How To Save Money

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This happens all the time… I sit down with a client to help get their finances on track, I look over the most recent paystub and see $40 being direct deposited into savings.  I ask what the $40 is for and often get a response like, “What do you mean, I know I’m supposed to save so I save”.  Next I ask “How much is in that account right now?”  The usual answer is, “Between $1 and $20.”

Saving money with no plan or defined purpose is pointless because it will disappear every time the wind blows “unexpected expenses” your way.  It’s like running a race without knowing where the finish line is… you run but never get anywhere because you don’t know what direction you’re heading.  Poor planning and lack of goals for your savings is the surest and quickest way to an empty bank account.

Here are six main goals you need to have for your savings.  Read them carefully, write down goals that best fit your situation, and begin putting the goals in place so you can finally build your savings!

1) Work with a great bank

Matt’s note: The only banks I recommend in full confidence are Capital One 360 and Ally Bank.  I mainly use Capital One 360, but have also had accounts with Ally for years – I’ve always been impressed with both, and they’re the only banks I’ve ever been impressed with.

2) Save money for non-monthly budget items

When doing a budget, it is vital to plan for expenses that don’t occur every month, but do occur one to four times per year.  Some of those expenses include:

  • Real estate/Property taxes (if not escrowed)
  • Auto/Home/Life insurance premiums
  • Auto registration/tags
  • Christmas gifts
  • Home maintenance (furnace and air checks, etc.)
  • Kids’ sports/School supplies/Tuition and other child-related expenses
  • Medical expenses

There are definitely others as well, but this will get you started on your own list.  Make the list and start working it into your budget.  Planning for these expenses by putting money aside in a savings account each month (and labeling that account for each category) will greatly reduce your stress level.

3) Save money for large purchases

Perhaps you will need to buy another vehicle sometime.  What about a new couch, a new roof, a new furnace, and many other large ticket items – do you have money laying around for these items?  Most likely not.  If those expenses are coming, how are you going to pay for them?  For most of you, debt is the answer: a car payment, a home equity loan, credit cards.  I have a different, completely crazy idea: save up for the item and buy it with cash!  I know this goes against the culture, but I promise you’ll have less stress if you save for big ticket items now and pay for them later with saved money.

4) Save money for an emergency fund

This is actually very similar to #2 above.  If an emergency comes up, most people use debt to cover the costs because they have no money set aside for an emergency.  By the way, a new vehicle or even a new roof is not an emergency.  Those are things you know are coming, so you should plan for them.  Getting laid off from your job is an emergency.  When I ask my clients how they got into debt, many of them tell me that they got laid off from their job for a time.  They had no savings and, even worse, did not adjust their lifestyle.  That “plan” (or lack thereof) will lead a large amount of debt fast!  Having an emergency fund of three to six months worth of expenses will prevent debt and help you sleep better at night.

5) Save money for retirement

I am not sure about you, but I don’t plan on the government taking care of me in retirement.  Therefore, I have to do something about it.  I suggest saving 15% into a retirement account.  For the purposes of this post, I won’t get into specifics as far as where exactly to put it.  The key is to make it habit to put aside a certain percentage for retirement investing so that you have money to live on and hopefully thrive on when you reach the golden years.

6) Save money for college

This only applies if you have kids, of course.  College costs are extremely high and if you do have kids, it’s a great idea to put aside money to help offset those costs.  There are many other ways to go to college without debt, so this is not vital.  I don’t suggest saving for college unless you are fully saving for retirement, have a fully funded emergency fund, and have no debt (other than a mortgage).  These goals are more important than saving for college, but if you can start putting aside even a little for college, it will definitely help.

If you have no savings, now is the time to start.  If you have been saving but have not goals or plan for the money, now is the time to start saving with purpose.


This article was included in the 2nd Get Out Of Debt Carnival.

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1 Shona

Fully agreed with you. I also used to spend every penny, but we have now got into the habit of saving around 10% of our income. It’s not much, but it is a starting point. Being prepared and not needing it is better than needing it and not being prepared or not having it…

2 Mike Young

Excellent point. I don’t worry too much about the exact percentage of your income your saving, as long as the saving is done with a purpose!

3 Claire

If you need extra cash, this seems to save me some extra money every month

4 Donna

The only thing I would add is medical etc. for me as I have a chronic illness. Due to it’s nature and cost I make good use of my husband’s flex plan. The key is to be very disciplined in taking care of receipts quickly. I budget for a years worth of regular meds, alternate vision and dental and about $600 for co-pays. It does help quite a bit. Keep up the great posts.

5 Matt Jabs

You’re right Donna, I added medical expenses to the list.

6 Mike Young

Absolutely! My wife, Mandy, and I have a Health Savings Account with a $10,000 family deductible. We have to be very diligent about saving for medical as it is $10,000 out of pocket each time we have a baby (which is twice in the last 3 years!) Thanks for adding that Matt!

7 Gary

We have ING Direct in Canada and it’s been working great for me over the last few years. I never go into the bank any way so why do I need a branch? Solid list BTW.

8 Mike Young

More and more people are definitely using internet banking-it is really convenient! Thanks for the comment Gary!

9 Richard Brown

I have always planned a budget but I have never thought of planning a budget for expenses which occur once a year (christmas gifts). This is definitely valuable information. Thank you for sharing.

10 Mike Young

No problem Richard. Planning for the non-monthlies can really relieve financial stress. I often have clients tell me, “it was an amazing feeling to just have money for Christmas instead of trying to figure out where we were going to get it”. Which, by the way, was usually credit cards. Thanks for reading!

11 Richard Brown

Now that you mention this, I do recall setting aside “spending money” on one of my vacations and I felt a lot more stress free spending it since I knew it was specifically set aside to be spent during that vacation. Great tips!

12 Bryan

So are you saying that I should have multiple savings accts? One named trash service. one named my car tax, one named wife’s car tax, one named, etc

13 Mike Young

Great question Bryan! Some people do that, but that’s not what I do or recommend my clients do. To me, that gets way too confusing. Instead, just have a sheet of paper or file on your computer that labels what everything in your savings account is for. So, if you have $3,000 in there, your “Savings Sheet” might say that $1,000 is for emergency fund, $1,200 for Christmas, $300 for car repairs, and $500 for medical expenses, etc. I hope that makes sense!

14 free money mentor

Not use a credit card and pay with cash! You are right, that is crazy. That’s as crazy as putting 20 percent down on a new home or having 6 months worth of income in an emergency fund. I’m glad somebody gets it, thanks for the good tips.

15 Mike Young

I see we’re on the same page!

16 Bill

Very impressive post !, I am glad you have chosen this topic to write. Saving the money for retirement is very important in today’s world.

17 Mike Young

Yes it is! I know I don’t want to have my retirement years controlled by what politicians happen to be doing at the time with social security!

18 Mona

We can deposit to the bank if we hav a lot of money, but if hav just a little…? what can we do?

19 Mike Young

Great question Mona! It really just depends on your specific situation, but I can give a couple of broad comments. First, it’s all relative. If you make $200,000, you will be able to save much more, which will help you continue your “higher” lifestyle. If you make $30,000, then you won’t be able to save much, but percentage-wise you should be able to save a similar amount to the $200,000 couple. You won’t need as much in savings because your used to a “lesser” lifestyle. Second, it all needs to be in the context of an overall plan. A budget is a MUST to be able to find money to save and prioritize your savings. Third, if it is an income issue, then I encourage you to make a 3-5 year plan to increase your income substantially. Then, you will have more money to save. I hope that helps.

20 joy

I have my contribution on saving the money on health care bills. Switching to generics can reduce the health care bills. I get the medications online with discount coupons provided by them can also help to reduce the costs.
I have been personally getting my things at International Drug Mart.

21 Mike Young

It is amazing how much of a difference there can be between generics and name brand drugs! Great advice Joy!

22 Johnson

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