Just about everyone says they should save more money. But do they do it?
Not so much. According to the most recent research from the Bureau of Economic Analysis, the personal U.S. savings rate is a paltry 6.00% of each individual’s disposable income. When viewed from another angle, that means most Americans are spending 94% of every paycheck.
In fact, the Board of Governors of the Federal Reserve reported in 2018 that 40% of American adults would not be able to come up with $400 in a pinch. They would either have to borrow money or sell property in order to pay any unexpected expense over that $400 threshold — and that’s an improvement over 2013’s numbers.
The good news? There are quite a few creative ways to save money that you might not have thought of. Try a few of these money-saving tips, and you can painlessly pad out your savings, allowing you to approach your financial future with confidence.
1. Divert Your Paycheck to Savings
This is perhaps one of the oldest tricks in the book, but many don’t even know it’s a possibility. If you participate in direct deposit through your employer, you can tell your HR department to deposit either a percent of each paycheck or a specific dollar amount into your personal savings account. After the first few paychecks, you won’t even miss that extra cash.
The key here is to leave that money in your savings. Don’t touch it. Then, try not to log in to your savings account for six months. When you do, you’ll be pleasantly surprised at your nice little stash.
2. Look for a Better Bank Account
If you’re like 94% of Americans that have a checking account, you might as well make it work for you. You can save some money simply by choosing a bank that doesn’t charge fees.
Yes, there are financial institutions that will not charge you $5 for using another bank’s ATM. You can even find some banks that don’t charge overdraft fees given that you are able to settle your account within a specified grace period. Considering that Americans paid over $34 billion in overdraft fees in 2017 alone, looking for a better bank account could be key to helping you kickstart your savings.
3. Pay Down High-Interest Loans Faster
The power of compound interest — which can be used for both good and evil — is something that many Americans don’t factor into their personal savings strategies. In fact, one of the most effective means of saving money is to stop paying interest.
According to CreditCards.com, the average credit card debt per borrower in the U.S. was $5,472 in 2018. That might not seem too outrageous, but when you consider that the average APR on those debts is 17.55%, the outlook gets a bit dire.
Let’s say you have a more modest $1,000 in credit card debt and choose to pay the minimum payment of $25 each month. Assuming you don’t increase that debt at all, it will take you approximately six years to pay off that $1,000, and in the end, you will have paid $514 in interest. This means that that original $1,000 purchase actually cost you $1,514.
If you pay off that debt immediately, you save $514. That’s a guaranteed savings you can’t beat anywhere.
4. Refinance High-Interest Debt
If you can’t pay off your debt immediately, there is another way to avoid paying interest and save that money instead: refinancing. If you have any debt with an interest rate of over 5.5%, this is an extremely smart decision that will put your savings potential into hyperdrive.
When you refinance a loan, you are essentially borrowing money from Lender B (usually a bank) to pay off your current loan from Lender A (which, in the case of student loans, is likely the government). You then owe Lender B the amount that was required to pay off your first loan, but with repayment terms that are better for you — usually a lower interest rate or lower monthly payments.
Let’s take a look one of the most common forms of debt today: student loans. These have been the bane of the millennial generation, and have held back many from accumulating wealth at the rate their parents enjoyed at the same age.
Interest rates on loans issued by the federal government range from 4.45% to 7.6% — and those are the lowest interest rates available. Now, let’s say you owe the government $10,000 on a federal PLUS loan with an interest rate of 7.0%. Over the course of that loan, if you make a minimum payment of $50, you will end up paying $3,933 in interest over the normal 10-year repayment term.
If you were able to refinance that loan through a new lender to 4.0% interest rate, you would only pay $2,149 in interest. That’s almost $2,000 in savings with what might seem like a measly 3.0% reduction.
5. Drive Less
It’s common knowledge that cars are expensive. The cost of fuel and maintenance alone is no laughing matter, as the average American spends almost $400 on gas and vehicle maintenance each month.
On top of that, each mile you commute to work has been estimated to cost you a whopping $795 a year in gas, maintenance, and other expenses. When you take these costs into consideration, reducing the use of a car — or cutting it out altogether — can save you thousands in gas mileage.
If you have the option, try living as close to your work as possible. Instead of driving, try cycling to work. Or, if driving is unavoidable, once you’re at work, try walking to lunch instead of hopping behind the wheel. The less you drive, the less often you will have to fill up your gas tank. Also, your car will require less maintenance the fewer miles it logs, potentially saving you hundreds of dollars each year.
6. Ditch Your Gym Membership
The average gym membership fee hovers at just under $60 — and almost 67% of those memberships go unused. If you’re a member of that 67%, your gym could be costing you around $700 a year.
If you’re adamant that you do need a structured fitness regimen there are less costly options. For instance, your employer may offer a gym discount as part of your employee benefits, or there might be a free gym in your office building that you aren’t taking advantage of.
If you’re self-employed or work remotely, explore free videos online. There are thousands of high-quality workouts streaming for free, and even several online subscription programs that are half the cost of going to a brick-and-mortar gym.
7. Eat at Home
On average, Americans spend $262 a month eating out, whether at sit-down establishments or fast food restaurants. When you look at that on an annual basis, the figure rises to $3,144 each year. Say you eat out three times a week, each meal costing you about $20. If you were to eat out even one time less each week, that’s over $1,000 in annual savings.
8. Buy Generic Brands
If you’re going to be eating in more, you might as well make sure you’re not paying too much for groceries. Now, buying a name-brand loaf of bread that costs $2.99 versus a generic-brand loaf that costs $1.89 might seem like peanuts when you’re at the grocery store.
But those pennies add up to a lot of money over time. Even if you were to switch from buying name brands of a few staple items — such as water, bread, yogurts, cereals, and soups — you could reduce your grocery bill by almost $1,000 a year.
9. Brew Coffee at Home
Another quick win that can help you spend less money is to skip the coffee shop in the morning. By waking up a mere five minutes earlier each morning to brew your own cup of coffee at home (or better yet, set it up the night before), you can save hundreds.
Think about it. Even a regular coffee at your local cafÃ© averages about $3.00 a cup. Drink a cup every day before work, and that’s $15 a week. That’s $780 a year you could put back in your wallet by drinking your own coffee.
10. Cut Out Cable
While you’re cutting out over-priced food and drink both at home and eating out, you might also want to consider ways to reduce your entertainment costs — cable television in particular. The average cable subscriber shells out $85 a month for the privilege of getting an overwhelming wash of channels.
There are more cost-effective options. By purchasing an indoor television antenna for a low one-time cost of $15, you can likely pick up all the major national networks. If that’s not enough choices for you, try subscribing to one of the many streaming services — such as Hulu, Netflix, or HBO Go — which will usually set you back a little over $10 a month. In fact, the average savings for consumers who cut cable in favor of streaming services is around $55 a month.
11. Think Green
Your electric bill can often get out of hand in the scorchingly hot summer months, or when you’re freezing in the dead of winter. There are a number of ways to combat high energy bills when the climate takes an extreme turn.
For instance, in the winter, you might want to consider using a space heater to warm only the rooms where you’re cozied up watching your affordable streaming service. In the summer, a portable fan might serve the same purpose.
By reducing the number of kilowatt hours on your energy meter, you can often reduce your utility bills hundreds of dollars each month.
12. Enjoy the Public Library
You’re already paying for it with your taxes anyway, so you might as well get a library card. This is a move that can save you more money than you think. After all, a library isn’t just for books. Sure, you can save money by not buying every book you want to read, but there are other hidden benefits.
If you can’t find a movie you really want to see on any of your streaming services, your local library may have it available for lending. And rather than paying $14.95 a month for an Audible account, many libraries offer audio books for free. Visit your library website or your nearest local branch to explore the resources you have at your fingertips — for free. It might amaze you.
Watch Your Money Grow
Little changes add up over the course of your financial life. Whether you’re saving by effectively managing your debt, or by actively looking for opportunities to spend less, you’ll be amazed by how a dollar here and a dollar there can add up drastically over time.
By being conscientious about your spending habits, and tracking your expenditures, that extra money can help you progress toward your financial goals. In less time than you think, you can easily save your way toward a more secure future.