# What is the most effective saving money method? [closed]

Sometimes people realize that their salary suddenly disappears before the end of the month. What are some tips on how can I save my money, or how can I increase my income besides my full-time job?

## closed as too broad by mhoran_psprep, Nick R, Brythan, Victor, Chris W. ReaJan 17 '17 at 1:27

Please edit the question to limit it to a specific problem with enough detail to identify an adequate answer. Avoid asking multiple distinct questions at once. See the How to Ask page for help clarifying this question. If this question can be reworded to fit the rules in the help center, please edit the question.

• Simplest strategy: Don't buy stuff you cannot afford. – Mason Wheeler Jan 16 '17 at 18:59
• money.stackexchange.com/help/dont-ask "Your questions should be reasonably scoped. If you can imagine an entire book that answers your question, you’re asking too much." – user22731 Jan 16 '17 at 21:12
• Strategies and processes only work if you actually use them, so the most effective method for you to use to save money is the method that you will actually use. And that's up to each person, so this can't really be answered. – barbecue Jan 16 '17 at 21:15
• Saving money is like losing weight. Any reasonable method will work as long as you stick with it. Over the next couple years try to add a new good money habit every 6 months. You will find that some work well for you, others not as much, and that those buckets might be a little different for you than the next person. Don't use finding an "optimal" solution as an excuse to put off getting started or to bounce around from silver bullet to silver bullet. – Jared Smith Jan 16 '17 at 23:15
• I don't want to add an answer when all of the "budgeting" answers are the best, but I did want to mention the other half of saving. Budgeting will help you be aware of where your money goes, but you should also be aware of what you are saving for. Understanding the kinds of purchases you are saving for is almost as important as understanding how to go about saving it in the first place. – Cort Ammon Jan 16 '17 at 23:50

In a word: budgeting.

In order to have money left over at the end of the month, you need to be intentional about how you spend it. That is all a budget is: a plan for spending your money.

Few people have the discipline and abundance of income necessary to just wing it and not overspend. By making a plan at home ahead of time, you can decide how much you will spend on food, entertainment, etc, and ensure you have enough money left over for things like rent/mortgage and utility bills, and still have enough for longer-term savings goals like a car purchase or retirement.

If you don't have a plan, it's simply not reasonable to expect yourself to know if you have enough money for a Venti cup as you drive past the Starbucks. A good plan will allow you to spend on things that are important to you while ensuring that you have enough to meet your obligations and long-term goals.

Another thing a budget will do for you is highlight where your problem is. If your problem is that you are spending too much money on luxuries, the budget will show you that. It might also reveal to you that your rent is too high, or your energy consumption is too great. On the other hand, you might realize after budgeting that your spending is reasonable, but your income is too low. In that case, you should focus on spending more of your time working or looking for a better paying job.

• +1 for budgeting! My wife and I used to bicker often about finances until we established a budget. Then it was simply a matter of checking our budget to see if we had the money to go out to a nice dinner or if we should just stay at home. Of course, you need to budget for some savings, as well so that you are sure to put some money aside each month. – dub stylee Jan 16 '17 at 18:55
• On the topic of budgeting, Mint is a really handy (free) app/website that connects to your bank account to scan the things bought via credit card. It then automatically categorizes them based on the merchant. eg. $12 at McDonalds would be added to "fast food".$25 at a grocery store would fall under groceries, etc. Its also super customizable and you can modify the categories and set budgets and savings goals. Even just using it for a month would really illustrate where most of your spending occurs. – BunnyKnitter Jan 16 '17 at 21:45
• The right budgeting software does make the job easier. See this post (and other posts linked to that question) for my thoughts on the different types of software available. – Ben Miller Jan 16 '17 at 22:21

A technique that is working pretty well for me: Hide the money from myself:

I have two bank accounts at different banks. Let's call them A and B. I asked my employer to send my salary into account A. Furthermore I have configured an automatic transfer of money from account A to account B on the first of each month.

I only use account B for all my expenses (rent, credit card, food, etc) and I check its statement quite often. Since the monthly transfer is only 80% of my salary I save money each month in account A. I don't have a credit card attached to the savings account and I almost never look at its statement.

Since that money is out of sight, I do not think much about it and I do not think that I could spend it. I know it is a cheap trick, but it works pretty well for me.

Entire books have been written on how to get to the end of the month before you get to the end of the money. It's a very broad problem. But in your case, let me point out that your salary never "suddenly disappears" (unless you're paid in cash and it blew away or was stolen while you were sleeping.) You spent it.

For a month, monitor your spending. One approach is to write everything down in a small notebook. Come up with categories like "Rent", "Food", "Transportation" and look at the totals. Over time, you can estimate what you spend in a normal week or month on these things. When you spend much more, you can ask yourself why. It might be because you just splurged money you didn't have on something you didn't need. It might be because something broke, and you hadn't been saving a small reserve month after month to pay for those repairs when they would be needed. It might be because some bills only come once a year or every 6 months, and you hadn't been saving a small reserve to pay that bill when it came in.

Once you understand where your money is going and why it sometimes runs out, you can work out what to do about that. It might involve spending less. But that's not the first step. The first step is not to be surprised by "sudden disappearances" that are anything but.

• Yes get a wallet with no holes in it. Good one. – Victor Jan 17 '17 at 0:38

A trick that works for some folks: "Pay yourself first." Have part of your paycheck put directly into an account that you promise yourself you won't touch except for some specific purpose (eg retirement). If that money is gone before it gets to your pocket, it's much less likely to be spent.

US-specific: Note that if your employer offers a 401k program with matching funds, and you aren't taking advantage of that, you are leaving free money on the table. That does put an additional barrier between you and the money until you retire, too. (In other countries, look for other possible matching fundsand/or tax-advantaged savings programs; for that matter there are some other possibilities in the US, from education savings plans to discounted stock purchase that you could sell immediately for a profit. I probably should be signed up for that last...)

• +1, someone must not like the pay yourself first option, voting them down. – Victor Jan 17 '17 at 0:41
• 401k and matching is very US-specific, whereas the question has no indication that it is about the US and OP's profile says they are in Hungary. Still, +1 for pay yourself first. That also works nicely for creating an artificial scarcity, which for some people is a good substitute for a formal budget. I have tried more formal budgeting methods several times but it just doesn't work very well for me; however, setting aside a significant fraction of my take-home pay every month and being diligent about not withdrawing from savings works very well for me. People are different. // cc @Victor – a CVn Jan 17 '17 at 9:57
• Agreed, 401k is US-specific. It's also something which folks overlook entirely too often, and having done so myself early on I would rather that others not make the same mistake. – keshlam Jan 17 '17 at 12:49
• While 401k my be US specific, similar programs also exist in the UK and other countries. – TomTom Nov 4 '17 at 20:05

First pay yourself. When you get salary, send some parts of that (for example 10%) to your saving account.

Step by step you'll save nice money ;)

"Envelope budgeting" is pretty simple. It's easy enough that you can teach it to children, and flexible enough you can use it as an adult.

The general idea is that you take your cash money (no bank accounts involved in the simple version), and stick it in envelopes marked for what it's supposed to be for. So for example, you get paid, you cash your paycheck and you put $100 in an envelope marked food. Now when you go out to eat, you go get the money out of your food envelope, and spend it on food. When your food envelope is empty you go hungry. In the simple version you have envelopes for things like "food", "candy", "toys", "games". etc. (simple version is usually taught to kids.) So you want a$60 game, and your game envelope only has $5. Well you can't get the game. You need to add more money to the game envelope. You need to eat so you have to put money there, but maybe you don't need toys. So you can divert some incoming money from toys to games. Sure it's still going to take a while to get to$60, but now with some simple kid friendly math you can see how long, and more importantly, you can make decisions on what is more important. Candy or Toys?

In the adult version things are much the same. We just have more envelopes. We have Rent, Car Payment, Gas, Food, Electric.

Then we need some envelopes for "savings" and "retirement". etc.

Now when you get your Paycheck you prioritize your money and you stuff it in the envelopes. How much you put in each envelope is easy. Enough to pay for that thing. Savings and Retirement meet different goals. You want $6,000 savings. Well just like that game in the kid version, you're not going to get there all at once. But you can see and make decisions on what is most important. You want$1,000,000 to retire on. Sure, but that envelope is going to take a while to fill up.

At it's core, the important parts are that:

• You only count money you have in hand. Not future money, or expected money of any kind.
• You only spend money from the correct envelope. Your rent envelope doesn't have enough. Then you go homeless. Thankfully your car envelope is good, so at least you can live in your car.
• You decide whats more important, WHEN PLACING MONEY IN THE ENVELOPE. The rent envelope is gonna be a bit lite, divert money from the savings envelope.
• You do not use money from one envelope to cover another. Only when you're placing money in envelopes can you decide that something is more important.

Let me explain the rent example, as it's the oddest.

You get $500 a week, and you need$1000 for rent.

• Week 1 - $500 in Rent envelope • Week 2 -$500 in Rent envelope <- You paid your rent next month
• Week 3 - $500 in other envelopes • Week 4 -$500 in other envelopes

This means you're spending from your envelopes. During week 1 and 2 you're spending last months week 3 and 4.

You DO NOT do:

• Week 1 - $250 in Rent envelope • Week 2 -$250 in Rent envelope
• Week 3 - $250 in Rent envelope • Week 4 -$250 in Rent envelope <- next months rent paid here.

This is important because if you lose your paycheck in week 3 or 4 you are homeless.

Finally, in general, you stick stuff in savings envelope. And you want to reach a savings envelope goal of 6 months of your average pay checks. Once you reach this goal, then you're in good shape, and a job loss doesn't mean you're homeless. You can always just pull from savings.

It's important when using these envelopes to understand that you only make the decision of what is more important when you're sticking money in, not when you're taking money out, and that you only work with the money you have right now today (in your hand). Now what you think you're going to get tomorrow.

Money in the bank can be split into virtual envelopes. Money in savings can be in any vehicle, but generally you want a short term emergency envelope (savings account) and a long term envelope (CDs for example).

Take a look at YNAB.com they used to provide free lessons in using their software to manage an envelope system.

And the I know it's going to get comments section.

The rent v.s. homeless is a real example. You should not take money from, say, the food envelope, to cover the rent. This may seem silly, but if you're doing that then you made poor decisions when deciding where the money goes. Use the emergency fund envelope to cover the rent, and next time put less money into food. It's this "rule" that makes envelope budgeting work well. You may be homeless, but you can eat, drive to work, put gas in your car, and pay your bills. Taking money from different envelopes usually results in a spiral, where you attempt to do the sensible thing, but in the end, you're worse off.

Migrating to envelope budgeting (in the strict sense) is hard. The best way I have taught people to do it is to only envelope budget an increasing part of their income until their envelopes are full enough for one month. That means that you might only envelope budget 10% of your income at first. But unless your situation is such that you can cover all your bills with one paycheck, it's not going to be possible to transition without breaking the "don't take money from other envelope" rules.

• "This is important because if you loose your paycheck in week 3 or 4 your homeless." But the first variant magically saves you if you lose your income in week 2? Somehow I fail to see how that works. 100% rigid budgeting almost never works long term. Losing your only income stream is certainly one scenario where an emergency fund is useful. You briefly touched on that with the "savings" envelope, but if losing your job and needing to pay the rent (or mortgage, or whatever other expense keeps a roof over your head) is not a good time to use the emergency fund, then I don't know what might be. – a CVn Jan 17 '17 at 9:55
• Sorry, that might not have been clear. That's a perfect time to use the ER fund. But it's not a time to use the "Food" fund. Homeless and full is better then Homeless and hungry. – coteyr Jan 17 '17 at 10:15
• If you really get into that situation, your fastest path back to normal is to keep paying your bills on time. You think it's gonna be hard to get back on your feet after you can't pay the rent and get kicked out. Try it when the electric company, the water works, the oil/gas company, the phone company, and the car insurance company come at you for you bill plus late fees, plus interest, and in some cases legal fees, and refuse you service till you pay your back bills. Better to pay your bills and crash on a fiends couch. – coteyr Jan 17 '17 at 10:18
• At least then when you do get back to work you only have to worry about deposits and not back bills. – coteyr Jan 17 '17 at 10:18