Michelle Brandstetter

For the longest time, my savings account looked bleak. I didn't save money the way people are supposed to – instead of setting aside a specific amount each month, I'd toss a small portion of my paycheck into savings. I'd hope I didn't need it, and then take most (or all) of it back out by the end of the month. To be honest, I'm still breaking this habit.

My wake-up call came in the form of seriously bad luck – an emergency room visit smack in the middle of an awkward time between health insurance plans. I had people in my life who were able to help me pay the bill for the x-ray, but I knew I'd have been in trouble if I hadn't. The thought of having six months' worth of income saved up had, to that point, sounded like a ridiculous pipe dream. Now it's my savings goal.

Here are, in my opinion, the five things I've done that have had the biggest impact on my ability to save money effectively. If you follow these tips, you should find it a lot easier to make your savings account something to be proud of.

1. Understand Your Habits

The first step toward figuring out what you can save is understanding what you currently spend. It's not just knowing the numbers. You need to recognize what kind of expenses you're putting your money toward.

Try tracking your finances for at least a month and putting each of your purchases into categories. Start with something simple, labeling each purchase as a "want" or a "need." Bills, groceries, transportation – these kinds of costs have to happen and are fairly consistent each month. Eating out or drinks fall into the "wants" category, and things like clothes could qualify for either.

Remember, the point is not to eliminate your "wants," but it's to recognize them. If you're not saving enough, these are the areas where it's possible to cut back. Something as simple as cutting back your coffee budget by $10 a week can make a significant impact.


2. Set a Strong Goal

Right now, your goal might just be "save money." While admirable, it's not specific. People work best when they have very quantifiable achievements they can reach, so building a detailed objective will serve you better in the long run. Here are some questions you could ask yourself to create your goal:

What are you saving up for?

Maybe you're like me, and you want to build up your emergency fund. You could also want to build a nest egg for the future or add more money to your retirement account. Decide what you're saving up for, so you have that finish line in mind.

How much do you want to save?

The answer to this will largely depend on what you're saving for. Some savings goals have concrete costs – for example, if you're saving up to buy a high-ticket item, the total saved is going to be the price of the item. If you're saving for your emergency fund, the rule of thumb is six to 12 months of income.

Some are more nebulous, however. Retirement goals, for example, can fluctuate as your lifestyle changes. That said, you can estimate a ballpark number by multiplying your current salary by 12.

What is your timeline/savings per month?

These questions are together because you'll generally use one to find the other. If your savings goal is something that will happen at a specific time in the future (for example, a vacation or a big move), then you'll want to determine your savings per month by dividing the total amount by how many months you have to save up.

Once you've answered all of these questions, you'll have a far more tangible plan set. You might decide that you're saving $2,000  by putting $100 away each month for a little over a year and a half. This is a much clearer goal than "saving money."

3. Pay Yourself First

This is simple, but you'd be amazed by how well it works. Make a habit of putting money into your savings account before you spend on anything else. This means before you pay bills or buy groceries, you've already transferred your monthly savings amount into the appropriate account.

The reason this works so well is that if your money is in your checking account, the odds are good you're going to spend it. By moving it to savings right away, you've mentally removed that money from your total to spend.

4. Get Creative

Try to think of ways to save a little extra throughout the month. One way you can do this is by rounding up your purchases. This means that if you spend, say, $4.50 at Starbucks, you round the purchase up to $5 in your head and put that .50 cents into savings. You can do this manually if you're interested in putting in the time and effort, but there are bank accounts that will do this on your behalf.

If you have a profitable skill or hobby, try to make money off of it on the side. Sell scarves on Etsy or offer photography services for weddings: Tap into the things you're already doing to find ways to make a little extra cash.

5. Make Transfers a Pain

Making it difficult to transfer money from your savings account is probably the most important thing you can do to achieve your goals. Open a savings account with a different bank than your checking account, and don't get a debit card for it. Because of how bank-to-bank transfers work, it will take a few days for the money to move between your accounts. This means you can't impulsively transfer a few dollars when you're running short to buy the new gadget you just heard about.

If you can, try to open an account with a bank that limits transfers out of savings accounts per month. This will help you treat the flow of money as a one-way process, meaning you're actually putting away what you mean to. Since you won't be able to take money out of it as easily, your savings account will grow way faster than it has before.



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