Struggling to save? Here’s how to get back on track

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Everyone should save, but it’s something that many people struggle with. According to a Bankrate survey, 57% of American adults aren’t comfortable with the amount of emergency savings they have. Around one in five have no emergency savings at all.

Regardless of where you are with your savings or what your goals are, there’s still time to catch up. Here’s how to get back on track with your savings.

Put your emergency fund first

When it comes to building savings, one of the top priorities is having an adequate emergency fund. Life is unpredictable, and unexpected expenses, like medical bills or car repairs, can arise anytime.

An emergency fund acts as a safety net to handle these unforeseen circumstances. That way, you don't have to use credit cards or other high-interest debt to cover your bills.

Start by assessing your savings and determine how much you want to set aside. Most experts recommend saving between 3-12 months of necessary expenses for emergency savings. The amount you should save depends on your finances and risk tolerance.

“For example, if you are relatively healthy and finding a job in your industry is easy, a three-month emergency fund may suffice,” says Avanti Shetye, a charted financial analyst and personal financial educator. “If you are risk-averse, you may want to consider a more sizable emergency fund.”

Start by calculating your monthly expenses, including rent or mortgage payments, utilities, groceries, and other essential bills. Multiply this figure by the number of months you aim to cover, typically between three and six months. This will give you a rough estimate of the total amount you should save.

Building up your emergency fund takes time, so don't feel discouraged if you don't reach your goal immediately. Start by setting a smaller, more achievable goal — like saving $500 — and make a plan to contribute over time.

Even having a smaller emergency fund is better than having no emergency fund at all. The important thing is to prioritize saving for emergencies and work towards building up your financial safety net.

Now that you have a plan, adjust your spending so you can set aside some cash each month and add it to your emergency fund. You can try to increase your income or cut expenses to help you save more quickly. Options include:

• Look for ways to boost your skills to increase your chances of getting a promotion or a higher-paying job. This can involve taking courses, attending workshops, or pursuing additional certifications.
• Explore side hustles or freelance work to earn extra income outside your primary job.
• Consider having a conversation with your manager about a raise or promotion.
• Look for subscriptions you no longer use, review your entertainment and dining expenses, and find ways to reduce spending.
• Small changes, like making coffee at home or packing your lunch, can add up to substantial savings over time.

While cutting $30 from your monthly budget won’t make you a millionaire, it can help build your emergency fund faster. Even small amounts can help. Once that emergency fund is built, you can focus on other savings goals.

Catch up on other savings goals

“Once you have achieved your target emergency fund goal, the next step is to continue building wealth,” says Shetye.

That means setting and working towards your additional savings goals. Start by clearly defining what these goals are. Potential goals include:

• Buying a home
• Buying a car
• Taking a vacation
• Funding your retirement
• Helping to pay for your child’s college

Determine the amount of money you need to save and the timeframe for reaching your goal. If you have multiple savings goals, prioritize them based on their importance and urgency. This will help you allocate your resources effectively and focus on the most important goal first.

Big goals can be overwhelming, so break them down into smaller, manageable milestones. Divide your goal into monthly or quarterly targets that are easier to achieve. This way, you can track your progress and stay motivated.

Building a budget isn’t most people’s idea of fun, but it’s very important if you want to be able to save money. Analyze your expenses and identify areas where you can cut back or reduce spending. Allocate a specific amount towards your monthly savings goal and stick to it.

Set up automatic transfers from your paycheck to a separate savings account dedicated to your goal. This way, you won't be tempted to spend the money, and your savings will grow consistently.

Other strategies to save more

Paying off debt and building a budget is the key to saving money. But there are other things you can do to make saving easier.

Whenever you receive a raise or a bonus, increase your savings. Automate these increases so that your income goes directly into your savings account. This way, you can avoid lifestyle inflation and save more over time.

If you have outstanding debts, focus on paying off high-interest debts, such as credit cards. Consider consolidating debt to get better interest rates and reduce your monthly payments.

If you’re saving for retirement, take advantage of tax-advantaged accounts like 401(k)s and independent retirement accounts (IRA). Contribute as much as you can, especially if your employer offers matching contributions. Aim to maximize your contributions, or at least contribute enough to take full advantage of any employer matches.

As you build your savings and invest, consider seeking advice from a financial advisor. They can provide advice tailored to your needs and help you make informed decisions.

Where to save based on your goals

Where you save your money depends on your specific goals — and how long you have to save.

• Short-term goals (1-3 years): For short-term goals, such as saving for a vacation or a car, it's generally advisable to prioritize safety and accessibility. Consider saving in a high-yield savings account or a money market account. These accounts offer competitive interest rates while keeping your money easily accessible.
• Medium-term goals (3-10 years): If you have medium-term goals, like buying a home or funding your child's education, consider a mix of savings and investments. While safety and accessibility are still important, you can explore options like certificates of deposit (CDs) or short-term bond funds. These investments offer slightly higher returns than traditional savings accounts but still maintain stability.
• Long-term goals (10+ years): For long-term goals, such as retirement or building wealth, consider growth potential and inflation protection. You can invest in a diversified portfolio of stocks, bonds, and other assets to generate higher returns over time. Retirement accounts like 401(k)s and IRAs are excellent options for long-term savings due to their tax advantages.
• Emergency fund: Your emergency fund should be easily accessible, which makes a high-yield savings account or a money market account a solid choice. The focus is on preserving the initial deposit and having quick access to funds in case of an unexpected expense.

The bottom line

There’s no question that saving money can be difficult. Even if you don’t have much money to spare, trying to save, even a small amount, is a good idea. Some savings are better than no savings, and building good financial habits can help put you on the path to future success. 

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