How to Start Saving Money in 2018

Almost 6 in 10 Americans responding to a Gallup poll said they like saving money more than they like spending money. While we clearly like to think of ourselves as savers, a personal savings rate of just 3.2% in October 2017 suggests otherwise.

Most Americans are woefully behind in retirement savings and have little money set aside for emergencies. Whether you're one of those Americans with $0 in the bank, or you have a little nest egg, you probably could stand to save a little more.

This five-step guide will show you how to start saving money in 2018. Just follow these steps to end the year with a savings rate to be proud of.

1. Decide what you need to save for

Sixty-four percent of Americans are concerned about not having enough money for retirement. If you aren't saving for retirement already, you're setting yourself up for financial disaster. You'll either have to save a fortune to make up for starting late, or could be left without a nest egg and forced to struggle to live on Social Security.

While saving for retirement is vitally important, it's not the only goal to have. If you don't have an emergency fund, funding one should be a priority. In one 2015 Pew Survey, 60% of Americans indicated they'd had a financial shock -- with a median cost of $2,000 -- during the past year. More than half hadn't recovered financially six months after the incident.

You also may want to save for a house down payment, college education, or even a vacation fund. Anything you want that you won't be able to pay cash for should go on your list of savings goals.

2. Open the right accounts

When you know what you're saving for, you can open up the right accounts to put your money into. For retirement savers, this means an account that offers a tax break.

Investing in a 401(k) is usually the simplest approach if you have access to one. However, if your 401(k) doesn't offer a good selection of investments, or if the fees are high, it makes sense to invest only enough to receive an employer match and then make IRA contributions. Companies like Ally Invest make it easy to open an IRA online with no minimum balance.

As for your other savings goals, any cash you may need within two years -- including money in your emergency fund -- should be invested in a basic savings account. There are plenty of high-yield savings accounts you can open online. Moving money out of checking into a separate savings account makes it much less likely you'll spend the money.

3. Set a budget that prioritizes savings

Now the hard part: coming up with money to transfer into savings. Your goal should be to save at least 20% of your income, with at least 15% for retirement. If you made the median income of $52,700, you should be saving $10,540. To save anywhere close to this much, you need to avoid wasteful spending -- which means making a budget.

To get started, track your spending for 30 days to ensure you're basing your budget on realistic numbers. If you're spending $1,000 monthly on groceries for your family of four and you budget $200, you're not budgeting -- you're wishcasting and writing down a fantasy instead of a plan.

When you know what you're spending -- and where you're overspending -- you can make a budget that works. When you do, include saving as a non-optional expense, along with the mortgage or rent. After prioritizing required expenditures, allocate the rest of your dollars into spending categories, and give every dollar a job.

Don't forget to build in money for unexpected expenses and irregular expenses like birthdays and holidays.

4. Look for ways to slash your spending

If your budget reveals there's a big mismatch between expenditures -- including savings -- and income, it's time to make big lifestyle changes. This could mean getting a roommate, moving to a lower cost-of-living area, taking on a side gig, or selling your car and getting a cheaper vehicle.

Even if your budget shows you have some cash left over to save, it's worth going through your expenditures to look for ways to save a little bit more. A few options to consider:

  • Reduce the costs of cable: Great streaming services, including Sling TV and Hulu, provide access to local TV, sports, and more -- for a fraction of the cost of cable.
  • Take a close look at your cellphone plan: Are you paying for more data than you use, or texting services you no longer need?
  • Make your home more energy efficient: Turning your thermostat up or down a degree, changing to LED bulbs, and unplugging devices that use phantom power are simple, effective ways to save money without big lifestyle changes.
  • Change your grocery-shopping process: American families throw out food worth around $1,365 to $2,275 every year. If you invested $1,365 every year in a 401(k) instead of using it to buy food you toss, you'd have $154,631 dollars in 30 years, assuming an 8% return. Stop wasting food by planning meals, using a shopping list, and scheduling days to eat leftovers.
  • Cut your credit card costs: If you're in debt, consider taking a 0% interest balance transfer, or a personal loan to make payback cheaper. If you have a credit card with an annual fee, call your creditor and ask to have it waived. This worked for 82% of cardholders whose fees were either waived or reduced, according to a survey by

There are dozens of other ways you're probably wasting money -- just take a critical look at your spending. Even saving $1,000 more per year in a 401(k) -- just $83 per month -- could turn into $113,283 in 30 years.

5. Automate the process

Once you've got your budget in place and know how much you want to save for your savings goals, make the transfer of money automatic. Ask human resources at work for paperwork to set your 401(k) contributions to the desired amount, and set up automated transfers from your paycheck to your savings account and IRA on payday.

If you have to make the decision every month to transfer money, you'll constantly be forced to avoid giving into temptation. If you set up an automated system, you only need to do the right thing once.

Make 2018 your year to stop worrying about money

Eight in 10 American families are living paycheck to paycheck, and 60% can't cover an unexpected $500 expense. Living with no savings is really stressful. If you follow these steps and start building a nest egg, 2018 can become the year when you don't have to worry about money any more.

The $16,122 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

The Motley Fool has a disclosure policy.