You have probably heard the old expression, “Save your pennies and the dollars take care of themselves.” Although these words were not likely spoken by Benjamin Franklin, we can thank whomever really said them for their sound advice. If you watch the small expenses and make saving money a habit, the end result will be a sizable nest egg. The first step is to find those pennies—the areas where you are overspending—and set up ways to save that money for the future instead of spending it.
Americans tend to be better spenders than savers, which makes it even more important to learn the skills of saving. The average American family earns $74,664 per year but only has $8,721 left at the end of the year. Many families are living right up to the edge of their expenses—or exceeding their incomes—by spending their entire monthly income on necessary expenses such as housing, food, utilities, and healthcare. However, the average household also tends to waste a lot of money that could be saved instead. According to a survey by Hloom, only 17.4 percent of Americans consider themselves “not wasteful.” The biggest money wasters are dining out (68.89 percent), alcohol (25.42 percent), credit card interest (19.34 percent), clothes (13.85 percent), and electricity (11.92 percent).
Another obstacle that makes saving more challenging is falling into the habit of unconscious spending. Consider how many dollars you spend each day on unnecessary things. Buying a premium brew on your way to work, for example, is expensive compared to making coffee at home. Eating lunch out is substantially more costly than brown-bagging it. What about impulse purchases? Do you buy a bottle of water instead of carrying a reusable bottle? Do you frequently stop by the ATM for small amounts of cash, even though you have to pay ATM fees each time you make a withdrawal? These are all small expenses, but they all detract from your ability to hit your savings goals, whether you’re putting money away for retirement or saving up for your first car.
Here are some strategies to help you find ways to save more without earning any extra money.
1. Save on electricity
If your parents used to continually remind you to turn off the lights, they had good reasons. In the U.S., we fail to use two-thirds of the energy we generate, and a lot of the electricity we do use goes to waste. There are a number of ways to save energy and lower your electricity bill each month. Start by turning off the lights, heat, and/or air conditioning when you don’t need them. Replace your incandescent light bulbs with LED bulbs—they last longer and use a fraction of the electricity. Unplug those energy vampire devices that continuously draw electricity. If you need reminders, stick a Post-It note on your switches, thermostat, and energy-heavy devices and appliances. After just a few weeks of adopting new energy habits, you’ll be pleasantly surprised at the drop in your electric bill!
2. Cancel your unused entertainment subscriptions
It’s amazing how many households have redundant entertainment services. Now that you can watch your favorite shows on your smart TV, laptop, tablet, and phone, many people are (often unknowingly) paying for multiple subscriptions to premium cable and streaming services like Netflix, Hulu, and HBO. If your favorite show on one of those platforms is between seasons, cancel your subscription for the time being. Only pay for the one or two services that you truly use, and cancel the rest. Check your card statements to make sure you aren’t still being charged month after month for an auto-renewing service you are no longer using or didn’t think you were still paying for.
3. Rethink your gym membership
We all need exercise, but if you aren’t making use of your expensive gym membership, you might consider saving that money instead. If you want to stay active, there are many other ways to get exercise that are also less expensive, such as running, jogging, or biking. You could also consider picking up a new activity that you can enjoy for free at your city park or rec center, such as tennis, basketball, or swimming. If you miss the group environment, look on social media or apps like Meetup to find local running or fitness groups that get together in your area.
4. Buy prepaid mobile phone services
Prepaid mobile phone services are less expensive than smartphone contracts and make it easier to manage your monthly phone costs. You can opt to add data or other services you may need, but you won’t get locked into expensive contracts or escalating use charges.
5. Cut commuting costs
If you drive to work, you’re paying for gas (or electricity), adding wear and tear to your car, and possibly paying extra for parking. Are there less expensive alternatives? Could you carpool with coworkers who live in your area? Compare your current routine to public transit options to see if there are less expensive ways to get to and from work. You could also ask about working remotely either full time or a few days per week to save on transportation costs
6. Reduce credit card costs
Eliminating credit card debt and reducing the amount you pay in interest is one of the most beneficial money habits you can learn. Keep your credit cards paid to eliminate extra charges, and consider using credit cards with cost-saving perks such as shopping points, cash back, and low or no annual fees.
7. Pack your lunch
Eating out every day adds up, even if you are only buying a sandwich or a salad. Bringing your lunch will save you a considerable amount every month. Also consider a refillable water bottle—it costs 300 times more to drink bottled water than tap water.
Saving starts with being mindful of your spending. Every time you reach for your wallet, ask yourself, “Do I really need to buy this? What is motivating this purchase?” Another strategy is to think of the item and the cash amount side by side—and pick one. For example, if the item costs $15, ask yourself if you would rather have that item or a free $15. Even though the $15 isn’t technically “free,” it’s $15 that will stay in your pocket if you choose not to buy the item.
Coming up with a few simple questions to ask yourself before swiping you card can help you override impulses to spend money unnecessarily and instead put that money toward achieving your important financial goals.
Turning cost-cutting into savings
Reducing your spending is only the first step. Now you need to convert those pennies into savings. Start by developing a savings strategy. Set yourself a savings goal, whether it’s for a trip, a new car, or a higher contribution to your retirement fund. You might start by calculating how much you can save with the tips outlined above and use that as a target amount to save each week or month.
As you find ways to save, you’ll need somewhere to put your money. The simplest and most secure way is to open a savings account that will pay interest on the money in your account.
However, your savings account will only grow if you remember to deposit what you are saving. You could start putting that extra cash in a jar each day and going to the bank, but if you already have a checking account, you can set up automated deposits from your checking to your savings so you don’t have to remember to transfer those extra dollars.
Always be on the lookout for additional ways to grow your savings. Rewards credit cards, for example, can offer cash and travel rewards based on dollars spent. Many banks also offer automatic savings plans, such as our Pocket Change savings program. Pocket Change rounds up the transactions you make with your debit card and automatically deposits the extra cents into your savings account, helping you save money without thinking about it.
A great long-term goal is to save at least 20 percent of your income every month. As you build the balance in your savings account, you can convert some of the money into a higher-yield savings product such as an individual retirement account (IRA) or a certificate of deposit (CD). If you are diligent in saving your pennies, your dollars will grow. Looking for specific advice on how you can save more every month? Talk to our team about developing a personal savings plan.