Make saving a cinch with these lesser-known tricks.
Building an emergency fund, creating a nest egg for retirement and socking away money for your children’s college fund are fundamental steps to ensure long-term financial well-being. But how do you save money when you’re on a stringent budget? While it can be challenging to set money aside on a small salary, it can be done. So if you’re looking to pad your savings, use these expert-backed strategies.
Make a game out of saving.
Jacqueline Gilchrist, who manages the personal finance website, Mom Money Map, suggests employing a “no spend” challenge. “A no spend challenge is when you don’t spend money for a certain period of time. It could be a weekend, a week or a month. You can set rules to spend only on essentials or other allowances,” she says. By participating, “it forces you to be creative with what you have and learn new skills to avoid paying for a solution,” she says. “When you feel like you have no money to save, doing a no spend challenge can possibly open your eyes to more ways to save.”
Get a side hustle.
“There’s only so much you can save when you’re barely making ends meet as your savings is your income minus your expenses,” Gilchrist says. However, “what you can make is unlimited,” she adds. She suggests bartending or entering the ride-sharing market. You could also become a personal shopper for the delivery service Shipt, a side gig that’s gained steady momentum. If a side hustle doesn’t appeal to you, Gilchrist has another suggestion: Ask your main employer for a raise.
Modify your income tax withholding.
If you receive a sizable tax refund every year, Elio Alfonso, a professor of accounting at the University of Tampa, suggests that you look at adjusting your withholding allowances. “Basically, you are giving the IRS an interest-free loan during the year for absolutely no reason,” Alfonso says. “You should have more of that money in your bank account earning interest and working for you.” If you opt to withhold less from your paycheck, just make sure that you put some of that money aside from each pay period to go into savings.
Invest your raise.
If you receive a raise in the near future, put that extra money into a savings or retirement account. Too often, “people move into a bigger apartment or buy a more expensive car to reward themselves for receiving the raise. What happens is they are unable to improve their financial condition because they spend everything they make,” says Robert Johnson, a professor of finance at Heider College of Business at Creighton University in Omaha, Nebraska. According to Johnson, “People would be well-advised to pay heed to Warren Buffett’s sage words: ‘Do not save what is left after spending; instead spend what is left after saving.’”
Use technology to save.
Johnson advises downloading the right financial apps to optimize savings. “One popular app is called Acorn. You tie Acorn to your debit card, and it rounds the purchase up to the nearest dollar, effectively allowing you to invest your spare change.” Here’s how it works: If you buy a latte that costs $4.44, when you use your debit card, $5 will be taken out of your account, with $4.44 going to the coffeehouse and $0.56 going into your investment account. “This allows you to save money as you make everyday purchases and you don’t have to make the decision to invest the money,” he says.
Identify areas where you can scale back.
“Take a look at your monthly expenses and see if there are any areas where you can reduce your spending,” says Joshua Zimmelman, president of Westwood Tax & Consulting LLC, in Rockville Centre, New York. “For example, replace expensive dinners out with more home-cooked meals or cancel your cable in exchange for cheaper streaming services like Hulu or Netflix.” Alternatively, you could also negotiate your cable bill or switch insurance providers and go with a cheaper option. “There are probably a lot of spending cuts you can make that will barely affect your day-to-day life but could save you hundreds of dollars a year,” Zimmelman says.
Pay your bills on time.
“Don’t waste money on late fees and penalties. Avoid late fees and interest charges on your credit cards, loans and other bills by always paying in full and on time,” Zimmelman says. If you’re struggling to pay bills, you can get accustomed to a routine where you’re always paying bills late – and seeing that you got it paid at all as a victory. But take a look some time at how much you’re spending on late fees. For instance, late fees on credit cards can set you back $25 or more. If you pay your credit card late every month, aside from paying higher interest rates than you otherwise would on revolving debt, you’d be spending $300 a year – in late fees.
Prioritize saving over convenience.
Pierre Habis, president of PurePoint Financial, a bank headquartered in New York City, says consumers pay money for things they could easily do themselves. According to a survey commissioned by PurePoint, “Two in five Americans would spend four times as much on transportation just to save 20 minutes, and one in four Americans would spend twice as much on food to avoid a 20-minute walk,” he says. Rather than spending money on food delivery services or transportation, consider making “a habit of walking to pick up your food or taking public transit,” he advises. “Paying extra for convenience might seem like a miniscule cost at the time, but it adds up when it comes time to pay your bills.”
Pay yourself first.
“It can be incredibly difficult to save money when you are struggling to make ends meet, obviously. The way to be successful is to set a savings amount and consider it a bill, the same as any other bill like electricity or rent,” says Elizabeth Windisch, a certified financial planner at Aspen Wealth Management in Denver. You have to consider what you put into savings as equally important as that electricity or rent payment, she says, “because you will need money to live off later, or an emergency will arrive.” She suggests putting away what you can, whether it’s $50 a month or $5. “Small amounts add up, and small amounts can be incrementally increased over time.”
Here’s how to save money on a shoestring budget:
- Make a game out of saving.
- Get a side hustle.
- Modify your income tax withholding.
- Invest your raise.
- Use technology to save.
- Identify areas where you can scale back.
- Pay your bills on time.
- Prioritize saving over convenience.
- Pay yourself first.