The easiest and most painless way to save money is to simply save 100% (or at least most) of every raise that you get. It is much easier to maintain a lifestyle at a certain level of spending than it is to reduce your spending. This also goes for if you are a college or graduate students who just enters the workforce (although I would advise first investing in your health by improving from the stereotypical student diet before investing in your retirement or most other financial goals).
How to Save Money?
At the end of the day, the name of the game is to spend less than you earn. Abdul Rehman’s answer covers a lot of the bases in terms of how to reduce your spending, so I won’t repeat his points other than to emphasize the “wait before you buy” one.
Me, I generally try to wait at least one month before buying anything I considered a “big ticket” item (which I define as over $100, but you can vary that threshold depending on your income level). Oftentimes, I find that I don’t really want the item anymore after a month!
Paying yourself first is another relatively easy step, meaning set aside money for savings before spending the rest (i.e., don’t spend first and then save whatever’s left over — most people will repeatedly end up with nothing left over). If you work for a company with a retirement savings plan, setting up a portion of your paycheck to go into your retirement savings is a great way to do this. Don’t stop at the company match level (if you get one), but put away as much as you can, up to the limit. Remember that you can save both in a 401k plan and an IRA.
Create a Budget and Avoid Debts
Another bit of advice is to avoid bad debt, meaning that with high interest rates and little or no tax advantages, such as credit card debt. If you are disciplined enough to do this, it’s okay to use credit cards as long as you pay off the full balance every month (thus basically earning short-term interest-free loans).
If you’re not disciplined, do not use credit cards at all stick to debit cards and checks instead. For really expensive purchases, I would always make sure to save up for them rather than to buy them on credit (or, if it could be purchased with a no-interest loan for a limited time, I’d set up a payment schedule so that the loan would be paid off during that time).
Another obvious (albeit not-so-fun) step is to create a budget and then stick to it. Document a few months of your actual spending to see where your money is going. If you’re happy with your level of savings, that’s it, but if you want to increase it, you can now see where your money is going and better decide how much of that is necessary and how much you can do without (eating out and television/streaming are obvious luxuries that can usually be reduced). After that, make sure you check how you did against the plan.
Use Accounting Programs and Apps
A personal accounting program like Quicken can make this easier, and I used to use that, but now we personally just have a simple spreadsheet with rows for each category, a column for the plan, and then we just loosely monitor our balances and check in on it from time to time (if we find things get off track, we add columns for all the actual levels of spending to compare).
If this level of planning is too daunting, consider at least a rule-of-thumb. When I was in my 20s, my rule was to never buy more than one “big ticket” item a month (where I defined “big ticket” as anything over $100), and this worked for me because I generally didn’t buy a lot of little things that would add up.
Lastly, make sure you invest in maintenance! Go to your regular health checkups, make sure you get your oil changes, keep up with whatever needs to be updated on your house, don’t miss payments, etc. Nothing really throws a big monkey wrench into your finances like a big unexpected bill that could have been averted by some basic preventative measures and planning.
Originally posted at Quora.