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 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?
Saving money isn’t easy. There’s so much we don’t control aside from living expenses:
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:
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:
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?
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?
You can’t fight temptations forever. You need to get them out of your environment.
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:
The first one is your classic “bulk order.” You can save 20%-40% of the purchase value when, for example:
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?
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:
Minimalism also means simplicity:
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:
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:
#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:
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.
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:
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 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:
Save Money
VS
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:
As for productivity, there are countless tips to do more with less:
And by saving time, you’ll inevitably save money:
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.