How to Save Money Every Month

In tough economic times, it's often difficult to put away savings for when you'll need it. Many of us find ourselves living paycheck to paycheck, struggling to pay rising living expenses. Because emergencies like health problems and job loss can happen to anyone, many advise that a minimum savings goal should be roughly three-to-six months of living expenses.^{[1]XExpert SourceTrent Larsen, CFP®
Certified Financial PlannerExpert Interview. 22 July 2020.} In contrast, a recent survey found that only 71 percent of Americans had any type of emergency savings, the lowest surveyed in five years.^{[2]XResearch source} Saving money may seem impossible now, but luckily there are many simple ways to live frugally.

Part 1

Part 1 of 4:

Setting and Sticking to a Budget

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1
Track your expenses. Save receipts for all purchases you make in a month. Gather your monthly bills. Sort them into two main categories: fixed and flexible. Break each of these down further into two subsections: needs and wants.^{[3]XExpert SourceBenjamin Packard
Financial AdvisorExpert Interview. 11 March 2020.}
- Fixed expenses are roughly the same from month to month. Fixed needs are things like rent, utilities, car payments, student loans, insurance, basic phone service, and ongoing healthcare expenses. Fixed wants are typically subscription entertainment services, such as cable television bills, premium phone service, and high speed Internet (unless necessary for your business).
- Flexible expenses vary from month to month. While they often have a minimum required cost, most people spend more than that. Flexible needs are things like food and clothing. Flexible wants are typically entertainment, alcohol, hobbies, electronics, and other items that we may treat ourselves or our loved ones to.
- Some banks and credit card companies offer free automated software that tracks your spending and can create some of these categories for you.
2
Create your budget. Start with your typical net monthly income, which is your paycheck after taxes. First subtract your fixed expenses. Then, determine what 10 percent of your net income is. This should be your minimum goal to save each month, although 20 percent is even better.^{[4]XExpert SourceBenjamin Packard
Financial AdvisorExpert Interview. 11 March 2020.} Subtract that number from what's left of your paycheck. The final amount is what you will work on to figure out a budget.
- Do you have enough money after bills and savings to cover your typical spending habits? If not, reduce your expenses. Look first at flexible wants, then to fixed wants and flexible needs for areas you can improve.^{[5]XExpert SourceTrent Larsen, CFP®
  Certified Financial PlannerExpert Interview. 22 July 2020.}
- If your income is irregular, such as most retail workers who don't usually have fixed schedules, start with an average of the last six to twelve months.
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3
Avoid making impulsive purchase decisions. Always "sleep on" larger purchases that don't need an immediate decision. If you aren't mindful of your spending, a trip to the store or a few clicks on the web can blow your entire budget.^{[6]XExpert SourceBenjamin Packard
Financial AdvisorExpert Interview. 11 March 2020.}
- What constitutes a larger purchase will vary depending on your income level. The two biggest purchases for many people would be a car or a house. Both of these should take a lot of research and time before committing to. However, while most workers would consider things like furniture, appliances, and electronics to be big purchases, very high earners may not. Conversely, while some may consider a superfluous pair of shoes or a new book to be a major purchase, others may view them as trivial.

Part 2

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Reducing Monthly Bills

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Reduce your energy consumption. Electricity is often a large monthly expense. Do both your wallet and the environment a favor and cut back on your home's energy use.
- Seal cracks in your home to better insulate it and reduce the need for heating and air conditioning.^{[7]XResearch source} Set your thermostat to a higher temperature in the summer and a lower one in the winter.
- Unplug appliances when not in use^{[8]XResearch source} and remember to turn off the lights. Change your computer's settings so that it enters a very low-consumption "hibernate" mode when you're not using it.
- When buying new appliances, go with ones that have energy-saving features.^{[9]XResearch source}
Shop around for a different service provider for your insurance, phone, and Internet. There may be new, better offers from carriers that have been introduced since you first started your plan. Evaluate whether your current service or coverage level is still right for you. Also, try to negotiate with your current provider for a lower rate. If you mention your intention to switch to a competitor, they may be more likely to give you a better offer.
If you are looking to buy a new vehicle, make sure your purchase has high value. Buy a model known to last a long time with low maintenance costs. You will also immediately begin to save money with a car that has better gas mileage, especially if you commute via car to work.^{[10]XResearch source}
If your credit rating has improved since buying a home, it may make sense to refinance your mortgage. Because many homeowners find their credit getting better over time, they may qualify for a lower interest rate than they did a few years earlier. Refinancing can result in lower monthly payments and/or less money going towards interest. Consult your mortgage company to figure out if refinancing is right for you.^{[11]XResearch source}

Part 3

Part 3 of 4:

Curbing Your Spending

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1
Be smarter about food. While food is a necessity, it's also a problem area for over-spenders. Although cheap food is often considered unhealthy, there are plenty of ways to pay less without sacrificing nutrition.
- Many Americans overspend by eating out often, especially when it comes to lunches at work.^{[12]XResearch source}^{[13]XExpert SourceTrent Larsen, CFP®
  Certified Financial PlannerExpert Interview. 22 July 2020.} If you resolve to prepare a majority of your meals at home, you will be able to save quite a bit of money each month.
2
Shop sales. Instead of sticking by a brand or making a traditional shopping list, buy items as they go on sale for the best deals. While the savings of buying sales items in bulk may be tempting, only purchase what you can safely store or consume quickly.
- Always pick the item with the lowest cost per unit. While many people assume the biggest version of an item will be the best value, that is often not the case.^{[14]XResearch source} If you don't want to do the math yourself, many grocery stores will even list the cost per unit next to the item.
3
Spend less on entertainment. Many people spend a large portion of their incomes on entertainment. Luckily, these costs are the ones we have the most control over and thus the simplest to cut back on.^{[15]XExpert SourceTrent Larsen, CFP®
Certified Financial PlannerExpert Interview. 22 July 2020.}
- It can be easy to be peer pressured into unnecessary spending if your social group spends its time at expensive bars and other venues. Instead of dropping your friends, start suggesting or planning lower cost get-togethers. Have a movie night at your house instead of the theater. Host a casual potluck instead of catching up at an expensive restaurant. Go to a public park instead of maintaining an expensive gym membership.
4
Evaluate your subscription services. Cancel anything you don't use enough to be worth the cost. In the age of high speed Internet, an easy thing for most people to eliminate is cable television. Video game subscriptions, beauty boxes, and magazines are other expenses that may seem small but add up over time.
- If you use these services regularly, downgrading may still be an option. Do you pay for a movie rental service that includes both online streaming and physical discs but find yourself exclusively streaming content? Switch to a cheaper plan without the discs.

Part 4

Part 4 of 4:

Earning Extra Income

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1
Sell items you no longer want or need. Go through old belongings and consider selling things you no longer want or use. Sell big ticket items like furniture instead of throwing them away when you replace them.
- Sell smaller, easily-shipped goods through online shops or auction sites. Try to sell large, bulky or very inexpensive items locally. Remember that your time in valuable, and it may not be worth the effort of posting a listing and mailing something that sells for a dollar.
- If you can, pretend any additional income doesn't exist. Instead of factoring it into your monthly budget, put all of your extra income into savings.
2
Start a side business. Use your free time to start a simple side business, like babysitting and dog walking.
- If you enjoy making potentially marketable products, try selling your work on a popular craft site. Popular items typically sold include clothing, stuffed animals, beauty products, art prints, and jewelry.
- Until your savings reaches a comfortable level, avoid starting businesses with large startup costs. Stick to projects that use materials that are inexpensive or you already have available.
- You are also likely to start spending less. If your Saturday nights become devoted to babysitting, you'll save money by not going to the movies or running up an expensive bar tab.^{[16]XResearch source}
3
Rent out or sublet extra space. In many areas with a high cost of living, it has become common to rent out second or third bedrooms in your home or apartment. This could potentially net your hundreds of dollars to put towards your savings.
- Check your lease and local laws before you sublet. Generally, your landlord must be informed about the sublet or you may risk eviction.^{[17]XResearch source}
- Be cautious about who you rent to, especially if you'll be living with them. Remember that your safety, property, and (if subletting) credit may be in jeopardy if you aren't careful. It's best to find potential tenants through mutual friends and coworkers.^{[18]XResearch source} Run an inexpensive background check on all potential renters.
- Are you going on a long business trip or vacation? Consider short term renters while you're away. Alternatively, if you live in a city like Austin or San Diego that has annual events that draw huge crowds, you may choose to stay with a friend and rent out your place for its duration at extremely high rates.^{[19]XResearch source}^{[20]XResearch source}

How Do I Set a Reasonable Savings Goal?

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How can I lower my rent costs?
Trent Larsen, CFP®
Certified Financial Planner
Trent Larsen is a Certified Financial Planner™ (CFP®) for Insight Wealth Strategies in the Bay Area, California. With over five years of experience, Trent specializes in financial planning and wealth management as well as personalized retirement, tax, and investment planning. Trent holds a BS in Economics from California State University, Chico. He has successfully passed his Series 7 and 66 registrations and holds his CA Life and Health Insurance license and CFP® certification.
Trent Larsen, CFP®
Certified Financial Planner
Expert Answer
Live with a roommate! Splitting rent costs with other people is often cheaper than living in a 1-bedroom place on your own.
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How do I make smart purchase decisions?
Trent Larsen, CFP®
Certified Financial Planner
Trent Larsen is a Certified Financial Planner™ (CFP®) for Insight Wealth Strategies in the Bay Area, California. With over five years of experience, Trent specializes in financial planning and wealth management as well as personalized retirement, tax, and investment planning. Trent holds a BS in Economics from California State University, Chico. He has successfully passed his Series 7 and 66 registrations and holds his CA Life and Health Insurance license and CFP® certification.
Trent Larsen, CFP®
Certified Financial Planner
Expert Answer
Do your research! Don't just pick the first item of whatever you're buying. Instead, try to weigh the pros and cons of different things and make sure that you're getting the best bang for your buck.
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Eliminating your phone's land line saves money. Before doing so, verify that your land-based phone calls have the same quality that your cell phones do in your house.
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Once you have a short-term emergency fund, work on paying off certain types of debt. If you have any high interest debt, such as anything with a double-digit interest rate, pay it off as soon as you can. Such debts compound quickly, robbing you of potential future income. After high interest debts are paid, work on paying off debts with single digit interest rates. Very low interest debt, such as a 0.9% car loan, can wait until you have that full six to twelve month emergency savings.
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Don't cut out things like entertainment, hobbies, and other indulgences entirely. A happier you will be more productive and make more money in the longterm.
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