How to Start Saving Money for the Future

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Learn how to start saving money for the future now.

When it comes to getting ahead financially there are a few major categories you should focus your effort on.  These are earning money, saving money, and investing.  The category we have the most control over and can change the easiest is saving money. 

I’m writing this guide to teach you how to start saving money for the future now based on what I’ve learned from my own personal experience. 

Why are you Saving Money for the Future?

One of the greatest motivators when it comes to saving money is the financial goals you’re hoping to achieve. 

My Motivations for Saving Money

When I was a kid, there were often times in my life where my parents were both working long hours and still just barely surviving financially. 

Don’t get me wrong, my family always had everything we needed and then some, but money was tight and there were several occasions where we’d be at the grocery store checking out only to find out that we didn’t have enough cash or a card was declined. 

I remember these moments vividly because I remember how embarrassed my mother was and how angry it made me feel knowing that my parents were working their butts off, but didn’t make enough to put any money away.  

Flash forward to college and my parents had managed to move up in their careers and even pay for a good portion of my undergraduate college education.

Those memories from my youth combined with the opportunity and gift my parents gave me in the form of higher learning, have helped motivate me to be intentional with my own personal finances. 

Also, my goals of one day being financially independent and helping others achieve their financial and professional goals have pushed me to strive toward earning more, saving more, and investing for the future.

They are also some of the reasons why I now share my journey with you. 

Your Motivation for Saving Money

What is your motivation?  If you don’t already have one, think about the things that are most important in your life.

For your long-term goals like retirement, financial independence, paying for college, etc. 

  • Are there children or a loved one that you need to put through college? 
  • Do you want to retire early and give back?
  • Do you want to start a business?

For your short-term goals like paying for a house, traveling, furniture, car, etc.

  • Are you saving towards a specific vacation?
  • Do you have an old car that’s on its last legs and need to start saving for a replacement?
  • Are you sick of renting and yearn to own your own home?

Each person’s motivations will be different. 

When you first start saving money, it will be difficult because it will most likely mean a little financial sacrifice.  Less time spent out drinking or eating with friends. Less buying things on a whim. More being intentional with your money.

Whenever you think about the hardships you’re enduring, think back to your reason for doing this. 

If it helps, write down the motivation somewhere you’ll see it every day or put a reminder in your phone that goes off daily or weekly to remind you why you are doing this. 

Create a Simple Monthly Household Budget

Before you can start saving money, you need to first understand how much money you currently have going in and out.  By creating a monthly budget you’ll be able to track where your spending is going each month and identify any opportunities for saving money.

Learn how to create a simple monthly household budget here.

Cut Unnecessary Expenses

Once you have a monthly budget, you’ll be able to identify the expenses you can cut from your budget.  A few low-hanging fruit to consider are food expenses, utility bills, cell phone bills, excessive travel, transportation, etc.   

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Pay Off Your Debts

Before you start saving money for the future, you should consider paying off your debt.  I like to think of debts as a stupid tax I’m paying for my past mistakes.  Before you can properly save for the future, you should first take care of your bills from the past. 

Debts typically have high interest rates (much higher than a savings or money market account) and will delay your savings progress. 

You should always keep some form of emergency fund just in case something unforeseen happens, but aside from that, the smart money is on paying down your debts first, then saving for the future.

Create an Emergency Fund

An emergency fund is a financial buffer that helps you mitigate the financial risk from life’s unexpected events.

Imagine you walk into work one day. Shortly after dropping off your coffee and briefcase, your boss stops by your office and asks to see you immediately. You sit down, he gives you a somber look, and starts reading a prepared memo from the CEO.

You’ve been acquired by another company and, effective immediately, certain positions within the company are being eliminated. Lucky for you, one of those positions was yours.

Your severance package includes one month of pay. You immediately start polishing up your resume and get on the street looking for a job. One month goes by; no interest. Two months go by; a couple of interviews, but no interest. Four months go by; still no interest.

All the while, your debts have been piling up. You can no longer afford to pay the mortgage or car payments. You car gets repossessed and the bank starts filing for foreclosure. All you have left is enough for running water, power, and a little food on the table. You’re stressed out all of the time and it’s starting to affect your health.

Hopefully this exercise showed you what can happen if you don’t have an emergency fund to help you navigate financial surprises. You need an emergency fund because it keeps you from falling behind at the first sign of financial trouble. This happens to people everyday, all around the world. Please don’t let it happen to you.

It is typically recommended to save 3-6 months of living expenses in your emergency fund or rainy day fund.

This money should only be used for emergencies like losing a job, getting in a car wreck, a medical emergency, etc.

Participate in your Employer’s 401(k) Savings Plans if There’s a Match

If your employer sponsors a 401(k) plan and provides a match, take advantage of the match.  The match is free money that you get to squirrel away for retirement.  In essence, this is still saving money for the future, but it won’t be easily accessible without a penalty.    

Regardless of the match, you should still consider investing for retirement as early as possible. The only difference is that there is no extra incentive to invest now in the 401(k). It may be more advantageous to pay off debts first, then worry about investing for retirement later once you’re finances are better under control.

Set Money Saving Goals

This will probably not be possible for everyone starting off, but most people will be able to save a little money each month.  When creating your monthly budget, determine how much you are going to save each month.  To better motivate you, this saving amount should be tied to some goal you’re looking to achieve. 

  • Are you starting to save money for a house?
  • Maybe you’re hoping to pay off some debt? 
  • Or maybe you’re saving money for a new car? 

If you have a certain goal you’re tracking towards, figure out how much money you need to save each month to meet that goal, and determine how you’re going to earn or save that money each month. 

  • Will your current budget work? 
  • Does it require cutting expenses above and beyond what you originally planned? 
  • Will it require overtime or a side job for a little while?

Pay Yourself First

Make sure to always pay yourself first.  What this means is that when you get paid, the money you have earmarked for saving should immediately be placed in whatever fund you have setup for it.  If you wait to deposit it later in the month, there’s a chance it may get spent on something else. 

Save Money Consistently

The key to your long-term money saving goals is consistency.  It’s not sexy in this day and age of immediate gratification, but it’s a proven method for wealth building. 

Develop the habit of saving money and treat this money like it’s off limits.  The only time you should need to touch it is for a real emergency (medical, shelter, food, etc.) or when you reach your intended goal.

Save Your Money in an Interest-Bearing Account

When saving your money, don’t just take out cash and bury it in the backyard.  Try to place it in an account that will put your money to work.  At the time of this writing, it’s easy to find money market accounts that will return 2.00%+ interest on your savings. 

Stay Committed and Persevere

If you’re first starting out saving money, it’s probably not going to be fun setting up a budget and sticking to it each month.  The longer you do it, the easier and more satisfying it will get.  You’ll see your nest egg grow each month and each year and before long you’ll be excited to save money because it means you’re one step closer to your goal. 

Take Action Now!

The sooner you take action, the sooner you can started getting ahead financially.  You can get started with as little as a few dollars a month.  This will, if nothing else, help you develop the habit of saving money. 

Saving money is not a sprint, it’s a marathon. The sooner you get started, the sooner you can achieve your financial goals. 

Start Investing for Your Future as Early as Possible

If your goals include retiring one day, you need to start investing money as early as possible.  The power of compound interest is real and you need it in your corner.  If you were able to invest $6,000/year over 20 years with a 6% average interest rate, you would have ~$230,000 (almost double what you would get by just saving it).

Vanguard is who I personally use and because they have a $0 account minimum, have low cost index funds and ETFs, and have low expense ratios on their funds and low management fees. 

I invest in individual stocks sparingly (no more than 10-15% of my portfolio), but when I do, I typically use Robinhood for their free trades.  I am by no means a professional trader and don’t need the fancy tools that other professional trading platforms provide.

If you sign up using this link, you’ll be eligible for a free stock! The odds aren’t very high, but it could be a stock like Berkshire Hathaway or Apple (valued at $200+ each).

Conclusion

The one thing I need you to take away from this article is that starting to saving money for the future isn’t difficult or doesn’t have to take much time, you just have to start.  Take action now while the material is fresh in your mind and your motivated to improve your life. 

If you manage to get a handle on saving money, you’ll be a third of the way towards gaining control of your own finances and be well on your way towards achieving your financial goals.