Whether you’re just starting out and need to pay off your student debt or you’re established and looking to overhaul your finances, it’s always wise to work on optimizing your financial situation and “engineer” your finances.

Here are some quick, practical tips and tricks to help you save more money and thus acquire more wealth for yourself.

Please also check out Engineer Your Finances: How to Manage Debt

 

General Disclaimer:

This information is for educational use only. The Engineer Mindset does not guarantee any results or financial returns based on the advice below. There is also no guarantee that this information applies to your specific situation now or at any later time. Consulting with a qualified financial advisor is recommended for all your financial decisions.

 

How to Save More Money

When you go about refining or defining your saving habits, the first step is to think about what you are saving money for and why. 

Understanding your specific saving objectives will allow you to implement the most appropriate strategies for each goal.

Additionally, knowing your savings targets will also help you stay motivated and resist the temptation to procrastinate or steal from your savings funds.

 

Set Savings Goals

Make a list of all your savings desires in order of importance, and also by time of need.

Priority is important when you begin to accumulate money, and you may want to build up the most significant or time sensitive places first.

The major things people save money for are retirement, houses, education funds, and emergency, or “rainy-day” funds. Others save for other short-term things such as vacations, cars, and other big purchases.

Emergency funds, as Dave Ramsey points out, are most important to build up first since they protect you from those moments where life happens and your finances can provide that safety net for you.

Retirements and 401k’s are very long term goals and it’s hard to be disciplined enough to start saving early, so funneling money out of your paycheck before you see it is a great tactic, but let’s look at our whole list of saving strategies.

 

Implement a Saving Strategy

Whatever your savings goals are, the next step is to implement a saving strategy for each goal.

What trips people up most is that it’s difficult to save regularly without some sort of system.

Here are some strategies to help you save money more easily:

1. Automate Your Saving

Set up savings diversions so that they come out of your paycheck automatically before you even notice.

This way the money will get set aside without effort, and you’ll soon grow accustomed to living off of what’s left.

Use this saving strategy for things like your 401k contribution, emergency fund, or for other savings such as a house or a trip.

2. Hide Money from Yourself

Out of sight, out of mind, and therefore you’re less prone to dipping into it. Use a different account or even a different bank from the one you normally use.

You can use an online bank and funnel savings into this account automatically from your paychecks. You can also set up automatic transfers to happen once a month or so.

This tactic is great for your vacation or house savings.

3. Put Yearly Raises into Savings

One thing that’s worked well for me is to divert all or a portion of any yearly raises into retirement funds.

This way, you increase your retirement savings, but don’t notice a loss since you’ve been accustomed to living off of a certain amount.

4. Name Your Savings Accounts

Naming your account instantly reminds you of your goal and may reduce the temptation to take money from it.

Use nicknames like Hawaii vacation, new house, property taxes, or daughter’s new car.

If you see that it’s for your house or a vacation you’re excited about, you’ll think twice before you rob from it.

5. Lock Up Your Money

Another strategy that helps is to lock up your money. This is why 401k programs are so successful because there’s a penalty for taking money out early.

You can put some of your savings accounts into certificates of deposits (CD’s), or some other safe place where you can’t get to it.

With a CD, you can’t pull out the money early and you get a slightly better interest rate than a money market account.

6. Reduce Unnecessary Spending

Here in the modern world of convenience, it’s all too easy to set up automated monthly subscriptions that can get lost in your regular monthly spending habits.

Netflix, Hulu, and Amazon are common things that automatically pull from your accounts.

Give your monthly expenses an overhaul from time to time and eliminate things you don’t really use or need.

Negotiate internet and cell phone rates. Look for better deals.

You’d be surprised how much you can save by changing to a different internet carrier, or going with a pre-pay plan on your cell phone.

7. Recycle Your Unnecessary Spending Back Into Saving

As a last step, total up all of the unnecessary spending you eliminated and transfer it to a savings account.

Automate it. Hide it. Name it. Lock it up. Divert it. These are the basic tactics when it comes to implementing saving strategies.

 

How much should you set aside?

For retirement funds, Nerd wallet recommends diverting 15% of your paycheck, but that’s a lot for many people.

Just start somewhere and increase with time.

Some 401k’s or retirement funds have an automatic increase function over time.

The 15% can include your company match, but you need to put in at least the amount that gets your maximum company match because that’s free money!

Emergency funds can take a long time to build up, but you need to begin somewhere.

Start with mini emergency fund of say $500, and then shoot for $2000. Later, plan to increase to one month of expenses, then 3 months and so on.

Saving for your children’s education encourages them to apply and go to college, but you don’t have to cover it all. Saving even $25 per month using a 529 plan will help.

You can also encourage relatives to contribute to their education fund instead of getting plastic toys or junk gifts.

 

Conclusion

One of the easiest ways to improve your financial situation is learning how to save more money, and also reducing or eliminating your debt, which is discussed here.

Saving first starts with listing and examining your saving objectives and purposes, and then setting some goals.

Next, implement the most appropriate saving strategies for each goal. Here’s some ideas:

1. Automate Your Saving – setting up automatic draws
2. Hide Money from Yourself by creating separate accounts
3. Put Any Yearly Raises into Savings
4. Name Your Savings Accounts to remind you of your goals and purpose
5. Lock Up Your Money by putting it into CD’s or other funds
6. Reduce Unnecessary Spending by overhauling your shopping habits and email inbox; recycle this capital back into savings
7. Recycle Unnecessary Spending into Savings

Knowing how much to set aside will be an iterative thing and something you customize for yourself over time, but 15% is a general target to aim at first.

Hopefully this advice leaves you with more structure to your thinking about how to save, but as with everything in life, start small, develop some sort of plan or approach, and then customize it as you go along.