The wave of economic uncertainties stemming from COVID-19 pandemic has forced many Americans to think about a big question: how to save money. Whether you’re working to build your emergency fund or trying to save for retirement, consider these 14 simple steps to help you save money.
1. Review your spending habits
If you want to figure out how to save money, your first step is to figure out how to spend less of it. Start by reviewing your past spending history.
Many banks offer access to your monthly statements, and some offer more robust categorized spending analyses and weekly summaries. You can get a good sense of where your money has been going, which will help you identify the best places to reduce your costs. And if you’re married or live with your partner, make this review process a shared task. Money can be an awkward subject, but if you’re serious about making that relationship last, you’ll both need to focus on cutting some expenses.
You can sign up for Bankrate’s myMoney to categorize your spending transactions, identify ways to cut back and improve your financial health.
2. Put your smartphone to work
Budgeting is the most basic piece of personal finances, but it can also be the most challenging to fit in your life. Start with the screen that you might already be staring at for multiple hours each day. There are a wide range of budgeting and money-saving apps that can help automate your savings, alert you if you’re overspending and invest some of your savings (note that there’s a risk involved any time you hear the word “invest) for growth. Remember, though, that an app shouldn’t be your only guide to budgeting. Make time to evaluate the app’s findings about your spending behavior so you can think deeper about your financial decisions.
3. Compare other options for your mobile service
Speaking of your smartphone, how much are you paying to use it each month? As mobile adoption has increased, the number of companies who can help you stay connected has grown, too. That competition is good news for pricing. Companies like Mint Mobile offer great plans for $15 per month. Take a look at your data usage to see if you’re overpaying. If you’re spending most of your time at home, you should be connected to your Wi-Fi network, eliminating the need for a supersized (and expensive) data plan.
4. Turn off those notifications that want you to spend money
While your smartphone can be a powerful tool in helping you save, it can also be a big source of temptation to spend. Think about all those promotional emails you receive that invite you to “save big,” “shop the newest trends” and “last chance for this great deal.” Every time you open one, you’re closer to spending on a product you might otherwise have skipped. Consider unsubscribing from those lists and deleting any apps that want you to spend rather than save.
5. Refinance your mortgage, or look for a more affordable rental
Housing is likely the largest line item in your budget. Many financial advisors recommend spending no more than 28 percent of your income on your housing needs. However, just because you can spend 28 percent doesn’t mean you should. If you’re paying back a home loan, compare options for refinancing your mortgage. Mortgage rates are historically low, so you may be able to dramatically reduce your monthly payments. Keep in mind, though, that refinancing comes with closing costs, which can add up to thousands of dollars.
If you’re renting, the pandemic has a silver lining: the ability to find cheaper housing. Depending on where you live, the rental market may have shifted in the midst of people moving out of big cities. For example, data from Apartment List showed that year-over-year rental prices in Chicago dropped by nearly 12 percent and more than 14 percent in Washington, D.C. If you’re looking for a new rental, be sure to use that market data in your lease negotiations. You just might have the bargaining power to save money.
6. Shrink your utility bills
In addition to saving money on housing, you can take small steps to save on the costs of actually living there, too. Start with your lightbulbs. According to the U.S. Department of Energy, replacing the five most frequently used lights with energy-efficient bulbs can save around $45 per year. One additional step to consider is a programmable thermostat to better manage your temperature. You’ll have to pay to install the system, but it can pay you back over time. One Nest study pegs the average annual savings somewhere between $131 and $145.
7. Evaluate your entertainment expenses
Do you really need all 400 channels on your TV? The average basic cable package is around $60 per month, but there are loads of cheaper options, like Sling, Hulu and Netflix, to keep you entertained at home. If you’re an Amazon Prime member, you’re already paying for access to the company’s expansive library of TV shows and movies. And if you’re paying for Spotify or Apple Music, keep in mind that Amazon Music – the company’s similar all-you-can-listen-to music service – is included, too.
8. Take advantage of free community entertainment options
Make the most of every opportunity to explore the parks system near your home, and do some research to find free days to local residents at museums and cultural centers. Even if your local city doesn’t offer a program for residents, your bank might be your free ticket. For example, Bank of America’s Museums on Us program gives BofA debit and credit card holders complimentary access to more than 225 cultural institutions across the country.
9. Be a strategic grocery shopper
You’re not going to be able to stop buying groceries, but you can stop throwing it away. A 2020 study conducted by researchers at Penn State University estimates that the average household throws away more than $1,800 of food each year. As you make your grocery list, think about what found its way into the waste basket last time and how to avoid a similar fate. Are you buying too much fresh produce? Is the fresh bread from the bakery going stale before it’s eaten? Did you forget to freeze the meat? The study found that those who made a shopping list before going to the store typically threw away less food, so take extra time to plan out your meals.
10. Break up with brand names
While you’re making that grocery list, think about some of the common items in your pantry: pasta noodles, spices and other non-perishable ingredients you might always keep around. Do you really need the top-shelf brand name with those foods? Compare the ingredients and nutritional labels. If there is no significant difference between them other than the price, you’re simply paying for the packaging – not the actual product that will nourish your health.
11. Compare other banking options
If you’re paying any fees for your checking or savings account, it’s time to figure out how to reduce those costs. You may want to consider moving your money to an online bank. Institutions like Ally Bank and Discover do not charge monthly service fees. Their online-only presence means they have lower overhead than big banks with branch locations scattered across the country, and that can translate to saving for you, too. Online banks pay some of the best interest rates on deposits. While those rates are very low right now (it’s a low-rate environment), earning a 0.5 percent interest on your stash of savings is much better than earning a 0.01 percent rate. Some banks will pay you a bonus for opening a savings or checking account, too.
12. Investigate alternatives for your insurance needs
If you have a track record of safe driving, it’s time to ask if another insurance provider will do a better job of rewarding that good behavior. Compare other options with your existing insurance company to see how much you can lower your premiums while maintaining an equal amount of coverage. And if you’re not spending much time at the wheel, it may be wise to think about pay-per-mile or pay-per-use insurance, which can match coverage based on the amount you actually use your vehicle and save in the neighborhood of 30 percent on your costs.
13. Use coupons
The concept of couponing might sound old-school, but finding deals does not require clipping portions of the Sunday newspaper. You know that “promo code” box that sits on the checkout page of nearly every e-commerce website? See if you can find one before you click buy. While a standard search can help uncover those savings opportunities, there are also extensions like Honey and Coupert that will automatically do the work for you while you shop.
14. Challenge yourself to a spending freeze
When companies want to save money, they often issue hiring freezes. When you want to save money, you can try a spending freeze. That doesn’t mean you’ll stop spending altogether – you have to pay all your bills in order to maintain good credit. Instead, it means you’ll cut all your unnecessary expenses for a certain period of time. Think about it like a diet where you might try giving up sweets or other certain foods. In a spending freeze, you’ll get a good sense of just how much you’re spending, and you’ll watch all that money add up. That means no restaurants, no trips to the coffee shop, no extra movie rentals – anything that seems extra is deemed unnecessary.
Savings strategies for specific goals
Saving is about working toward something. Maybe you’re planning for your retirement, or perhaps you’re thinking about how to save money for something on the immediate horizon. If you have a deadline in mind for when you need a certain amount of money, sticking to your plan is critical. Saving should be an everyday routine that involves monitoring your progress and identifying ways to accelerate the cash flowing to your saving account. Get started with these tips for some of the most common goals.