Don’t Know How to Start Saving?  Start Here!

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Saving money is always a good idea.  But what if you don’t know how to start saving?  Here are some easy steps to start on your journey to being a super saver.

Start with a savings goal

One of the best ways to begin is by determining your savings goal.  Maybe it is for an emergency cash cushion, or perhaps you need to save up for a down payment on a house.  Write your goal down and keep it in a place you will see it often.  When temptation strikes, it is good to have a visible reminder of what you are saving for.  Perhaps you could cut out a picture of the goal or item you are saving for from a magazine or print one you find online.  Whatever the goal is, it’s easy to feel worried or stressed about where you should be saving the money.  And how much should you should save?

Where to keep your savings

As for where to save it, it depends on the goal.  If the goal is to plan for an event within a five-year time span (building an emergency fund, saving for a car, saving aggressively for a house down payment, etc.), use a bank account.  Preferably, this will be an account that earns interest and has no fees.  If you belong to or are eligible for a credit union, those institutions are usually your best bet for better interest rates on your savings.  Investing in stocks or bonds is too risky for a shorter time horizon.

If you have a longer-term goal, such as saving for your child’s college education (if that is more than five years from now) or saving for retirement, you should be investing, not saving.  (You can find information on investing by searching for that key word on the SimpleMoney blog page.)  Right now,  let’s focus on getting the ball rolling on your shorter-term savings.

How much you should save – the simple method

Determining how much to save is more of a challenge.  You can use the simple method or the more thorough method.  The simple method is to guess.

Yes, guess.

How much do you think you can reasonably save each month (or week)?  You know your spending better than anyone else.  Most people guess on the high side.  Enthusiasm to start saving is admirable, but overestimating is very easy to do when you are in a state of wild enthusiasm to finally! start! saving!  So, make a decent guess, and then divide it in half.  Start with that amount.

How much you should save – the thorough method

The thorough method requires reviewing your budget carefully to determine how much you can carve out to save each month (or week).  If you don’t have a budget, then now’s the time to create one and determine your targeted savings goal.  Look over what expenses you can trim or find ways to increase your income to discover more funds that are available for your saving goal.

As with the simple method, I suggest reducing the amount you think you can save to an attainable, reachable level to start.

Monitor your progress and ratchet up

After you’ve established how much you want to put aside into savings, you’re ready to go.  After a few months (or weeks), gauge how well this amount worked.  Did you struggle to pay your bills with this amount of saving?  Or did you hardly miss it?  If you struggled, reduce the amount for a few months.  If you barely missed that money in your budget, then go ahead and crank up the amount you are saving.

Repeat this process pretty much indefinitely:  every time you determine that you are easily saving a certain amount, raise it.  Spend a few months at each level, though, to account for unexpected expenses that might derail your saving plan.

Why this works

The beauty of this approach is two-fold.  First, by doing a slow upward ratchet of the amount you are saving, you are building discipline and success into the project.  If you start with too high an amount, you are likely to give up very quickly and conclude that you aren’t cut out for this saving stuff.  Build your saving chops by starting small and building the amount slowly.  I promise you will be pleased with your progress!

The second reason this approach is effective is that the saving discipline can be transferred to a different financial planning goal as soon as the first goal is reached.  And once you have your short-term goals fully funded, you can transition right into investing for retirement or some other longer-term goal.

Are you killing it on saving?  Do this next

Finally, if you are just killing it on this savings thing, automate it!  Nothing is simpler than having technology do the work of saving for you.


What are your tips and techniques for saving money?  Do you find it difficult?  Share your thoughts and let’s chat.  Here’s how:

Comment below or join the free SimpleMoney Community on Facebook to share your thoughts!

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*This post is an updated version of a post from December 2017.

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