11 Tips to Save and Increase Your Savings Rate

If you want to make financial progress, you need the discipline to save

“A simple fact that is hard to learn is that the time to save money is when you have some.” — Joe Moore

We all have good savings plans, don’t we?

We tell ourselves that we will start saving as soon as we reach a certain turning point, for example, when we reach a certain age. Then life gets in the way, and there goes our ability to save.

The capability to save money is the foundation of wealth creation. It is also important for the feeling of security. The math is simple: to save money, you need to spend less than you earn.

But, this is usually easier said than done, especially when you give up or delay something you want now.

In reality, you will only save money if you develop good financial practices. And if you consider your future needs to be more important than your current desires.

One reason we struggle with savings is our inability to delay gratification. When our goal of saving money is not high enough to delay the purchase of the latest smartphone, kitchen counter, new car, or new furniture, we spend. And often, we spend beyond our means.

For those that save, we don’t seem to make progress because our savings rate is low. Often, equal to or less than 10% of our gross earnings.

To make significant progress, you have to increase your savings rate to 30% or more. Increasing your savings rate is partly related to your budget, but spending less is 80% behavior and 20% math.

Remember, the reason I encourage you to increase your savings rate is not just for the sake of saving. Rather, it is to enable you to invest in assets that will allow you to accelerate the growth of your wealth.

“If you would be wealthy, think of saving as well as getting.” — Benjamin Franklin

Here are 11 tips that can help you reduce expenses and increase your savings rate without impacting the quality of your life. Some of these tips aim to reduce money waste, others aim to automate and increase earning.

1. Set your savings target rate before your budget

Most people misunderstand the purpose of a budget. You don’t create a budget to spend, and then save whatever is left. Instead, you set a savings target rate and create a budget for what’s left after you subtract your target savings.

Stretch yourself by setting a higher savings target rate and plan to increase it regularly. The higher your savings rate, the faster you will accumulate wealth.

Pete Adeney, in his blog article titled “The Shocking Simple Math Behind Early Retirement”, he provides a correlation between savings rate and years until financial independence.

With a 5% savings rate, you will need 66 years of savings to be financially independent. With 20%, 37 years, and with a 75% savings rate, you will only need 7 years.

Setting your savings rate is the first step. Choose a percentage, check how much you have left, then plan your expenses based on that number. Continue to increase your savings rate as you find more and more ways to save.

2. Automate your savings plan

Saving more money is a matter of behavior. The more discipline you have with your savings, the more likely you are to reach your target savings rate.

One of the best techniques is to pay yourself first by setting up automatic periodic transfers to your savings account each time you’re paid.

You can easily set this up at your bank in person or via online banking. There are mobile apps that can also automatically save you money. Chime Bank, Read Qapital and Digit are some examples.

3. Get into meal prep –cook at home

Your food budget is one of the easiest items to cut. If necessary, reduce eating out at restaurants and choose more homemade dishes. This can save you a lot of money.

The average American spends an average of $3,459 per year on food away from home . . . aka eating out. Together we spend over $250 billion a year. If you can create a plan for what you eat in the next few days or weeks, you can determine exactly what you want to buy at the store.

This reduces your chances of buying impulsively and throwing away food you never eat.

4. Cancel unused subscriptions, including cable

The average monthly cost of cable tv is $205 per month, which is $2466 every year. Meanwhile Netflix, Tulu, and amazon prime are cheaper alternatives.

Are you paying for multiple monthly or yearly subscriptions, some of which you don’t use? You pay for Netflix, Stitch Fix, Amazon Prime, etc. and you hardly use all of them in a month. Cancel them. If you really end up missing one, order it again down the road.

5. Switch to a generic phone plan

The four largest mobile operators — Sprint, Verizon, AT&T, and T-Mobile — spend a lot of money on advertisement and branding. They calculate premium rates for customers who want to pay for their brand. Yes, they also have an extensive cellular network, so you will have to pay higher fees for the service.

You can switch to a different plan, or jump to a different carrier to save on your phone plan. You’ll be pleasantly surprised by how quickly you could save up to 30 to 50 bucks by making minor changes.

6. Lower your mortgage payment

Explore if you can refinance your mortgage at a lower interest rate. With a fixed rate on $ 100,000 over 15 years, you can save more than $ 5,000 in interest over time by lowering the rate by 0.5%.

7. Audit your home energy plan

Ask your local electricity or gas supplier for a free or low-cost energy audit for your home. The test can reveal an inexpensive way to reduce the cost of heating and cooling your home by hundreds of dollars a year.

8. Save unexpected income

If, by the way, you get a good bonus from work, inherit money or receive a tax refund, take advantage of it and save it.

If you have other loans or credit card debt at higher rates, you can use these funds to pay off your debt instead of saving the money.

9. Sell unwanted items

Look around your home for items of value you no longer use. Gather them and list them for sale in an online marketplace.

Once you sell these items you will make money and also create space in your home. You can save the money you earned from selling stuff you no longer use.

10. Challenge yourself to a period of a spending freeze

We are always spending money, sometimes on random stuff we don’t really need. Instead of spending hundreds of dollars on impulse buys, we can decide to go on a spending freeze for a month.

To do this, cut out all non-essential items in your budget for one month or a quarter, or even a year — you decide how long.

You will see your savings rate grow significantly and you will actually enjoy the challenge knowing that the spending freeze has an end date.

You may find it so enjoyable you will do it forever. Not spending money is the best way to save it. Period.

11. Start a side hustle

One way to increase your savings rate without cutting your expenses is to start a side hustle. Side hustles are quickly becoming a regular part of life for many people regardless of status or income level.

More and more people are adopting this new trend to earn additional income so they can save more.

There are a variety of options. You can start an online business if you have a computer or a smart device and an internet connection. You can learn a new skill and teach it online for income.

With the additional income from your side hustle, you can increase your savings rate.

In Conclusion

Maximizing the savings rate is not quick. It takes time and it requires great discipline.

But it is the most reliable way to begin the process of wealth accumulation.

As much as you can, reduce your expenses. Increase your income. Pay off high-interest debt. Automate your savings and investments, and reinvest dividends to accelerate investment growth.

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” — Robert Kiyosaki

P.S. Join my mailing list here to be notified of how you can join my 5-Day 1-hour-a-day challenge starting on July 6. This challenge will put you on the path to financial freedom and help eliminate all your money worries forever!

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