- Saving for a big money goal takes planning. Start by looking at your income, your current spending, and what's left over.
- Lower essential expenses by negotiating bills, downgrading services, consolidating debt, and even reconsidering your living arrangements.
- Spend less on "extras" by focusing on what brings you joy—and cutting out the rest.
Maybe you're dreaming about a big vacation, home down payment, zero balance on your credit card, or fuller emergency fund. There are countless reasons you might want to save thousands in a year. The secret to actually doing it? Combine practical strategies (How do I cut my spending?) with mental endurance (What can I live without?).
Here are 9 moves that could help.
1. Understand your spending
It's hard to save for later if you don't know where your money's going today. No, you don't need a receipt for every purchase or a detailed forensic model of your transactions (unless you're into that). Start by looking at a few big numbers: how much you earn in a month, how much you usually spend, and whether there's any money left over. From there, you can create a budget.
"We suggest the 50/15/5 budgeting guideline," says Ashley Tran, assistant branch leader at Fidelity. "Ideally, spend no more than 50% of your after-tax income on essentials; contribute 15% of your pre-tax income, including any employer match, to retirement savings; and then put 5% of after-tax income into short-term savings for an emergency fund. Anything left over is for spending on nonessentials and for additional savings."
Once you've set up your budget, you can start identifying ways to spend less and save more.
2. Lower your essential bills
Did you know that a lot of regular bills, such as your utilities, phone, cable, and internet bills may be negotiable? Call your providers to ask about discounts (such as if you bundle services) or to see whether you can downgrade your plans. For example, you may be paying for more data from your phone provider than you're using.
When it comes to insurance, you may be able to save by comparison shopping and opting for different types of coverage, depending on your needs. Usually selecting a higher deductible—the dollar amount you must pay before your insurer chips in—gets you a lower premium (your monthly payment). If the risk of potentially paying more out of pocket up front is worth it to you, and you have an emergency fund to draw from, raising your annual deductible by a few hundred dollars can slash your monthly payment by around 10%.1
Another way to bring down your monthly bills is to refinance or consolidate debt—such as your mortgage, student loans, or auto loans—for a lower interest rate and smaller minimum payment. Just beware of potentially expensive closing costs or extending the term of the new loan much longer. You don't want short-term savings to cost you more over time.
3. Rethink your living situation
Moving is a big deal. But because your rent or mortgage is likely your largest single monthly expense, downsizing to a cheaper apartment or moving to a lower-cost-of-living area could free up a lot of extra money every month.
So, too, could moving to a city with better career opportunities. That worked for Sakeena Andrade, age 35, and her husband. In 2014, they moved from El Paso, Texas, to Houston. Almost everything is more expensive in their new city,2 but Andrade earns much more, offsetting the elevated cost of living. She has now saved more than $10,000 a year since 2016. Her goal: retiring early.
Not interested in a drastic change? Negotiating a lower rent can be tricky (especially now), but renters can consider finding a roommate or offering to help their landlord with maintenance, such as snow removal or lawn mowing, in exchange for a discount. Agreeing to nonstandard lease terms might also help you save.
4. Cut back on "extras"
After optimizing your essential expenses, review what you spend on nice-to-haves. Can you order in and dine out less often without making yourself miserable? Can you borrow books and movies from the library, and can you exercise outdoors instead of paying subscription and membership fees? If you're up for it, challenge yourself to go big, such as instituting "no spend" weekends or not buying new clothes for a year.
Remember to consider what's realistic and worth it. "If that daily latte makes your morning happier and more productive, then, please, go get it," Tran advises. "Otherwise, you're going to develop negative feelings toward saving, and it's not going to work." Finding balance between what brings you joy and what you can live without is key when limiting spending.
5. Reimagine your social life
Explore free ways to socialize, such as taking walks, playing sports, or hosting a movie night or potluck dinner at your home.
If big events call for big expenses—such as a weekend bachelorette party or a faraway friend's birthday at an expensive restaurant—it's OK to politely decline invitations. People who care about you will understand why you're opting out.
6. Gift thoughtfully
Instead of aiming to hit a certain dollar amount for birthday, holiday, or other types of gifts, consider homemade options and thoughtful gestures. Not particularly crafty? Split the cost of a pricier item with mutual friends. Considering the average wedding gift amount is about $100,3 going in on a $300 registry gift with 4 other people would save you $40. If you have a lot of weddings to attend, that adds up. You could also talk with your partner, family, and friends about mutually forgoing gifts for certain occasions and simply enjoying time together. Speaking of...
7. Buddy up
It's easier to do something difficult when you have a friend or partner along for the ride. That's why Tran suggests that savers seek out an "accountabilibuddy," a.k.a. "someone who can keep you accountable to your budget, spend time with you, and celebrate with you," Tran says. "There's strength in numbers."
8. Pursue a side gig
If you've pared down your expenses and you're looking for more money to put away, you can investigate a possible side hustle. Tran suggests that savers choose only gigs they'd enjoy. "Dog walking works for someone who loves dogs," Tran says. "But it's not for everyone."
Tran also recommends calculating the value of the side gig, accounting for your time and potential costs. You may find that a side hustle won't yield as much as you imagined—in that case, make sure you aren't investing more into the gig than you're getting out of it.
9. Reward yourself for saving
An ambitious saving plan is easier to stick to when you get a greater emotional payoff from saving than from spending. Tran suggests tracking your saving progress and observing milestones along the way. "Say you're planning for a honeymoon," Tran says. "When you've saved enough to cover your airfare, have some champagne with your partner to celebrate."
Looking for somewhere to stash your newfound savings? Fidelity offers a cash management account with no fees or minimums, a debit card with reimbursed ATM fees, and a tool to track your spending. And if you have more time to save for a long-term goal, such as retirement, consider investing some of that money to take advantage of potential compound growth. That could reduce the amount you need to save in the long run.