Qapital’s Ultimate Guide to
15 Scientifically Proven Tactics to Help You Save Money Fast
Did you know that experts recommend having at least the equivalent of your annual salary saved by the age of 30? In addition, you should also have between three and six months’ worth of living expenses saved in an emergency fund.
Unfortunately, most of us have fallen short on saving – in fact, only 41% of Americans have enough in their emergency fund to weather a $1,000 crisis. Many people simply don’t know how to save money effectively, or are unsure of how much money to save each month – and that’s where we come in.
We’re taking a closer look at everything you thought you knew about how to save money. Using evidence from behavioral science, here are fifteen things you can do to save more money each month and pocket up to an extra $5,000 per year.
1. Start Saving Money by Turning your Habits Into Savings
There’s no better way to save more money each month than by integrating saving into your daily life. Wondering how to save money for a house, vacation, or another future expense? Tie saving to your daily habits with Qapital’s “If This, Then That” savings strategy. Using the Qapital app, you can trigger automatic savings based on any parameters you choose – each time you hit 10,000 daily steps on your fitness tracker, stop for a latté, or stay under your weekly budget, you can trigger automatic savings that will help you save money fast and reach your goals.
2. Automate, Automate, Automate
If you want to know how to save money efficiently, consider making it automatic. Qapital has a feature that allows you to transfer money automatically from one account to another on a weekly or monthly basis. This can help you save more money in the long run, since you won’t forget or miss a transfer like when you do it yourself manually. To maximize your savings, it’s best to automatically save a percentage of your paycheck each month.
Some experts suggest setting aside 20% of your monthly income, but if that’s too overwhelming you can start small by automatically saving $1 per day and setting small weekly increases until you reach your goal. Whether you’re attempting to beef up your emergency fund or save money for a house, college fund, or retirement, making savings automatic is key to establishing long-term saving habits.
3. Save More Money by Sweating the Small Stuff
It can be easy to think that a latté or second happy hour cocktail don’t really matter in the long run, especially when you’re talking about big-ticket savings like retirement or saving money for a house, but the reality is that everything adds up – even these so-called “small” purchases. For most people who want to learn how to save money, taking stock of the small stuff is the first place to start. While you don’t have to totally cut out these simple pleasures, think about making small cuts to your weekly budget, using coupons for discounts on items at the store, or looking for free things to do in your town or city, and then save what you would have normally spent. When you do have to make a purchase, use Qapital to round up each purchase to the nearest dollar and direct the difference to your savings account. Doing so will help you save money fast, as well as help you save more money each month.
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4. Pay Yourself First
There’s no better way to save money fast than to make saving the first thing you do come payday. Many people think that paying bills and buying necessities should take priority over saving, but then they often find that by the end of the month there’s nothing left over to save. You can break out of this cycle and start saving more money each month by paying yourself first. Qapital’s Payday Divvy feature can help you do exactly that by separating your paycheck into different virtual buckets as soon as it hits your account. By paying yourself first, you’ll naturally adopt a more responsible approach to spending and saving.
5. Find your Spending Sweet Spot
Part of knowing how to save money comes also from knowing how to spend money – responsibly, that is. Rather than constructing a rigid, unforgiving budget, think instead about finding your Spending Sweet Spot – it’s the middle ground between treating yourself non-stop and depriving yourself to the point of misery. Finding your Spending Sweet Spot isn’t about having specific line items on a budget that dictate what you can spend your money on, but rather discovering a sum of money that you can use flexibly throughout the week. Of course, it’s important to spend less than you make, but the Spending Sweet Spot goes beyond that to teach you to be happy with the way you’re spending. It eliminates both the disappointment you feel after overspending – and the impulse to save to the point of deprivation, which often leads to a spending spree. Those who know their Spending Sweet Spot have less volatility and can more comfortably save money each month.
6. Set Goals, No Matter How Big or Small
When it comes to finding the motivation to consistently save more money than you spend, it’s essential to save with a goal in mind. Whether it’s retirement, saving money for a house, or saving for a vacation, having a goal will help you start saving money if you aren’t already, and continue to cultivate good saving habits once you start. Plus, studies have shown that thinking of something you want in the future and taking the time to save to reach that goal actually increases enjoyment of the thing you purchase.
Here are some of the most common savings goals of Qapital users:
- Rainy day fund for short-term, unexpected costs
- Emergency fund as your a safety net for a financial emergency
- Retirement savings fund
- New home or home improvements fund for saving money for a house
- College fund
- Fun fund, or money for fun experiences
- “Treat yourself” fund for the occasional luxury
7. Manage Debt on Time
While it’s not impossible to save money while carrying debt, it is much more difficult – especially if you’re trying to save money fast. Most debt comes with an interest rate that applies when that debt is not paid in full, which means that you’re going to be paying much more than the cost of the original purchase, even if you make on-time monthly payments. Money to pay off debt inevitably comes out of what you could be saving; so while debt is not always completely avoidable, you’ll want to keep your debt at a minimum and pay off any credit card purchases immediately to start saving more money each month. Knowing how to save money is ultimately about establishing healthy spending habits, and incurring a large amount of debt is going to works against your saving plans in the long run.
8. Understand Opportunity Cost
Saving money is just another way of saying, “I am going to spend this money later.” Each time you spend money now, you’re giving up the opportunity to spend that money later. If you think about this in more concrete terms, when you spend money now, you’re not giving up on “saving”, per se – rather, you’re giving up on getting closer to that kitchen renovation you’ve been dreaming about, or that European vacation you’ve always wanted to take. Really understanding why and how to save money is about having a concrete understanding of what you’re inevitably giving up when you spend money now.
Even with seemingly small purchases, you should still be thinking about opportunity cost. While spending $4 on a latté each morning before work may not seem like a big deal, over the course of 25 years (and factoring in a modest interest rate of 1.6%, comparable to a high-yield savings account) that $4 coffee habit could total nearly $45,000! That’s $45,000 less in your retirement account, college funds for your children, or a number of other experiences that you could have had if you’d been saving that money each month.
9. Opt-in to Work-Sponsored Retirement Programs, or Set One Up Yourself
If you’ve been wondering how to save money for retirement, consider asking your employer if they offer any work-sponsored retirement programs, like a 401(k), 403(b) or a 457 plan, and if they’ll match any personal contributions to your retirement savings plan. If so, you should absolutely take advantage! Many employer-sponsored retirement plans offer tax advantages that help you save more money in the long run. And when your employer offers a match on contributions, well, that’s free money! If your employer doesn’t offer access to any tax-sheltered annuities, then it’s up to you to set one up for yourself. Depending on your goals, you may want to consider an IRA (traditional or Roth) or an HSA.
As with most big-ticket purchases, the sooner you start saving money for retirement, the better. Compound interest rates mean that those who begin saving for retirement in their twenties have up to twice as much money in the bank for retirement than those who began saving money in their thirties. Many people put off saving because, at 20 years old, retirement seems so far away and they think they can make up the difference as they get older and make more money. But there’s no real way to save money fast when it comes to saving for retirement – you just have to start as early as possible, and take advantage of as many resources as possible to make your dollar go further.
10. Challenge Yourself with Money Missions
If you’re looking for a fun way to start saving money, try out some of Qapital’s Money Missions. Money Missions keep you accountable to your Spending Sweet Spot, prioritize your saving habits, and maximize your enjoyment when it comes to saving money. The aim is not only to save money each month, but to be smarter about spending and to improve your overall relationship with money so that looking at your bank account is no longer daunting or anxiety-inducing. Some Money Mission examples include:
- Sell something you don’t want
- Cancel a subscription
- Make Sunday your meal prep day, or challenge yourself to make a meal only with items you have on hand at home
- Turn daily habits into weekly treats
- Buy experiences, not things
- Put one thing back when you shop
- Wait 48 hours before buying something unexpected, to make sure it’s not just an impulse purchase
11. Avoid Stress Triggers, Such as Obsessively Checking your Investment Portfolio
When the market is up and your portfolio is making steady gains, it can be fun to regularly check-in and see how your nest egg is growing. However, it’s also important to remember that saving money is a marathon and not a sprint. While an investment portfolio can get you started on saving money fast, most are really meant to grow over a period of years, not months. The market will have its ups as well as its downs, so checking in too much on your investment portfolio can be stressful when the market is on a downturn and it looks like you’re losing money. This kind of stress might lead to poor decision making, which can include over-spending, under saving, or making an unwise transaction before the market has had a chance to right itself. Part of knowing how to save money is knowing when not to act, so if you notice that daily check-ins on your accounts are starting to cause you stress or anxiety, it’s best to just log out and step away for a little while.
12. Be Consistent, But Not Complacent
When it comes to saving money each month, consistency is key. Part of this consistency means paying yourself first and making savings automatic. However, consistency in saving doesn’t necessarily mean “set it and forget it.” As your financial situation changes, so too should your savings strategy. Whether it’s getting a raise or an unexpected windfall, earning extra income via a side hustle, or a major life event (such as getting married) that results in a change in your income, you’ll need to adjust your savings plan accordingly. Take time every six months or so to reassess your strategy and to make improvements. Doing so will help you figure out how best to save money in the long run, and will prevent you from becoming too complacent in your saving habits.
13. Get Technology on Your Side
Tech-savvy millennials and Generation Z have a huge advantage over previous generations when it comes to figuring out how to start saving money: access to technology. With the creation of personal finance apps like Qapital, it has truly never been easier (or more fun!) to learn how to save money fast. Qapital uses technology that can help you set up a budget and so you can find your spending sweet spot, automate your savings, and even split up your paycheck into different categories so that you can make the most efficient use of your money. Whereas your grandparents may have spent an entire day each month poring over bank statements and pay stubs, and then physically visited a bank to make their monthly deposits, technology has made it so much easier to both manage and to save money each month with just a literal click of a button.
14. Manage Unexpected Income Wisely
Sure, everyone has dreams of winning the lottery and never having to worry about how to save money ever again. But while you may never hit the big bucks, smaller windfalls do happen, and you should be prepared to know what to do with an unexpected sum of money. It can be tempting to want to spend it on something fun – after all, it’s an unexpected surprise – but think about opportunity cost and consider saving it instead. Unexpected income can be a great way to save more money toward your emergency fund or to beef up savings for what you’ve been trying to put toward another goal, such as saving money for a house. Surprise income can also be used to help pay down debt.
15. Be Mindful, but Don’t Deprive Yourself Either
As you learn more about how to save money, it can start to seem like you’re just never supposed to spend any! In most instances, it’s often true that it’s better to save than to spend, and everybody could benefit from trimming the “extras” from their budgets. But while it’s important to be mindful of your spending habits, it’s also important to continue to live your life – and that means not depriving yourself of the occasional treat or luxury. Never spending anything is not really going to save you more money in the long run if months of hardcore saving are undone by a spending binge. Plus, an “all save, no spend” strategy might help you save money fast, but if you’re miserable and not living life, then it may be time to reassess and find a more sustainable balance between saving money and spending it.
How To Save Money - FAQ
What Are the Best Ways to Save Money Each Month?
The best way to save money each month is by finding a Spending Sweet Spot that balances saving and spending. Many experts recommend saving at least 20% of your monthly income to various accounts, including an emergency fund, debt payment fund, retirement savings, and other investments. By automating your savings and paying yourself first each month, even before bills or any other necessary spending, you can make reaching this 20% goal a reality. If you wait to see what’s left over to save at the end of the month, you may find yourself falling short of your savings target. Ultimately, the goal is to live not within your means but below, so you can maximize the amount of money you save each month.
How Do I Automate My Savings?
There are a couple of ways to make saving money each month happen automatically. If your workplace pays you via direct deposit, you can use Qapital’s Payday Divvy feature to allocate your pay to multiple accounts. That way, you can be certain that the money that comes into your checking account is yours to spend, and you never have to worry about how to save money each month. If this is not possible, or if you’d prefer to have more control over making changes to your savings strategy, you can use Qapital to set up automatic transfers between your checking and savings accounts.
How Can I Save More Money for Retirement?
The best way to save money for retirement is to get started immediately. When it comes to retirement savings, you have to use time to your advantage in order to get the most out of compounding interest. If you’ve already started saving for retirement but are still looking for more ways to save, then work to save enough money to meet your employer’s match, if that is an option available to you. You can likewise use windfalls or unexpected income to your advantage in saving for retirement. Finally, if you are 50 years of age or older and you haven’t saved as much money for retirement as you would like, be sure to take advantage of catch-up contributions.
How Do I Save Money for a House?
The best way to save money for a house is by planning ahead. Determine your budget and how much you’d like to have for a down payment, and then develop an aggressive savings plan to help you meet your goal. This will probably mean pressing ‘pause’ on any saving that is not house-related and drastically cutting your non-essential spending so you can save as much money as possible toward your new house. You might also want to consider finding ways to earn extra income that you can immediately direct into the savings account for your house. The key to saving for a house is by saving as much and as often as you can.
Nothing herein should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Qapital Invest LLC (“Qapital Invest”) is registered with the SEC as a Registered Investment Adviser. The information provided herein is for informational and general educational purposes only and is not investment or financial advice.
Past performance is no guarantee of future results. Any historical returns, expected returns or probability projections are hypothetical in nature and may not reflect actual future performance. This content does not constitute a complete description of Qapital Invest’s investment advisory services. Brokerage services will be provided to Qapital Invest clients by Apex Clearing Corporation, an SEC-registered broker-dealer and member FINRA/SIPC.