How to Save Money: 12 Ways to Grow Your Savings

If you’re wondering how to save money, you’re in good company. 64% of Americans live paycheck-to-paycheck, and people across the socioeconomic spectrum are feeling the strain. Of the 166 million people in this circumstance, 8 million earn more than $100,000 a year. 

When your income barely covers your monthly expenses, it can be tough to find extra money to put into savings. Yet putting aside money for emergencies and future goals is an important part of building long-term financial security. The good news is that there are many techniques you can use to reduce your spending so you can start saving money for the future.   

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In this article, we’ll cover these savings tips:

1. Track your spending
2. Create a budget
3. Cut out impulse purchases
4. Plan out grocery shopping
5. Compare car insurance
6. Reduce your energy bill
7. Cancel subscriptions
8. Pay off high-interest debt
9. Set your savings goal
10. Open a high-yield savings account
11. Automate transfers
12. Stop comparing yourself to others

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1. Track your spending against your income

Before you can start trimming down your spending and putting money into a savings account, you’ll need to get a clear picture of the money coming in and going out every month. The first step in saving money is to track your spending and compare it to your income. 

Start by making a list of all your monthly expenses. Consult your bank transaction history, credit card statements, and billing statements to see how much you usually spend on what. You may wish to look at records from the last six months to make sure you capture everything. Here are a few types of expenses to keep track of.

Fixed monthly expenses are the recurring bills you pay for the must-haves of life. They’re usually the same every month. Common expenses include: 

• Rent or mortgage
• Utilities, like electricity, water, and gas
• Phone and internet
• Health insurance
• Healthcare, like prescriptions and regular doctor appointments
• Minimum debt payments, such as student loans and car payments
• Transportation, like bus fare, gas, car insurance
• Childcare and school tuition
• Streaming services and subscriptions
• Membership fees, like a gym or co-working space 

Variable expenses are just like they sound: spending that varies from month to month. While the amount of money you spend is different each month, you can get an average by tallying up what you’ve spent over the last six months and dividing by six. Expenses you may want to capture:

• Groceries
• Dining out
• Entertainment
• Pet costs, such as food, grooming, doggy daycare

• Home maintenance
• Medical and veterinary bills
• Travel
• Gifts
• Personal care and wellness

Periodic expenses refer to predictable spending that happens infrequently, such as quarterly or annually. It’s easy to forget about these expenses, but you’ll need to plan for them if you want a complete picture of your finances. To break it down into how much money per month you’ll need to fund these occasional purchases, divide the cost of each by the frequency. For example, if it costs $120 a year to renew your car’s tags, divide that amount by 12 to get $10 a month; that’s how much money you’d need to put aside each month to have the amount you need when the bill comes due. Check your records for expenses like:

• Annual vehicle registration
• Annual tax preparation
• Quarterly utilities
• Subscriptions that renew annually
• Car maintenance
• Home maintenance
• Periodic healthcare, like new glasses or annual physicals 
• Clothing and shoes
• Household items and furniture

Unexpected expenses are the hardest to plan for because, of course, they’re not expected. One reason you might want to start saving money in an emergency fund is to be sure you can cover these kinds of things when they come up. But you can anticipate some of the expenses that might come up so you can start planning ahead. Track what you’ve spent on things like:

• Car or home repairs
• Medical and dental bills 
• Unplanned travel
• Emergency vet bills
• Weather emergencies
• Replacement appliances

Income is all the money you bring home. You need a clear picture of what’s coming in to make sure you have enough to cover the expenses you’ve identified. Make a list of all sources of income, which might include:

• Your net pay from your job 
• Money you make from a side hustle
• Child or spousal support
• Disability or veterans benefits
• Dividends or other income from investments

Once you’ve gathered the info about your expenses and income, it’s time for some simple math. Add up all your monthly expenses, including averages for variable expenses and periodic expenses. Then tally up your monthly income. When you compare the two numbers, ideally your income will be larger than your expenses. If it’s not, you may want to consider how to save money by reducing discretionary spending or trimming the cost of necessities.

2. Create a budget that works for you

With your list of income and expenses in hand, you’ll be ready to make a budget. In its simplest form, a budget is a list of your planned monthly income and expenses. Once you set it up, you track your actual spending compared to your plan and adjust in real-time as needed. 

Making and sticking to a budget is half the battle of saving money. It gives you a clear picture of your finances in real-time and helps you plan for your goals, like getting out of debt, saving up for a vacation, or building an emergency fund. It also allows you to manage short-term spending, like whether you can order take-out for dinner without putting yourself in a pinch when your car payment’s due. And planning your spending in advance can help you see how to save money on individual expenses and reduce the stress of wondering whether you have the money you need to cover your bills. 

There are many approaches to budgeting, and they all have benefits. What matters is finding one that works for you. Here are a few popular budgeting methods you might try:

• 50-30-20 budgeting: You categorize your expenses and allot income accordingly: 50% to needs, 30% to wants, and 20% to saving and investing.
• Zero-based budgeting: You assign every dollar to a specific expense so that the difference between your income and expenses is zero. 
• Pay yourself first method: Each month you first set aside money for saving and investing, which cuts spending and prioritizes your long-term goals.
• Envelope method: You allocate funds to expense categories and put the money into literal or digital envelopes; when an envelope is empty, your spending on that category is done for the month.

While budgeting for the necessities, be sure to include space for some discretionary spending in your budget too. It can be easier to stick to your spending plan when you have money specifically set aside for fun, and it can give you a bit of a buffer if you underestimate your needs in one of your budget categories.  

3. Cut out impulse purchases

Everyone has those moments: after a long day the thought of cooking dinner sounds exhausting, so you open a restaurant delivery app and unwittingly spend a good chunk of your grocery budget on one meal. Or an ad for a cool jacket pops up on your screen, you click the link, and suddenly you’ve spent that money you’d planned to put in your savings account on something you don’t really need. 

Impulse spending is only human, but it also creates a huge barrier to saving money. Consider trying these tricks to help you put the brakes on that spur-of-the-moment spending that undermines your budget plans.

• Stick to the 30-day savings rule. If you find you want to make an unplanned purchase, set the money aside and wait 30 days. If after a month you still want to buy the item, go ahead. But you may find that the delay takes some of the shine off of the thing that seemed so appealing at first glance, and a month later you might decide to put that money into your savings account instead.
• Go on a “cash diet.” Commit to only making impulse buys in cash. Build it into your budget with an “allowance,” then take the money out in cash at the beginning of the month. Swiping a card makes impulse spending that much easier, but handing over actual cash has a greater psychological impact and makes you stop and think about the purchase more carefully. 
• Delete your online payment info. The more effort it takes to shop online, the more likely you’ll be to pause and think about whether you truly want to fork over your money on a whim. Delete your saved debit or credit card information on any website where it’s stored and forget the autofill option; when you want to buy something, you’ll have to go get your physical card and enter the number. That extra time might prod you to think about your budget and saving goals.

4. Plan out grocery shopping trips

According to the nonprofit organization Feeding America, 119 billion pounds of food, worth $408 billion, is wasted in America each year. At a household level, the USDA reports that the average American wastes 238 pounds of food per year, or about one-fifth of the food they buy. If you want to save money, ensuring groceries don’t go to waste can be an important place to start, especially with the recent uptick in inflation of prices.

Planning out your meals and snacks for the week makes it less likely your groceries will end up in the trash. This allows you to make clever choices that ensure you use up all of what you buy; for instance, if a recipe calls for half a head of cauliflower, you can plan to use the other half later in the week instead of watching it go bad in the fridge.

Here are some other ways to help keep your grocery costs down:

• Scan sale circulars and store apps to find the best deals, and use print or digital coupons. 
• Consider shopping at several stores to get the best price on different items, if time allows. 
• Check your pantry before heading to the store so that you don’t double up on products you already have.
• Shop from a list, which will help you avoid impulse spending on products that grocers put in special displays.
• Purchase items in larger quantities and use them in several meals throughout the week or freeze portions for later use.
• Buy store brands instead of name-brand products with the same ingredients.
• Keep grocery trips down to once a week, if possible, which will force you to use up the food you already have at home.
• Shop online and pick up your groceries to avoid the temptation of going off your list while browsing the shelves.

5. Compare car insurance 

There are many avenues to explore when looking at how to save money on car insurance: comparing plans, maintaining a good driving record, and taking a close look at your coverage level and add-ons.

All those gimmicky insurance ads promise amazing rates; comparison shopping can help you find the best deal for you. Even if you’re happy with your current insurance company, requesting quotes from several other companies might reveal opportunities for saving money if you switch. You can also call your current insurer and ask if you’re eligible for any discounts; they’re often willing to offer an incentive to keep your business. 

Car insurance rates are based on several factors, including your driving record and your credit score. That means being a safe driver and improving your credit can save you money on car insurance. 

If you don’t have an outstanding loan on your car, another way to save money is to change the type of coverage you carry. Generally, there are three types of coverage available: 

• Liability insurance: Liability covers only other person’s damages if you get into an accident; this is the minimum level of coverage required by law.
• Collision insurance: Collision also pays to repair damage to your car if it crashes into another vehicle or object.
• Comprehensive insurance: Comprehensive covers both damages and pays if your car is stolen or damaged by storms, vandalism, or hitting an animal. 

However, collision and comprehensive insurance never pay more than what the car is worth. So, if you have an older car that’s worth less than your deductible plus the cost of annual coverage, you’re probably paying more than you need to; you could save in the long run by simply carrying the liability insurance mandated by your state.

Finally, review your current policy to see if you’re paying for any add-on services that you don’t need. Many policies offer extras like rental car reimbursement, roadside assistance, or windshield repair. If you’re paying for them, consider whether they’re really worth the cost. 

6. Reduce your energy bill

Saving money on electricity can add up over a year. Much like with groceries, one of the simplest ways to start is to reduce waste. A few simple habits can boost efficiency and shave dollars off your bill:

• Switch from incandescent to LED bulbs, which use at least 75% less energy.
• Wash your clothes in cold water, and don’t overfill the dryer. 
• Set the temperature of your refrigerator to 37°F and the freezer to 0°F, and clean the coils on the back of the fridge periodically to keep it working properly.
• Use the air-dry instead of the heat-dry setting on your dishwasher.
• Close shades and curtains on hot sunny days to reduce the cost of cooling your home, and turn off the air conditioner when no one is there.
• Change your furnace filter several times a year to keep it running at maximum efficiency.

If you own your home, you might also look into updates that will increase efficiency. Either your local utility company or a professional home inspector can conduct a home energy audit, which will help you understand how much energy your home uses, where inefficiencies exist, and which fixes you should prioritize to save energy. 

7. Cancel unnecessary subscriptions

Have you been keeping up with your Mandarin lessons, or is it time to let go of that language-learning app? How much time do you spend reading the magazines and newspapers you pay for? When you turn on the TV, how many services do you rarely, or never, actually use to watch something? 

When you’re looking for savings opportunities, review all the subscriptions you pay for each month and assess how much you’re using them and the real value they bring to your life. Look at things like phone apps, music services, TV and movie streaming, and print and digital publications. Consider hanging on to just the subscriptions you use at least three times a week and see if you even miss the others. 

Look for savings opportunities on the subscriptions you keep, too. Some services have multiple tiers or have friends and family plans that allow you to share an account and split the cost. Check to see if your phone or internet plan comes with a streaming service included. And remember, there are a lot of free options out there too; check to see if your library has a video or music streaming app.

Finally, review your bank and credit card statements to make sure you’re not paying for any subscriptions you’re not using, like a free trial you signed up for and forgot to cancel. 

8. Pay off high-interest debt

Whether it’s personal loans, student loans, auto loans, credit card bills, or mortgages, around 340 million Americans carry some form of debt. Saving money can be a struggle when your budget is burdened with debt payments. And it’s especially difficult when you’re paying high-interest rates; it’s tough to get ahead when your loan balance keeps mounting with interest charges. Credit card debt is often a particularly tough hole to dig out of; the average credit card interest rate is 23.77% as of February 2023.  

The sooner you make a plan to get out of debt, the sooner you can stash more money away in your savings account, emergency fund, and investments. If your budget allows, start paying down your high-interest debt like credit cards, personal loans, and car loans. 

But which loans should you tackle first? There are two popular approaches:

• The avalanche method is focused on paying off the debt with the highest interest rate because that higher rate costs you more money the longer you hold the loan.
• The snowball method is based on paying off your smallest balance first, then moving on to the next-highest balance, to give you a sense of momentum and accomplishment.  

9. Set realistic savings goals

Your monthly budget is a plan for what you’ll do with your money. That includes covering necessities like rent, groceries, and utilities as well as discretionary purchases. But your budget isn’t only about spending; it’s also your plan for saving up. So when you’re planning how to allocate your income, be sure to budget for savings. 

In addition to asking how to save money, ask yourself why you want to save money. That’s how you determine your goals, and saving up can feel more achievable if you determine specific, realistic aims. Consider planning for three kinds of goals:

• Emergency fund: When the unexpected strikes, your emergency fund is there to cover expenses that you might otherwise have to put on a credit card or leave your budget squeezed. Keep your emergency fund in a savings account so it’s easy to access in event of things like a big car repair, medical bill, or even covering living expenses in the event you’re laid off. Ideally, you’ll have enough money to cover six months of living expenses in your emergency fund. That may sound like a large sum, but if you put a little aside each month, you may be surprised at how quickly it adds up.
• Short-term goals: Think about what you want to save for in the next one to three years. Maybe it’s fun stuff, like a vacation, a new bike, or a gaming console. You might want to save for practical things, like replacing your aging car or moving into a bigger apartment. For each goal, figure out how much money you’ll need, how long you’ll save, and how much you’ll have to set aside each month to get there. 
• Medium-term goals: Saving for things three to five years in the future is also more achievable when you set specific goals; your motivation to keep saving may be stronger if you can picture what you’re going for. You might save for a downpayment on a house, remodel if you already own a home, or start a small business
• Long-term goals: When you think a decade or more into the future, goals might be harder to picture, but saving for them now can help you get there. Putting aside money for retirement and paying for your children’s college education are big targets, so focus on consistently saving a certain amount over time. When the far-off future arrives, you’ll be better prepared for it.  

10. Open a high-yield savings account

If you’re wondering how to save money more quickly, think about interest. When your money earns money, you add more to your nest egg without lifting a finger. The higher your saving account’s interest rate, the more your money will grow. And with compound interest, the interest you’ve earned also earns interest, so your savings grow even more rapidly. 

But if you’re keeping a large amount of money in a basic savings account at a big bank, you could be missing out on some serious earning potential. In February 2023, the average national bank savings account interest rate was only 0.23%, and it was a meager 0.01% at the largest banks. 

A high-yield savings account can help you reach your short-term savings goals and build your emergency fund faster. These accounts work just like regular savings accounts; some have minimum balance requirements or monthly fees, but many don’t. And with the proliferation of online banks, there are a growing number of options; some online banks offer high-yield savings accounts with annual percentage yields of 3.3% or more.

Curious about other ways to put your idle cash to work? Learn more about this investment.

11. Automate transfers to your savings account

Saving up money is an exciting idea in theory; in practice, though, it can take a lot of discipline. Once your paycheck hits your checking account, it can be easy to start spending and then discover that you’ve used up the money you’d planned to save that month. It’s much easier if you can save money without even thinking about it. That’s where automatic transfers come in.

Setting up an automatic monthly transfer from your checking account to your savings account is an effortless way to make sure you don’t accidentally spend. Another option is to have your employer deposit a certain percentage of your paycheck directly into your savings account. As the old saying “out of sight, out of mind” goes, tucking away your funds before you see them will help to reduce the likelihood that you’ll spend all of your money each month.

12. Stop trying to keep up with the Joneses

Your college roommate is posting photos from another Caribbean vacation, your co-worker just got the latest smartphone, and your neighbor just parked a brand-new car in the driveway. Meanwhile, you’re clipping coupons and eating leftovers for lunch…and your commitment to saving can start to waver.  

When you compare your life to what everyone else around you seems to have, it can lead to anxiety and poor self-esteem. Trying to keep up with the Joneses can lead you to torpedo your savings goals, spend money on things you don’t really want, and even accrue unmanageable levels of debt. The rewards are short lived, and you’ll end up undermining the strong financial future you’re trying to build.

Learning how to save money isn’t just about the logistics of budgeting and adding to a savings account. It’s also about adopting a mindset that puts your financial priorities first instead of comparing yourself to other people:

• Get clear about your money values and both the short-term and long-term financial goals you’re working toward. 
• When you see someone else splurging on a flashy new wardrobe, picture the things you’re saving for.
• Surround yourself with people who have similar values and goals.
• Limit your time on social media, and unfollow accounts that make you feel envious or discouraged. 
• Make a weekly date with yourself to update your budget and check on your progress to keep yourself motivated.
• When you achieve something, whether it’s hitting a savings goal or coming in under budget on your groceries, celebrate your accomplishment. 

Saving and investing for the long haul 

Once you get clear on your goals and figure out how to save money in ways that work for you, you may find yourself looking for more ways to work toward your long-term financial health. And that could include investing. If that sounds daunting, you’re not alone: 90% of Americans say they want to invest, but nearly half don’t know where to start. Stash makes it easy to begin putting your money into the market with automated investing and fractional shares that allow you to become an investor with as little as $5.

The sooner you start saving money and investing, the longer your money has to grow. Whatever methods you use to save, and no matter how small you start, taking the first step can set you on the course toward long-term success. 

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