your next payday
• Set up savings buckets named by goal (travel, retirement, gifts, etc.)

Then, you can maintain this momentum by reviewing your savings accomplishments each month, celebrating small wins, and finding an “accountability buddy” to discuss finances with.

FAQ About How to Save Money

Fortunately, there are many ways to save money as you think about your future and plan for what’s ahead. But when your savings fall short, Tower Loan can help with a fast and affordable personal loan. We even have a mobile app to help you stay on top of your loan payments.

Here are answers to common questions our customers ask about saving money.

How much should I save each month?

Aim for saving 10% to 20% of your take-home income and increasing your savings by 1% each quarter if possible.

How can I save money fast?

The solution to saving money fast may involve selling things you don’t need, cutting subscriptions, and avoiding restaurants for a month. You can also put a tax refund or work bonus directly into savings or try a no-spend week.

How big should my emergency fund be?

Ideally, your emergency fund should be around $1,000 to $2,500. Once you save this amount, you can build toward three to six months of essential expenses.