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A penny saved is a penny earned.

-Benjamin Franklin

We’ve all heard this old adage before. Every dollar you save today is a dollar that can go to something that you may want or need in the future. Maybe you’ve been eyeing that new pair of shoes for a while now. Or maybe you want to make sure that you’re set in retirement.

Regardless of your reason, saving a percentage of the money you make is incredibly important. Saving seems like a simple concept.

So why do so many people (myself included) have trouble with it? On this page I want to share some of my best tips for saving money. Saving (and by extension, living below your means) is one of the major pillars to financial freedom. Because as the famous saying goes, “It isn’t how much you earn, it’s how much you keep.”

Related: Should I Save Money or Pay Off Debt?
Related: Save Money With the 52 Week Savings Challenge
Related: Retirement — How Much Should You Save for It?
Related: Save Money in 8 Easy Ways

Saving Money

Although there are several methods to save money, there are some surefire ways to make sure you’re putting enough money away. Most experts generally recommend that you save between 10% and 20% of your income. Saving consists of liquid savings, such as the cash in your savings account, and retirement funds. We cover retirement in depth elsewhere in this blog. For now, we’re going to focus on liquid savings.

As with anything, it’s important to establish a savings plan that works for you. Give yourself a goal you want to obtain, then start working towards that goal. Want to take that vacation you’ve been waiting all year for? Plan for it.

Looking to buy a house at some point? You’d better start saving now. It’s important that you set savings goals that are reasonable, to keep from getting discouraged.

It’s highly unlikely that you’ll be able to effectively save 100% of your take-home pay. How would you live? Instead, give yourself a percentage (for example, 10% of each paycheck) or a dollar number each pay period. It doesn’t matter if it’s as much as $5 a paycheck. What matters is that you get in the habit of saving. Read on for tips for effective savings!

Pay yourself first

This is probably the golden rule of saving. You go to work, work hard, and collect your well-earned paycheck. The government gets its cut, and then you immediately start paying all of your debts and bills. When you’re finally done paying everyone and everything else, you have little or no money left over for your savings account. You’re doing it wrong! After taxes, you should be first in line to get paid.

Find some percentage or dollar amount that you’re comfortable with, and immediately put it away in savings. Then, and only then, start paying your bills. Not only will you start contributing to a healthy savings, but you will naturally learn to cut unnecessary expenses from your budget.

Trust me, your expenses always inflate to match your income. If you lower your income, you will find a way to lower your expenses if you don’t have it to spend. But instead of money lost to restaurants and expensive lattes, that extra cash will be tucked away safely in your savings account. Which leads us to our second step of effective savings…

Automate your savings

Automatic savings are crucial to establishing a solid savings. This includes direct deposit and/or automatic transfers to a savings account, separate from your main spending account. For this, I recommend keeping your savings at a different bank than your checking account.

For example, my primary checking account is with Bank of America, and my savings account is with Ally Bank. Each payday, I have a specific amount from my paycheck automatically transferred to my Ally account. Ally is an online-only bank, so it makes it more difficult for me to withdraw money from it.

This gives me some time to really think about whether what I’m withdrawing money for is truly worthwhile (Hint: Most of the time, it isn’t). On top of that, at time of writing, Ally offers 1% interest on all balances kept in your accounts. This is much higher than most traditional savings accounts, so I enjoy a nice interest bonus each month!

Saving Money tips

Set up an emergency fund

An emergency fund is an extremely important concept in personal finance. It can really save you when you’re in a pinch, and keep you from resorting to credit cards in an emergency. Experts generally recommend having an emergency fund of approximately 3 to 6 months of expenses, or more if you have unstable income (or responsibilities, such as a child). 3 to 6 months worth of expenses may be an undertaking, especially considering that you probably have other expenses and bills.

To begin, it’s a good idea to establish an emergency fund of $1,000 to begin with, then slowly build up to the 3 to 6 months after you’ve paid off all debt (more about debt here). Then, in the event that you have a car repair or unexpected medical bill, you don’t have to use a credit card then get wrapped up in interest.

Especially considering that at time of writing, the average credit card interest rate in the U.S. is over 16%. That’s money you could be saving or applying to something else. It’s unfortunately really easy to get buried in credit card debt, and you’d like to avoid that at all costs. It’s no surprise that the average U.S. household credit card debt in 2016 was over $16,000, according to NerdWallet.

Create a budget

Saving means nothing if you’re spending more than you earn. This is where a budget comes in handy. You can learn more about budgets in the budgeting section of this site. In short, budgeting tracks every dollar that comes and goes.

Budgets are invaluable when it comes to saving because they will help you show where you can cut back on expenses, which in turn can be put to savings. There are plenty of budgeting apps such as YNAB (You Need a Budget) or Mint that will help you keep track of your expenses and savings accounts.