10 Ways to Build the Habit of Saving Money

This is a guest post by Mehdi, author of StrongLifts.com.

Save Money

How much do you save? I hope you put money aside. You don't? Neither did I until a few years ago. How do you become a money saver? I'll first tell you how you don't: Not by using discipline or willpower. Discipline and willpower only work in the short-term.

What works in the long-term is understanding your spending habits. Once you understand, you can change by building new habits. That's how you become a money saver. And that's the topic of this post — ten ways to build the habit of saving money.

1. Set a Goal. What do you want?

  • Do you want to have your own place?
  • Do you want to be financially independent?
  • Do you want to get out of debt?

A goal will give you a reason to save money. If you have multiple desires, start with one goal. Once achieved, set a second one.

2. Set a Deadline. Set a date by which you want your goal achieved. Write both on a piece of paper. Put it somewhere you can look at it multiple times a day — your nightstand, for example. Look at your goal and deadline on waking and before sleeping. It will remind you why you're saving money.

3. Track Expenses. You probably have an idea of how much you spend, but unless you keep track of every cent, that idea is inaccurate at best. Here's a simple way to track your expenses. You probably carry a phone wherever you go. Note everything you spend in your calendar. When you get home, copy everything to your personal finance tool. At the end of the month you'll know exactly how much money you've spent and on what.

4. Analyze Costs. Check where your money goes. Reduce and remove costs. The first time you analyze your expenses can be shocking. The more the better. This is your first wake up call.

5. Make a Budget. Calculate how much money you need for:

  • Food
  • Rent
  • Bills
  • Clothes
  • Leisure
  • Etc

Remove costs from income. Now you know how much you can save each month. Even if it's not much, it's better than nothing.

6. Pay Yourself First. Make the first bill you pay each month the one to your savings account. Just like all your other bills, there's no way around. You must pay it month after month, unless you're in debt. Then the rule becomes: “Pay Your Debts First”.

7. Earn More Save More. Save a fixed percentage of your income. This way, as your income goes up, so will your savings. 20% is a good start. You can't? Then you're living beyond your means. Time to wake up.

8. Think Saving. If you have money left at the end of the month: save it. You don't need to spend every cent earned. It's okay to buy things. But make sure you really need them — don't spend just for the sake of spending.

9. Wake Up. I wrote in the introduction that you need to understand your spending habits. You need to understand why you buy things. Do you buy things:

  • To impress people?
  • To be part of the group?
  • To fill other's expectations?

Next time you buy something, ask yourself: Why am I buying this? What are my real motives? Don't judge. Just notice.

It takes time, but once you get it, it's eye-opening. Your life will be simpler and you'll avoid many financial headaches. Trying to keep the pace with others is a never-ending game, one you can't win. Wake up.

10. Read Get Rich Slowly. Your environment influences your personality, and thus your habits. If you want to build the habit of saving money, surround yourself with people who save money. Get Rich Slowly is a good place to start. Subscribe. Read it on a daily basis. J.D.'s tips will become your second nature. You'll become a money saver in no time.

Bonus Tip: Write this next to your goal and deadline: If I don't save now, I'll never have money. No matter how much I earn.

Mehdi is author of StrongLifts.com, a blog helping you build muscle and lose fat through strength training. Popular articles include the Beginner Strength Training Program and the Anabolic Diet.

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FinanceAndFat
FinanceAndFat
12 years ago

For sure, getting started is the hardest part. My savings account traditionally never topped about $25. Since getting serious about paying off debt and budgeting I have saved a $1000 emergency fund, started saving for a vacation, and I’m actually having fun saving money. Also, opening an account with a bank like ING really helps. Most traditional, large banks are going to give you a poor interest rate and the daily interest counter on ING is fun to look at. 🙂

Money Socket
Money Socket
12 years ago

Great post, I still have trouble with buying things I don’t need. In the beginning they seem like a need but its actually a want, such as my desire for an xbox 360. My excuse is that its entertaining to its worth it, I’m trying to stop myself from buying one.

I think a very dangerous reason is when people buy to impress others, such as a high end car. You end up making huge monthly payments and your saving ability is gone. Then the cycle repeats itself with other aspects of life, it becomes a competition.

Good post, thanks.

Amy
Amy
12 years ago

I’ve started leaving my wallet at home. I was in the habit of surfing the web at work and buying things out of boredom – racking up huge credit card bills. I also headed out every lunch hour to wander the local shops and pick up things I hadn’t planned on buying. Sometimes I’d even try to think up things to buy. So, now I have two wallets. One has my credit cards and cash in it, the other has $10 for the day, my i.d., a fuel card… and that’s it. I have been caught short once or twice,… Read more »

Mariette
Mariette
12 years ago

Great post! I wrote earlier today on a similar topic, on the need to have patience with ourselves when we are trying to transform our relationship to money and our saving and spending habits: http://blog.boulevardr.com.

Chris@ComicHacks.com
12 years ago

FinanceandFat,

What’s ING?

I haven’t heard of them before.

Got a link?

Dennis Schipper
Dennis Schipper
12 years ago

Tracking expenses and analyzing costs are the two things that affect my budget the most. It’s so easy for my spending habits to get out of hand I’ve been shocked more than once when i realized how much I’ve been spending. Now i leave most paycheck in the bank.

Great post.

Shawn Ward
Shawn Ward
12 years ago

@FinanceandFat:

I couldn’t have said it better myself. The biggest step – is starting ASAP!

With dieting and money management – so many of us are waiting for that “Perfect Monday” to start. Life is going to happen – and there will never be a perfect time -so start immediately.

IdeaSenator
IdeaSenator
12 years ago

Having my daughter was my wake up call. It is like when I looked down into the pretty life face as the nurse brought her to me…I decided I need to secure both of us as fast as I can. I grew up the day my daughter was born.

SR
SR
12 years ago

Ugh. What simplistic tripe! Continually tracking each and every expense is time-consuming and annoying, and people just won’t do it for the long-term. For a month maybe, but not more. The author thinks people should save 20% of their income? How much does he think they make?! I’m in the process of paying down my debt, and my debt-free calculations certainly do not include 20% to savings. Though, maybe the author means to include things like 401k/IRA in that number. In which case, my opinion changes — but this needs to be made crystal clear, because honestly, I know people… Read more »

Matt
Matt
6 years ago
Reply to  SR

You are wrong on several points, however, I will only attack one. You say that keeping track of each expense on a daily basis is impossible over the long term. When my wife and I got married she had already been doing this since she was in high school and had a professional degree. We continued the practice for the next 39 years of our marriage until she died in an auto crash. I still do it. I suggest that you stop trying to determine what other individuals might do in a given set of circumstances. You sound like a… Read more »

Frugal Goose
Frugal Goose
12 years ago

Another tip: Setup part of your paycheck to auto deposit into a separate high interest saving/checking account. A lot of real world and online banks offer these at 4-5%. The best way to save money is really to delay your access to it!

Rachel
Rachel
12 years ago

20%? Who are you kidding?

Mehdi
Mehdi
12 years ago

SR, I’ve been tracking my expenses for 4 years now. I can show you to the cent what came in & went out up to 2003. It just a habit that you build, nothing more. You write it in your phone, once a week you put everything in your excel sheet, done.

If you can’t save 20% of your income, you’re living behind your means. Track your expenses & analyze your costs. There are always costs you can cut, it quickly adds up.

Oh btw, I live in Belgium, Europe, we pay 55% tax on our salary.

Good luck.

Beth
Beth
12 years ago

I think the “Pay yourself first” concept might be the most interesting ones. When I first heard of it, living right at my means (i.e., no debt, but no savings), I thought, “I can’t afford that!” But I opened the ING account and set up the auto-deduct from checking. It’s amazing how my spending will adjust to my paycheck. I still need to cut things from my budget, but I’m slowly working on it. Also, I like INGdirect because I like the daily update in how much interest I’ve earned. I keep my annual expenses in savings accounts there (insurance,… Read more »

Josh
Josh
12 years ago

I agree, 20% is far too much to save in the US.

Mehdi, if I had to pay 55% income tax I would move or find a way to not pay taxes. How can you let your government do this?

Mehdi
Mehdi
12 years ago

Josh. There are many ways to get tax deductions which I use of course.

Belgium is heavily taxed because we have a strong social system. If you don’t know what I mean, check out Michael Moore’s movie “Sicko” which compares European’s social system with American’s system.

To give you an example: when I go to the doctor I pay a symbolic 3€. Tooth care is free. If you work one year full time & lose your job: you get 1000€ a month from the government while you seek another job. Etc.

Great system, but it has a price: 55% tax.

Matt
Matt
12 years ago

To SR, I save 33% of my gross salary ($3500 a month) and I live in Canada where taxes are higher than the US.

Too often, people who say something can’t be done are just looking for an excuse.

Hani
Hani
12 years ago

[email protected], The website URL is simply http://www.INGDirect.com. They have the best savings account the Orange account, and they even offer an electric orange checking/debit account. Setup an automatic monthly withdrawal from your checking and your savings will grow automatically. I love it. My girlfriend didn’t think she could afford $50 a month, and she never even noticed it. She’s got over $1600 socked away now earning interest and boy has her attitude changed. I never let her see her balance until it was over $1000 and she was SHOCKED. She had forgotten all about it… p.s. I agree that RDJ… Read more »

SR
SR
12 years ago

I’m not making excuses, I’m being realistic and practical. I’m also NOT a believer that living a meager and uber-frugal lifestyle is healthy or interesting (and no, I’m not an uber-consumer — not by any stretch of the imagination). I also save a higher percentage of my income than anyone I know, and I know people that make upwards of twice what I do. I actually saved about 23% of my income last year, but there were factors that most Americans don’t have (e.g. living abroad for part of the year in a poorer economy, but still earning US dollars).… Read more »

bystander
bystander
5 years ago
Reply to  SR

SR, If you put as much effort into looking at your expenses and finding things you could cut out or reduce as yo did in your response, you could save more money! Please don’t make generalized statements about groups of people that are demeaning and rude. You may not have personal experience with others being able to save 20% even on a lower income with expenses like children and a mortgage, but I guarantee you we exist. And we don’t go grocery shopping in dumpsters. As a point of reference (which you seem to need), I own my house, pay… Read more »

SR
SR
12 years ago

Oh, and Matt, according to the Canada Revenue Agency, you are not paying more income tax than an American. By your statement, you earn 3500 per month (42,000/yr). According to the CRA website, that means you are paying about 6541.10 in income tax per year. A typical, single American (with no kids) would pay 10,5000 in income tax, before standard deductions. I’m not convinced that with your basic income tax rate, in addition to your higher sales tax rates, are higher overall than in the US. But then again, going on about how you pay more for taxes, when medical… Read more »

Chris @ ComicHacks.com
Chris @ ComicHacks.com
12 years ago

Hani,

Thanks for telling me more about IGN. I need to check them out now!

Thanks for reading my blog! Iron Man can’t get here fast enough!

Maybe JD will do a review of the movie here? One can hope!

Mehdi
Mehdi
12 years ago

SR. I stand behind my words. You should be save at least 20% of your income, no matter what. The whole point of setting a 20% rule is that it sets constraints. And most people start to get creative when they set constraints. Frugality is great for your bank account, but it’s also hard when you have to say “no” to things you’d like to have. I would never have started to look into tax deductions, savings account with higher intrest rates & second stream of incomes, if I didn’t had set the 20% constraint first. You think it’s hard… Read more »

Investor Trip
Investor Trip
12 years ago

Mehdi, I’m going to agree with SR on this one: 20% seems a bit irrational for a beginner saver. I think people should start with 10% first, then try to increase the percentage over time. Besides, going from no savings to 20% a year is like jumping from high school football to the NFL. Frugality takes time to make sense, and saving 20% during your first month of expense tracking is pretty absurd. So my 2 cents is to do everything Mehdi said, but try 10% (like mentioned in The Richest Man in Babylon) instead of 20%. I’m not saying… Read more »

Ruth
Ruth
12 years ago

I find it’s most helpful when people speak from their own experience–“I save x% of my income by having a roommate and not eating out”; “I can only save y% of my income because I choose to buy organic food/have very high alimony payments/[whatever].” Trying to predict what mythical other people can and can’t or will and won’t do is much less helpful. I save a very high percentage of my income–at least 20%–by having very clear goals, and a roommate, and being frugal in all the usual ways. And I am on track to achieve my goals, and I… Read more »

Lars
Lars
12 years ago

> SR wrote: Now, that 1333 will have to cover utilities, food, car payments, daycare, pocket money, whatever miscellaneous expenses come up.

First off, “car payments” is nothing else but paying off debt, so it should be excluded from this list.
Also, I think $1333 is plenty for one month to live on, that’s more than $40 per day!
My current plan is to live on $700 for misc. expenses per month, therefore being able to save about 50% of my net income.

Mehdi
Mehdi
12 years ago

Investor Trip. 20% is perfect. It’s not too low, it’s generally too high. And to most people that’s what they need: setting constraints.

Setting constraints is, as I posted above, the best thing you can do. It breeds creativity. It pushes you to cut drastically into costs.

SR wrote 20% savings is too much, but she also wrote she doesn’t track her expenses. First mistake. You don’t track expenses, you don’t know where your money goes, you can’t cut costs.

Dave
Dave
12 years ago

20% is perfect for most people as Mehdi has said. Plenty of people will say that it’s too hard, it’s impossible, unrealistic, etc. Those people are also the ones who aren’t willing to put in the time to keep track of expenses, etc. Now I believe that 20% does include 401k, and paying down debt (long term capital debt, not car loans, electronics loans, etc). The idea is that that 20% is going towards your future value, not current expenses. So if you’re putting away 20% in a 401k, you’re already there. If you’re putting away 10% in a 401k,… Read more »

Dave
Dave
12 years ago

Oh, and someone said having personal examples is good. I recently figured out that my wife and I are saving somewhere around 40% of our net salaries. In percentages: 25% towards 401k 5% towards company stock purchasing 10% towards after tax savings We make a lot more than the average person, but we certainly save more than almost anyone in our salary bracket. The more you pay attention to your spending, the more you notice things that aren’t “needed”. If you do keep track of everything you spend, you quickly notice how fast coffee adds up, how much a certain… Read more »

SR
SR
12 years ago

I follow a detailed budget, so don’t even try to be snarky about my lack of being able to tell you how much I spent on shampoo last month. My money management is very healthy, sane, and goal-oriented. In fact, I’ve saved a significant amount of my income in the last eight months, in addition to contributing to an IRA, and paying down about 35% of my debt in the last six months. So see, you don’t have to track every little penny (imagine!) — just create a budget and stick to it. It’s really not that hard. Part of… Read more »

Kris
Kris
12 years ago

I think that the context for the 20% savings recommendation is this: In order to be able to live off one’s savings for a comfortable retirement, 20% of a decent income is a good guideline. There will always be many who cannot afford to do this. For most of those, “independent retirement” won’t happen. They will either be forced to continue work to earn income or become dependent on others/society. Nevertheless, the advice to save 20% (or more) is good advice. If you aren’t following it, there will be consequences later, whether the choice is out of your control or… Read more »

SR
SR
12 years ago

Kris, while there is merit to what you say, there are still difficulties in statements like that. If you have a low income or you have a low income for a long time (before starting a higher income), 20% savings probably isn’t going to cut it. It’s much better to work with target goals. It’s really easy, with online calculators, to figure out how much to save in order to retire with a million (or another amount). If someone is 23 and wants to save 2 million, it takes less savings per month than for someone starting at 33. This… Read more »

Rob in Madrid
Rob in Madrid
12 years ago

yes 20% does seem abit out of whack for most people, I’d suggust $50 a month as a good starting point and go from there. Also get in the habit and yes it’s a habit of spending less and saving more each week.

Dave
Dave
12 years ago

Everyone can have their own opinion about it, but I have a personal belief that thinking something is impossible makes it almost impossible to achieve. Part of the problem I’ve seen with people who don’t save much, is that they think it’s impossible to do so. They’re often shocked at the amount we save (even though we could do much better) So personally, I’d like to tell people “You should be saving 20%”. If they say “Oh my lord, 20%, you must be joking”, I would want to say “It is possible, but perhaps you could start on something easy,… Read more »

JJ_SF
JJ_SF
12 years ago

Saving 20% is not an impossible goal if your goal is to reach finical freedom while you still healthy to enjoy it. I am a single Mom with an eighteen year old and I have a net worth of high six figures with no debt. I would say my average savings rate for the past 25 years is around 25%. I don’t own a home because I like to travel, but I do own a well diversify portfolio that is making more money for me now then my annual salaries. I think I can reach my freedom day within five… Read more »

Jim
Jim
12 years ago

Several people are very resistant to saving 20% (or more). SR, was very vocal on this point. On the one had, I have been there, believing that I could not possibly save a large amount. On the other I did jump from debt and living paycheck to paycheck to saving 20% or more. When arguing that 20% is unrealistic, SR made several points. In one example he gave a figure for rent and cited “the 30% rule”. I presume he did so in order to make a claim to authority, and lend justification to his argument. As far as I… Read more »

SR
SR
12 years ago

Jim, where I live, real estate is expensive, and 30% is a good basis for most people. I, in fact, live in shared housing, so I’m far below 30%. However, when people are looking at rentals/mortgages, it is still the rule of thumb — especially when you live somewhere with expensive real estate (e.g. in my city, it’s generally difficult to find a decent 1br condo in a non-ghetto neighborhood for under 200k). As to housing shares for single parents, it’s a great idea. My (single) mother actually did that for a little while with a friend of hers. However,… Read more »

Dave
Dave
12 years ago

A few things. 1. You seem to think that the housing industry 30% rule is better than Medhi’s suggestion. Perhaps you’re not getting the idea behind this kind of website. We’re not looking for generally accepted standards. We are looking for better than normal, we are looking beyond the average person. The average person doesn’t save 20%, and they spend 30% or more of their salary on housing. I think this is too much, and so do other people. I don’t care if it’s generally accepted, it’s also generally accepted that people should take out loans for their cars, which… Read more »

SR
SR
12 years ago

Dave, you misread. The implication was not that a 20 year old had $2mn *now*, but that as a [65yo] retirement goal, it’s not enough. Obviously, most anyone with $2mn in the bank right now could retire. Theoretically it could be done with $1mn. Retirement doesn’t cost as much as you think, hmm? I’ve seen a variety of conflicting information on this. Did I miss where Medhi talks about how much to spend on rent/mortgage? Because it’s certainly not in the article he wrote. As to the proclivities of the readers of blogs, I’ve found that people tend to take… Read more »

Jennifer Saranow Schultz (aka Hint Mama)
Jennifer Saranow Schultz (aka Hint Mama)
6 years ago

Great tips:) And these are especially helpful to parents trying to cover the whopping costs associated with raising a kid. I’m working on trying #6, one of three creative ways to stash away extra money I wrote about here:
http://hintmama.com/2013/11/02/todays-hint-3-ways-to-stash-away-savings/

dorsulita
dorsulita
6 years ago

Ilove reading anything about finances.ived done all this steps..my main goal is to save for my retirement.i was 38 years old that time.listing every details i spend up to the last centavo.save every penny i have.its true i saved a lot of money.. then problem arises..with no spare funds to finance my issued checks to suppliers , i had no choice but to use my retirement funds for the meantime..but up to now that im 43years old.i find it difficult to start saving again. Any suggestion?

Lia
Lia
5 years ago

THANKS VERY MUCH THIS HAS BEEN VERY HELPFUL FOR ME, LIA.

Economizar Dinheiro
Economizar Dinheiro
5 years ago

Very nice!
I greatly appreciated your tips, I want to save money to travel and I will follow all your tips.

Sameer
Sameer
5 years ago

Great post!!!

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