How to Save Money in a Practical Manner

Forget what your parents, teachers, and friends told you about how you should save money for emergencies before you do anything else. Forget what financial experts say about building an emergency fund worth three to six months of your expenses. Forget about any numbers or figures or dollar amounts that radio shows and podcast hosts recommend you save.

Here is the problem with a majority of the saving money advice we routinely see: they treat saving money as if it were a number to compute or an account to open. It is not.

Savings is one thing and one thing only: Savings is a Commitment.

Pure and simple. Most American households can afford to save money each month, so why don’t they? It is not because of the dollar amount. It’s because of the commitment.

You prioritize what you commit to in life. Most people commit to anything they see as immediately beneficial to them or to those they love. Even though you do not think about it, you are committed to breathing. You do not count your breaths per minute. You do not measure the volume of oxygen you inhale. You are committed to breathing and you just do it. Whatever it takes. Saving is the same way. If you are committed to saving, you will just do it. You will care less about how much you save with each paycheck. You will worry less about how much you have in your accounts. You will, instead, automatically save something every time you receive income.

How to Commit to Saving Money

This analogy begs the question, “how do you commit to savings?” You involuntarily commit to breathing, even as a newborn. You can choose to stop breathing, at least until you pass out. Then, you start breathing again. What about savings? How do you make savings as involuntary as breathing? The following seven steps will take you through the process of first making your savings meaningful, then making your savings reliable, and finally making your savings as involuntary as possible.

7 Steps to Making Savings as Easy as Breathing

Depending upon the survey or study you read, anywhere between 60% and 80% of Americans are living paycheck-to-paycheck, meaning they have nothing left over at the end of the month to save or invest. For many of these households, savings seems like a fantasy, like running a marathon might seem to most adults. The reality is that it will take an initial commitment and ongoing commitment (action) to make savings a reality and a success. Making the transition from paycheck-to-paycheck to a regular habit of saving can become as natural as breathing. Follow these steps, and you will find yourself saving with no more thought than you give to the expansions and contractions of your own lungs.

Saving Money

1. Identify Savings Goals

To begin your commitment to savings, you must make the process as meaningful as breathing. You know that if you don’t breathe, you start to hurt and even black out. You will also likely end up with a major headache when you wake up.

What to Save Your Money For:

Everyone knows that having an emergency savings account can prevent major financial headaches, or at least remove much of their pain and sting. Setting additional savings goals for short-term wants will also remove much of the pain from your personal finances. From vacations and gift-giving to appliance repairs and your next car, there is seemingly no end to the things you should be saving for.

Use our Savings Pie calculator to determine how much of your savings will go to each savings category. If you are unsure how much money in total you should or could be saving, check out our Money Pie Budget Calculator.

Emergencies (25%): For periods of unemployment or in times of financial crisis caused by unplanned spending on medical or health necessities

Vehicles (25%): For extensive vehicle repairs as well as for purchasing your next vehicle

Household (20%): For repairing or replacing appliances and furniture, as well as for planned home and yard improvements

Gifts (10%): For gifts for birthdays, weddings, Christmas, or other holidays

Travel (15%): For vacations and out-of-town trips

Slush (5%): For unexpected but advantageous spending opportunities, such as finding the “deal of a lifetime” on an item or experience you had not planned on purchasing but decide you want after all

2. Use Separate Financial Institutions

As mentioned in the Savings Pie above, using savings accounts and certificates of deposit at financial institutions (banks and credit unions) that are separate from where you keep your checking account can be a powerful tool to keep you heading down the savings path. Too many adults make an attempt to save by transferring money to a savings account connected to their checking account, only to find they transfer the entire amount back to their checking mid-month because they had gone out to a nice dinner, gone out for a movie, or made another impulse purchase that they needed to cover with their savings. After a couple of months, they assume they are not savers or do not have what it takes to become savers. So, they give up and go back to their comfort zone of living paycheck-to-paycheck. They eventually accept the falsehood they tell themselves about not being a saver, because who wants to feel like a failure? Nobody. To minimize this possibility, find another bank or credit union where you can open savings accounts for your savings funds.

Make It Inconvenient to Get to Your Savings

You can understand the power of separating your checking from your savings accounts. To take this further, though, you need to make it as inconvenient as possible, without making it impossible, to access your savings. Here are some things to look for in a bank or credit union that would be an ideal place to park your savings and let them grow unmolested. Find a financial institution that:

  • does not issue you an ATM or debit card.

  • has no drive-through lane.

  • has no fees and no minimum balance requirements for savings accounts.

  • is nowhere near your home or place of work. Having only one branch is great. Being an online-only financial institution is also highly recommended.

  • keeps limited banking hours (no evening or weekend hours).

  • offers remote deposit of checks.

  • you connect to your paycheck through direct deposit.

  • you do not connect electronically to your checking account bank or credit union.

Once you have found the right fit in a bank or credit union, it is time to open your savings accounts. If you are wondering how many to open and how much to put into each, the next step is for you.

3. Open a Separate Saving Account for Each Goal

Another challenge many would-be savers face is figuring out how much of their savings is for which purpose since they put it all in one account. Think about it. If you have been saving for emergencies, a vacation, and Christmas gifts over the past five months, and summer rolls around, your natural question will be, “how much of this $1,500 is for our summer vacation, and how much is for the other goals?” Human nature would lead you to answer, “All of it is for my vacation next month!” You then justify this savings raid by saying you will get “caught up later” on your Gifts and your Emergency funds. The truth, though no one likes to admit it, is that you would never get caught up. When Christmas rolls around, you would spend the entire savings on gifts.

To get past this temptation, the simple answer is to open multiple savings accounts. In fact, open a new saving account for each of your major savings goals. That would include a saving account for your emergency funds, one for your travel and vacations, one for car repairs and replacement, one for appliances and furniture repair and replacement, one for gift-giving, and one for all other unexpected but important purchases.

Look at your savings pie above and open a separate saving account for each piece of the pie. Some will argue that having multiple savings accounts will become too confusing and too overwhelming to track. The reality is that with a separate account for each savings category, you will likely have just one or two deposits a month into each account. That can actually simplify the process of tracking your money and determining whether you have made your monthly deposits yet or not.

4. Give Each Account a Name… the Scarier the Better

This step is critical but not even considered by many savers. If you go through the trouble of setting up multiple savings accounts at a second financial institution and make some initial deposits, you may get confused the next time you look at the accounts because you have forgotten what they are each for. Here is where naming your accounts becomes so critical.

Virtually all banks and credit unions will allow you to give your accounts unique names, rather than designating them solely by their account numbers.

To simplify matters, you can use the savings categories above as names for your accounts:

1. Emergencies, 2. Vehicle, 3. Household, 4. Gifts, 5. Travel and 6. Slush.

Such names should suffice for many savers. However, for those who are still tempted to raid their savings mid-month to pay for impulse spending, consider names that are a bit more intimidating for would-be raiders:

  • Instead of “Emergency,” consider something like, “Save from homelessness in case of job loss.”

  • Instead of “Vehicle,” give it the name of the vehicle you really want next.

  • Instead of “Household,” consider the name, “No More Wasted Food in Run Down Fridge.”

  • Instead of “Gifts,” name the account, “Without this Money, Santa Doesn’t Show Up This Year.”

  • For the travel account, give it the name of your desired vacation destination, such as, “Mickeyville or Bust.” You might even add a date, like “European River Cruise 2025.”

Do not worry about what others will think of the names. They are meant for you and to motivate you to leave the money in your savings while watching it grow.

5. Commit to Save from Every Income Source

One of the oddities of human nature is that it is easier to commit to doing something 100% of the time than it is to do it 99% of the time.

If you have committed to saving something each and every time you receive income, it becomes automatic and you do not need to argue with yourself about whether you can afford it. However, if you commit to saving 99% of the time, you will also dither and dicker with yourself, wondering if this is the 1% of the time you should not save. Your mental and emotional exhaustion will eventually overcome your willpower to save anything at all.

Consequently, consider saving a portion of every bit of income you receive, from wages and salaries to gifts to tax refunds to that $200 you forgot your brother-in-law owed you from three years ago until he just paid you this morning.

Save something from every dollar every time. After all, you do not think about how much oxygen you want to get from each breath. You just breathe one breath after another.

6. Automate Transfers and Deposits

As you approach your final steps, you should recognize that what you are building is not just a habit but a system for saving money automatically. This step fills a central requirement of the system.

You must automate your savings deposits to happen every month into each of the savings accounts. You have a few options:

First, you can have money directly deposited from your paycheck into your savings accounts. Many employers limit the number of direct deposits to two or three per month, so you might consider depositing all of your savings into a single savings account. Thereafter, you may move the specified amounts into their own accounts.

Second, you can set up automatic transfers into your savings accounts. Do not fear that just because your savings accounts are held at a bank or credit union separate from the checking account that you cannot set up automatic transfers. Instead of transfers between accounts, you can set up transfers using your bank’s or credit union’s online bill pay option. With your savings account and routing numbers and the address of the branch where your savings accounts are held, you can set up recurring monthly bill payments that will be deposited into your savings.

Timing is critical for either method. Set up the transfers or bill payments to happen just two or three days after your payday. This allows for variations of deposit dates when your payday falls on a weekend or a holiday. Do not delay too long after your payday, though. The longer your money sits in your checking account, the more likely you are to spend it impulsively.

7. Accelerate Your Savings Funds with PowerCash

Finally, if you feel your deposits are insufficient to make much of a difference in your savings, consider the only way to accelerate your savings: deposit more money each month into your savings.

Not possible, you think? Perhaps you feel you are already depositing as much as you can. Use our PowerCash calculator to help you find an additional $50 to $200 that you can deposit into your savings each month with minimal pain or discomfort to your normal spending.

PowerCash works like this: estimate how much you spend on groceries, dining out, entertainment, gift-giving, and other discretionary expenses during an average month. Then, take just 10% of that amount and transfer it to your savings as soon as payday comes. For a typical household spending $600 on groceries each month, this means it will have to adjust to $540. That is less than $600, but with a minimal amount of adjustments and discipline, it is very achievable.

About the Author

Client Credit Report Authorization

You hereby authorize and instruct Debt Reduction Services, Inc. (DRS, dba Money Fit by DRS) and/or its assigned agents to:
  • Obtain and review your credit report, and
  • Request verifications of your income and rental history, and any other information deemed necessary for improving your housing situation (for example, verifying your annual property tax obligations and homeowner’s insurance fees)
Your credit report will be obtained from a credit reporting agency chosen by DRS. You understand and agree that DRS intends to use the credit report evaluate your financial readiness to purchase or rent a home and/or to engage in post-purchase counseling activities and not to grant credit. You understand you may ask any questions pertaining to your credit report. However, while DRS will review the information with you, the company is not able to furnish you with a copy of your credit profile. You hereby authorize DRS to share your information from your credit report and any information that you provided (including any computations and assessments produced) with the entities listed below to help DRS determine your viable financial options.
  • Banks
  • Counseling Agencies
  • Debt Collectors
  • Landlords
  • Lenders
  • Mortgage Servicers
  • Property Management Companies
  • Public Housing Authorities
  • Social Service Agencies
Entities such as mortgage lenders and/or counseling agencies may contact your DRS counselor to evaluate the options for which you may be eligible. In connection with such evaluation, you authorize the credit reporting and/or financial agencies to release information and cooperate with your DRS counselor. No information will be discussed about you with entities not directly involved in your efforts to improve your housing situation. You hereby authorize the release of your information to program monitoring organizations of DRS, including but not limited to, Federal, State, and nonprofit partners for program review, monitoring, auditing, research, and/or oversight purposes. In addition, you authorize DRS to have your credit report pulled two additional times to conduct program evaluations. You also agree to keep DRS informed of any changes in address, telephone number, job status, marital status, or other conditions which may affect your eligibility for a program you have applied for or a counseling service that you are seeking. Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Client Privacy, Data Security, and Client Rights Policy

NOTE: This sheet is to inform new or returning clients about our services, records, fees, and limitations that may affect you as a consumer of our services. This form also discloses how we might release your information to other agencies and/or regulators. If you do not understand a statement, please ask a Debt Reduction Services (DRS) counselor for assistance.

Debt Reduction Services, Inc. (DRS) has put into place policies and procedures to protect the security and confidentiality of your nonpublic personal information. This notice explains our online information practices and how we use and maintain your information to conduct our financial education and credit counseling sessions and to fulfill information and question requests. This privacy policy complies with federal laws and regulations.

To provide our financial education and credit counseling services, we collect nonpublic personal information about you as follows: 1) Information we receive from you, 2) Information about your transactions with us or others, and 3) Information we receive from your creditors or a consumer reporting agency. We do not share this information with outside parties.

We use non-identifying and aggregate information to better design our website and services, but we do not disclose anything that could be used to identify you as an individual.

You hereby authorize DRS, when necessary, to share your nonpublic personal, financial, credit, and any information that you provided (including any computations and assessments produced) with the following entities in order to help DRS provide you with appropriate counseling or guide you to appropriate services: third parties such as government agencies, your lender(s), your creditor(s), and nonprofit housing-related and other financial agencies as permitted by law, including the U.S. Department of Housing and Urban Development.

To prevent unauthorized access, maintain data accuracy, and ensure the correct use of information, we have put in place appropriate physical, electronic, and managerial procedures to safeguard and secure the information we collect online. We limit access to your nonpublic personal information to our employees, contractors and agents who need such access to provide products or services to you or for other legitimate business purposes.

Debt Reduction Services, Inc. complies with the privacy requirements set forth in the HUD housing counseling agency handbook 7610.1 (05/2010), including the sections 2-2 Mc, 3-1 H(2), 3-3, 5-3 F, and Attachment A.5. At all times, we will comply with all additional laws and regulations to which we are subject regarding the collection, use, and disclosure of individually identifiable information.

  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

Please refer to DebtReductionServices.org for details of our services.

  1. Limits: Our services are limited to our normal weekday business hours. We do not provide individual counseling or education services after hours or on weekends, although our education courses are available 24/7.
  2. Fees: We do not charge fees for our financial management counseling and education. However, if you use them, you may have to pay for our Debt Management Program, Student Loan Counseling, Bankruptcy Certificate Services or certain financial education courses (homebuyer education, rental topics, fair housing, predatory lending, and post-purchase-non-delinquency including home maintenance and/or financial management for homeowners).
  3. Records: We maintain records of the services you receive, including notes about your progress or other relevant information to your work with us. You have the right to access and view your records by making a request to your counselor.
  4. Confidentiality: We respect your privacy and offer our services in confidence with the understanding that we may share such information with auditors and government regulators. Certain laws or situations may also lead to disclosing confidential issues, such as those involving potential child abuse or neglect, threats to harm self or others, or court subpoenas.
  5. Refusal of Services: You have the right to refuse services without any penalty or loss.
  6. Disclosure of Policies and Practices: You will be provided our agency disclosure statement.
  7. Sharing of Information: Sometimes we will need to contact other agencies or we may need to share your information, including your records, with other agencies or with regulators. We will do this only if you sign this form that gives us permission except for limited reasons; please see # 5 above for examples of such situations.
  8. Other: You have the right to be treated with respect by our staff, and we expect the same from you in return. We encourage you to always ask questions if something is not clear. We also encouraged you to express your thoughts and advocate throughout our services.

You acknowledge that this authorization will remain in effect for the duration of time that DRS serves as your housing counselor or financial education provider. You also acknowledge that should you wish to terminate this authorization, you will notify DRS in writing.

Disclosure  Statement

NOTE: If you have an impairment, disability, language barrier, or otherwise require an alternative means of completing this form or accessing information about our counseling services, please communicate with your DRS representative about arranging alternative accommodations.

Program Disclosure Form

Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
  • A Debt Management Program (DMP) for consumers struggling to pay their credit cards, collections, medical debts, personal loans, old utility bills, and past-due cell phone accounts;
  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

No Client Obligation

The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).