Maybe you're dreaming about a big vacation, home down payment, zero balance on your credit card, or fuller emergency savings. There are countless reasons you might want to save thousands in a year. It's a good idea to combine practical strategies like identifying ways to reduce your spending, with mental endurance or taking note of the things you can go without.
Here are 9 tips that could help.
1. Understand your spending
It's hard to save if you don't know where your money's going. You don't need a receipt for every purchase or a detailed forensic model of your transactions. You can start by looking at 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 60/30/10+15 budgeting guideline. Fidelity's Plan Your Pay guideline is a target you can work toward to gradually to strengthen your financial foundation. It's a starting point of aiming to save:
- 60% or less of your take-home pay for essential expenses
- 30% for "nice to have" or nonessentials
- 10% for near-term goals and emergency savings
- 15% of pre-tax income for retirement
Everyone's situation is different, and these percentages are not goals or hard rules. Simply set up your budget and start identifying ways you can spend less and save more.
2. Lower your essential bills
Did you know that lots of regular bills, like your utilities, phone, cable, and internet bills, may be negotiable? Call your providers to ask about discounts (such as 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 pays—gets you a lower premium (your monthly payment). If the risk of potentially paying more out of pocket or up-front is worth it to you, and you have emergency savings to withdraw from, raising your annual deductible by a few hundred dollars can possibly reduce your monthly payment.
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 extra money every month.
Moving to a city with better career opportunities may also offer extra saving chances. 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, 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 is to retire early.
Not interested in a drastic change? Negotiating a lower rent can be tricky, 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. Consider ordering in and dining out less often without making yourself miserable. Another alternative is to borrow books and movies from the library and exercise outdoors instead of paying subscription and or
Remember to consider what's realistic and worth it. If daily lattes make your mornings happier and more productive, then, please, go get it! 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 all right 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. For example, if the average wedding gift amount is between $100 and $150, then 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. Talk with your partner, family, and friends about mutually forgoing gifts for certain occasions and simply enjoying time together.
7. Buddy up
It's easier to do something difficult when you have a friend or partner along for the ride. You could seek an "accountabilibuddy," (a blend of "accountability" and "buddy") or someone who can keep you accountable to your budget.
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. It's a good idea to choose only gigs you would enjoy. For example, customer service or retail themed stores with fun atmosphere's if you like engaging with people, fitness coaching if you enjoy wellness, or dog walking works for someone who loves dogs.
Calculate 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. You could track your saving progress and observe milestones along the way. For example, if you're planning for a honeymoon, celebrate when you've saved enough to cover your airfare by having champagne with your partner to celebrate.
Fidelity Goal BoosterSM can help you succeed with your short-term saving goals. Because every goal is different, each gets its own special saving (or investing) strategy. 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.