How to Save 40% of Your Income: A Step-by-Step Tutorial

1. Be the boss of your money

Have a budget. This is the main way we save money. We know where every single dollar is going and what its job is, most of the time. We have a plan for our money so we can keep an eye on it. It’s a tool of freedom for us. I always know how much money I have to spend on something.

A budget lets us see where we can tweak, where we can spend less, or where we need to spend more. We are always adjusting it, but our money is not just going wherever it wants to go. A budget is really about being the boss of your money.

2. Write down every purchase

It’s part of our budgeting plan, but we write down every purchase. This means we’re saving receipts, whether it’s on your phone or with paper receipts. This can help you keep track of every purchase that you make so you can account for your money.

This trick actually helps me to spend less money because I have to account for every dollar I spend. This makes it a bit of a pain to buy things so I don’t make purchases on a whim.

3. Saving automatically

It is a big buzzword in the personal finance universe, but paying yourself first is important. We have a variable income and variable expenses, such as a surprise doctor’s bill.

Make it a priority to save money but watch how large those automatic withdrawals are. You want to save as much as possible but you also need to have enough money in your main account so you can pay bills, too.

4. Make more money to save more money

Many of us fall into the trap of lifestyle inflation, which means that your spending balloons to match your income.

For example, you get a raise, then you decide to get a nicer car. But in reality, you’re just spending more money. We like to think of any raises as a savings bonus. You make more money so you get to save more money.

5. Watch rising housing costs

This can be unavoidable, but you should know how much house you can buy and fit within your income. If you get a larger place to live, your heating and water bills go up. It’s not just about a bigger mortgage payment. Everything is bigger and these expenses really add up.

6. Track your savings goals

Tracking savings goals helps keep us motivated and helps us see our progress. I’d recommend printing out a free debt-free chart which is a helpful visual tool to keep you on track.

Make sure each step of your savings goal is small enough to reach. For us, increments of $100 seemed to be a good place for us. If it’s $1,000 increments, you may just feel like you’re not making any progress and that’s just no fun.

7. Limit online shopping

Stay off of sites that advertise cool things. If you don’t want to spend money, it won’t help you reach your goals by spending your time on sites with items you’d love to buy. I break this rule all the time but I keep in mind that I will not spend money on these sites.

8. Watch your discretionary purchases

Dave Ramsey likes to talk about the four walls of budgeting. Food, utilities, shelter, and transportation. These are the essentials, but if something you want to purchase is not one of those four things, perhaps you don’t need it.

It’s a pain point for a lot of people because it involves taking away fun things like eating out, buying a brand new phone, new clothes, cable tv, coffee, shopping, etc. But it’s really about choices. Do we want fun now or fun later?

9. Stay organized so you don’t re-buy everything

Stay organized so you know what you have. I’m not so great at this. For example, we went shopping last week and bought dishwasher soap, but realized we had some when we came home.

It’s not a huge deal, but it can add up, waste money, and take up space. I know people like to get a slew of things on sale and that’s a different strategy.

How to save 40% of your income

Even learning how to save more income by 1 to 2 percent a month can help you reach your goals. It’s empowering to see how much money you saved and how hard you worked to get there.

Let me know what strategies you think could work for you or if you have any tips you’d like to add on how to save a huge percentage of your income.