No matter how much money you make, it seems you can never make enough. You’ve tried everything, but you still can’t explain where the money goes at the end of the month.
Does that sound like you?
- You KNOW you’ve worked hard for the past weeks, but the money is simply gone
- It’s a challenge for you to reach the end of the month and pay for everything you want
- You feel worried about how the economy can affect your income
- You don’t an emergency fund, no plan B to protect against uncertainty
- You know you should contribute to savings and retirement accounts. But you feel too tight to put money aside, even if it’s just 10-15% of your earnings
You can, of course, get out there and make more money. But if you don’t solve your saving problems first, these will increase to the level of your income.
Oftentimes, people believe saving doesn’t matter because you’re not earning enough in the first place. But cutting expenses is not just about saving money: it’s about how you spend your time and what decisions you make. Heck, it may be the reason your income is so low!
It’s easy to look at some extravagant entrepreneur and point out everything they’re doing wrong. But if you’re only making $15 per hour, your saving problems aren’t that obvious. If you’re not earning much, it’s still worth fixing it soon. Because by the time you earn more, you’ll have already wasted money.
This guide will help both big spenders and low-income groups. And once you set your saving strategy, you’ll see how easy it is to grow your bank account.
- How Much Money Can You Save?
- A Simple Way to Cut Off Expenses Fast
- 7 Proven Ways To Cut Off Expenses
- Do These 3 Things Before Buying Something
- The Untold Way to Save Money Effectively
- The Bottom Line
How Much Money Can You Save?
Saving money isn’t easy. There’s so much we don’t control aside from living expenses:
- You pay taxes for both the money you earn and spend
- Your family want you to spend money on holidays
- Your friends want to go out and eat outside every weekend
How much you can save depends on your current lifestyle. Some people will see life-changing benefits in saving $1K per month, while others need to cut off several thousand to see any effects.
These strategies work for both groups. But for the sake of simplicity, let’s look at the majority:
The average 38-year-old American earns around $6K and spends $5K per month (after-tax dollars).
The first thing that comes to our mind is: you spend $5 for every $6 earned. With only $1K saved per month, you have little money left to invest in retirement, emergency funds, and related.
There’s nothing wrong with spending 84% of your income as long as it’s justified. If it goes to investments, that’s smart money. But if you spend that much on basic, unavoidable living expenses, you have an income problem.
Would it be great to save 50% of your income? Can we go from 5/6 to, say, 3/6?
Keep in mind that there’s not a single way to fix your spending. It’s not about cutting off one thing and getting an extra thousand a month. It’s about saving a $10 here, another $20 there— until it adds up big numbers.
A Simple Way to Cut Off Expenses Fast
If you don’t know what to do first, start with your bills. Can you downgrade the services you’re using? In case you didn’t know, you can renegotiate with your provider to get a lower monthly payment.
You may not realize that you can get a very similar service for far less money. For example:
- You could get a “secret offer” to reduce your cable bill
- You can save 50% on furniture and appliances if you buy them at the right time
- You can save money on plane tickets when reserving online at the right time
- You can buy in bulk to save money on groceries
- You can remove your electric bill altogether by investing in solar panels
- You can cancel your contract and save money with prepaid phones
Saving on little things will add up to your savings over time. But it’s no use if you don’t learn how to save on big purchases as well. That should be your next priority:
- Learn how you can negotiate your house to spend less money
- You can buy new cars for cheaper if you know how to negotiate. Also, learn how to buy used cars to avoid scams
- If you’re borrowing money, set up a repayment plan. Learn about the types of loans that fit your credit score
No matter how much you cut off expenses, you will always pay something. At the same time, some companies reward you for using specific payment methods. So if you’re going to spend that money anyway, why not make money back?
- Learn how to earn hundreds of dollars with credit card churning and 1-5% cashback rewards
- Make a chargeback or refund goods or services you don’t need
This way, you will save some money. But if you really want to save a lot, you need to be more intentional with your money. That’s what the following methods are about.
7 Proven Ways To Cut Off Expenses
Why is it so hard to save money these days? Well, maybe it’s because sellers want you to spend as much as possible.
While you’re reading this guide, countless market experts are designing new ways to hook you into their products. They understand how human psychology works.
You can’t expect to walk into a store and buy what you want. If you don’t plan how to spend your money upfront, you’ll waste it on some products you don’t need. Then, you’ll try to convince yourself why that was a smart purchase. And when it’s the end of the month, you wonder why your balance is low again.
What’s the first step? Start thinking clearly.
#1 Reduce your marketing exposure
Are you always thinking of where to spend your money? Do you worry about missing out on some new products?
It doesn’t matter whether you buy on a whim or take days to compare options. Marketing conditions you to buy something before you decide whether you need it or not.
You’ll know what I mean when you go to your phone. What is there?
- Thousands of promotional emails
- Notifications from Amazon, eBay, and Etsy
- Strange numbers sending you offers via SMS
- Missed calls from annoying sales reps
- Product reviews in your social media “suggested content”
You can’t fight temptations forever. You need to get them out of your environment.
- Declutter your email and unsubscribe from everything
- Block notifications
- Block the other numbers or change yours. Keep the phone in plane mode unless you’re expecting a call
- Unsubscribe from review channels and delete those recommendations
One thing we can’t control is advertising. And that’s okay because every website needs to make money somehow.
It’s funny how Google will recommend you to personalize your ads so that they aren’t as annoying. But ironically, nothing is more distracting than an ad that matches your interests.
If you’re going to personalize, do the opposite. Uncheck everything you may be interested in so that you don’t feel tempted to buy.
Also, search engines will recommend content based on your searches. Pause your browser history, log out, or shop with Incognito Mode to avoid saving that data.
#2 Pay for 1 big expense to remove 100
When trying to save money, it’s second nature to look for the lowest prices. We ignore the fact some costs will never go away. So ask yourself:
- Can I spend less if I pay for all of it upfront?
- Can I buy something to get rid of recurrent payments?
The first one is your classic “bulk order.” You can save 20%-40% of the purchase value when, for example:
- You buy large product quantities
- You buy yearly service subscriptions
- You pay in full instead of financing
Maybe you’re consuming the same products every month. Or you spent years with the same providers. On your next purchase, ask for a bigger plan.
Now, how do you remove 100s of payments with a single one?
- When you choose a software plan, you go with the Lifetime plan upsell instead of the monthly subscription
- You buy a house instead of renting it
- Instead of buying the same every month, you purchase reusable products
- You buy product guarantees to make sure it lasts you many years
- You buy solar panels to replace your electricity bill. Or try reducing it with low-consumption light bulbs.
- You pay upfront, so you don’t worry about having enough balance every month
This strategy typically requires you to spend more upfront. But if you’re okay with that, you will save unlimited money in the long term.
What if you could make one decision that saved you money forever? It’s not a mind-blowing idea. It can be as simple as moving to a state with lower taxes. Many Californians, in fact, have been moving to Texas and Florida recently.
If you’re more open to new experiences, here’s a list of cheap places to live around the world (which are often English-speaking countries with high life quality).
#3 Live a minimalist lifestyle, at least, temporarily
The no.1 rule to save money is: only spend it on things you need. And to know the answer, you first have to ask yourself what matters to you and what doesn’t.
Minimalist finance is about reducing your lifestyle to the essential. This way, you also get the most value for your money. It means:
- You don’t buy things you won’t use
- If it’s not a basic expense or an investment, you don’t buy it
- You don’t have more credit lines other than the ones you use
Minimalism also means simplicity:
- You consolidate your debt with a single loan
- You bundle similar services to save money (e.g., Internet, electricity, cable TV, and phone plans. Or get all your insurance plans from the same company)
- You use a single payment method and keep most of your money there
Minimalists often have low bank accounts. It’s not because they don’t have enough money, but because they constantly invest the funds they don’t use.
Some people like this efficient lifestyle, while others find it boring. But you don’t need to keep it forever. Once you save enough money and increase your income, you have more freedom to change your lifestyle.
#4 Know where you’re going to spend your money
Personal accounting can look boring and time-consuming. Although some consider it useless, there are two major reasons to do it:
- You can’t execute a savings plan if you don’t know how much money you’re wasting
- You don’t know how much you need to earn by the end of the month
It happens to everyone, myself included. We don’t look at the balance, but we have a vague idea of how things go. “I expect to earn enough to pay for my expenses.”
The next thing you know is:
- You spend more than what you expected
- You earned less than what you thought
Don’t let this happen to you. Before you get back to work, decide where your money goes: how much for rent, food, entertainment, savings, transportation, and emergencies. Be extra-conservative, and create your daily income goal based on those numbers.
This number will be higher if you consider taxes. And if you skip days or make less money sometimes, you have to account for that error margin as well.
And if you need to use that money by the end of the month, you have to earn it fast enough to withdraw on time. So you don’t have 30 days to make it happen: you have 25.
That’s what I call clear expectations. It instantly shows you what to do:
- If expenses are too high, you ask yourself: “Do I really need to buy this?”
- Whenever someone makes an offer, you will easily resist the temptation
- With the daily goal in mind, you’re much more intentional at work. Because if you don’t achieve it today, you won’t have enough money by the end of the month
#5 Simplify your habits
How much money you save depends on all the decisions you make. We often assume we’re trying to save money when in reality, our lifestyle is preventing us from doing so. Here are some examples:
- Maybe you don’t need to keep the air conditioner/heater on for 24h
- Instead of negotiating $10 on your cable bill, you can stop watching television
- You can unsubscribe from Netflix, YouTube Premium, or Hulu. Why are you laying on the couch when you need money?
- If you exercise, you can get a beach body for $30 at a local gym (or pay once for home equipment). You don’t need $80/month for a sauna, guided classes, dietitian sessions, jacuzzi, tennis court, and dozens of confusing fitness machines
- Keep your wardrobe minimalist. You certainly don’t need three different sets for every day of the week. And just because it’s prime time, that doesn’t mean you should go shopping
- These vacations, you could stay at home or spend more time in your city. Those $2000 Caribbean vacations can wait
- You should bring your own food instead of paying inflated prices at airports, sports events, cinemas, and concerts
- Some clothing brands charge $50+ for a piece with a logo (shipping excluded). But you could instead buy a plain cloth template for $10 and customize the print
- If you like gaming, spending $60 on a video game is better than spending hundreds a month on expansion packs and microtransactions
- You shouldn’t “invest” over $50 on lottery tickets. If you spend more on such miracles, that says you’re not very confident in yourself and your income potential
- Don’t let them fool you. You don’t need to pay a website to make money online. Beware of work-from-home scams
- If you want to learn more about money, you could buy books for $20-$40 each. Or you could join Audible[AFFILIATE_OPPORTUNITY] for $15/month and get three free books your first month. You get one free book every month (no matter the length) and extra titles cost only $14.95.
- Even the simplest repairs can cost $100+, whether it’s your car, computer, washing machine, or a lightbulb. All you need to save that money is watching a YouTube tutorial and a bit of common sense
- You don’t need to pay an agency to create a repayment plan or negotiate your debt. DIY
- Some sellers charge you up to 5% when paying with credit cards. Instead, you should be **getting** paid in cashback for using them
- You can pay $10 per day to commute to work two hours a day. You can move closer to your office. Or you could work from home.
Believe it or not, the average American spends money on all of these at some point. How much do you think you can save by adding up all of them? If you follow these, you will have, at least, some money left by the end of the month.
#6 Pay more upfront
When you want to cut off expenses, paying more upfront is counter-intuitive.
But if you try to save money today, you’re going to spend more tomorrow.
- Do you want to pay 100% of your house today or 1% every month (plus 15-20% of interest)?
- Do you want to finance a car because you can’t afford it? Maybe you should look for a cheaper one or wait until you save up
- Do you need to borrow for tuition? The sooner you pay back, the less interest they charge you. And if you finish college a year earlier, you would save ~$20,000
- If it’s tax season and you’re about to receive money, pay them earlier. It will keep you in a low bracket while keeping the profits for another year
Why do you want to save money? If your goal is to reach financial comfort/freedom, you have to take the low-cost option, even if that means paying more today. It can also be a motivator to work harder and earn the amount in less time.
#7 Know who you trust money
Who makes most of the purchase decisions? Who that person is can affect whether you save or waste money.
Maybe you have a joint account. You deposit some money, but your partner buys something stupid without telling you.
Or you go to the supermarket with your family. You always bring useless products at home because the kids always want something new.
Ideally, you want to be the only person who makes the major money decisions. But if you need to share the funds, do your best to help that person manage that money:
- Tell them why personal accounting matters and how to do it
- Show them the right financial habits
- Educate them about fake promotions and online scams
As the person who earns the money, nobody knows the best way to spend it other than you.
Do These 3 Things Before Buying Something
Keep in mind that most products offer money-back guarantees. As long as you can return the product, you don’t need to be that thoughtful with what you buy.
But what if you don’t have that guarantee? What if you plan to spend thousands of dollars?
If you’re second-guessing the offer, do this first:
Give yourself time to think
How many times have you regretted the things you’ve bought? Some people would happily refund half of the products they own. It’s easier to answer “Why not?” than asking if you need it in the first place.
Let’s say you find an offer that’s too good to be true (exactly the price you want), but you don’t have a refund guarantee. Instead of buying, give yourself 24-48h to think about the decision. After that time, you will find your emotions influence your decision differently.
I know it takes discipline. But it’s the best way to save your money, knowing that:
- The offer expires in five hours
- There’s only one left in stock
- Nobody else sells it
The fear of missing out will likely cost you more money than what you save by jumping on these “opportunities.” You can write down why you think you should buy, or you can discuss it with others. But don’t buy it until 24h.
You can ask the seller to reserve you a unit. But if they force you to act fast, it’s a consumer trap.
Let go of the small details
When you’re emotional about buying a product, it feels good to know that you can afford it. But these listings almost always have something wrong. In order to find exactly what you want, you need to spend more hours looking for products and paying more money.
When you look at the long-term value, it’s not worth it.
Instead of looking for the perfect product to buy, we recommend you define an MVP: minimum viable product.
“What are the minimum required conditions to consider it a good purchase?”
If it doesn’t meet them, keep looking somewhere else. But if it does, take it and don’t waste your time.
Maybe you find the product a bit cheaper, but you don’t like the color/design. Or the features are slightly worse than what you wanted. So the seller then upsells you with another version, which has what you want (plus many other features you don’t need).
This happens a lot when buying computers, clothes, and shoes. You always find an inconvenience, so you look for other products. After looking for hours, all those small decisions have consumed your willpower.
At this point, you’ll probably buy whatever you find first, whether you wanted it or not.
Don’t obsess about the details. If it meets the criteria, buy it and don’t waste any more energy.
Use emotional metrics
Go watch any marketing videos and courses. They all teach the same thing:
“People buy with emotions and justify with logic.”
Why is it hard to manage money? Because it’s just a number. Our brain only understands emotions.
For example, everybody understands how the lottery works. We know very well that those $100 are a waste, and that the chances of winning are 1 in 13,983,816. But because it’s a lot of money, we rationalize the irrational.
Just as we rationalize why we should buy something, we can justify why we shouldn’t. But to do that, you have to look beyond dollars and cents.
What if you buy a $1000 TV? It seems you just spent $1K, no big deal.
But what if you earn $100 per day on a job you hate? That TV now costs 2 weeks of your time at work.
Is it worth throwing away that hard work for television? You will think twice.
As a high-earner, this works too. Imagine you charge $100 per hour, and you work 8h per day. Should you buy that TV?
Mind that you will want to watch TV. Because if you don’t, you’re getting its value.
So you spend ten hours this week watching episodes. Every hour you don’t work costs you $100. $1000 in this case.
If you have low income, use your hard work as your metric. If you earn a lot, remember that distractions cost you more than the price tag.
The Untold Way to Save Money Effectively
If you need to cut expenses, it’s second nature to think of money. Spend less = more savings.
But where does this money come from? You earn it. You spend it.
So if you changed yourself, that would somehow save money as well. It’s an indirect approach to personal finance.
Let’s say instead of saving money, you focus on saving energy. That will make you more productive, which means you save time. And because time is money, you also save more dollars:
Energy → Productivity → Save Time → Save Money
But why energy first?
You may think of energy as the ability to work harder. But it also represents your mental energy: the quality of your financial decisions. It’s not enough to know how to save money. You need enough willpower to follow that plan.
Here are three simple ways to have more mental discipline:
- Sleep for long enough and eat healthily
- Reduce the number of decisions you make, or make most of them the day before
- Stop overwhelming your brain with information and thoughts. Give yourself time to relax
As for productivity, there are countless tips to do more with less:
- Work on your most important task rather than doing ten different things
- Break your yearly/monthly goals into daily/hourly objectives
- Dedicate one day of your week for meetings and maintenance tasks
And by saving time, you’ll inevitably save money:
- Use apps to simplify your accounting, set automatic payments, and track your expenses
- Limit interruptions in your environment and avoid multitasking
- Get 80% of your results in 20% of your time (find your best time to work)
The Bottom Line
Hopefully, with all these tactics, I’ve saved you some time on research and planning (comment below which one helped you the most). But if you could only take one thing from this guide, it’s:
Switch from a consumer to a producer mentality.
The best way to understand how to save money is by making money first. Be okay with spending more upfront so that you can eliminate expenses in the future.
Before you know it, you’ll have saved thousands of dollars.