3 Ways to Save Money

We can help you get where you want to go, regardless of what you’re saving for or where you’re starting from.


Imagine what would happen if you found extra money in your monthly budget. Could you finally afford a real vacation? Could you sock something away for emergencies? Perhaps you’d be debt-free at last.

A 2016 analysis by the Urban Institute found that households with even modest savings — $250 to $749 — were better able to weather unexpected events like job losses or health issues, and were less likely to miss monthly housing or utility bills.

Lowering your financial stress is one benefit of a saving plan; getting beyond your “needs” to afford more of your “wants” is another. You can make responsible decisions now that’ll save you money and get you one step closer to financial security.

This guide can help you get where you want to go, regardless of what you’re saving for or where you’re starting from.

Let’s get started.

Make responsible decisions now that’ll save you money and get you one step closer to financial security.

1. Master the money-saving basics

At NerdWallet, we think about a budget as a spending plan. Saving money doesn’t mean you quit spending altogether; you can prepare for the future while still enjoying the moment.

Here are our five tenets of saving money — or, you might say, spending responsibly:

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Think about why you’re saving. Is a wedding on your horizon? Are you getting ready to buy your first home? Keep that picture in mind. It’ll help keep you motivated.

Set a target. Set a specific, but realistic, goal. It may be “save $5,000” or “pay off my credit card debt faster.” If you don’t have an emergency fund  — at least $500 put away against the unexpected — begin there. It’s OK to start small. Little steps add up.

Track your spending. Get a true picture of where your money goes today by keeping track of your monthly cash flow — your income minus your expenditures. This will also make it easier to mark progress toward your saving goal.

Find extra money. Get more out of your budget by living off less and trimming unnecessary expenses. Big changes like refinancing your mortgage or bundling your utilities will make the most visible impact, but you can also make a difference by reducing your grocery bill or eating out less. More on that below.

Automate savings. Don’t let the extra money you’ve unlocked go to waste. Arrange for a certain amount of your income to go automatically to a savings account instead of your checking account. There are ways to “trick” yourself into saving; if you never see the money, you won’t be tempted to spend it.

And be sure to celebrate your victories. Saving money will be a journey that’s unique to you, so enjoy your progress along the way.

2. Understand expenses

When you look at your spending, you’ll see two types of expenses: fixed and variable. Within both categories, some expenses are needs (essential) and some are wants (optional).

Fixed expenses are your regular, predictable monthly costs. These might include your rent, mortgage, insurance premiums, car loan or lease and any other consistent payment. But a fixed expense isn’t always a necessity. Think about your cable package: It’s a fixed cost, but you could live without it.

Variable expenses are just that — variable. Maybe it’s your morning coffee, or movie tickets on the weekend. Again, though, a variable expense isn’t always a “want.” Your monthly spending on groceries, for example, can vary greatly, but food is clearly a necessity.

See the categories below for examples of fixed and variable expenses; click to see ways to save.

3. Put a plan into action

Ready to get started? We recommend what’s known as the 50/30/20 budget for smart money management: Devote 50% of your income to necessities, 30% to wants and 20% to savings. If you find one of your allocations exceeds these percentages, make what adjustments you can to fit the formula.

The fixed expenses that take up the largest portion of your budget — such as your mortgage or rent — can often be the most difficult to reduce. But if you’re able to do so, they’ll yield the greatest savings. That’s not to underestimate the power of cutting the cord on your cable or skipping a night out at the movies, though.

Depending on your situation, there are several ways you could tackle your spending. Each of these scenarios assumes you already have a comfortable emergency fund and are paying down your debt obligations.

  • For dramatic savings, analyze major monthly expenses. These typically include housing, insurance, car loans and child care. Altering these may mean the biggest changes in lifestyle,  but they can also make a significant impact on your available income. For instance, you might downsize your accommodations to reduce rent, or trade in your car for a less expensive model.
  • For monthly savings, trim fixed expenses: For a little extra leeway in your monthly spending, you may consider bundling your cable and internet into one package, canceling a gym membership you don’t use or opting out of auto-renew on subscription service memberships.
  • For daily savings, reduce spending on wants: You can only trim your spending on essential expenses so much; you have more flexibility on things you buy for fun or leisure. Think about daily spending like shopping or dining out. Set a weekly limit, and stick to it. The savings will add up bit by bit.

As you put your spending plan into action, your efforts will bear fruit in your monthly budget. Remember to put your newfound funds in a savings account as you work toward your ultimate financial goal.