20 Ways to Save Money on Essentials
Create a Budget
The first step to saving money on essentials is to understand what you can afford and what’s necessary for you to purchase. Start by adding up all your sources of income, and then subtract fixed monthly bills, such as rent or a mortgage payment. Divide what’s leftover into essential categories, like groceries and gas. Before you go to the grocery store, look up prices and make a list of items that fit into your budget. Stick to your list, and you’ll avoid racking up unnecessary charges.Keep an Emergency Fund
If an expense catches you off guard and you don’t have savings, you might need to borrow money. That’s a common scenario for many Americans — 36 percent of adults wouldn’t be able to cover a $400 emergency bill without borrowing money or selling belongings, according to the Federal Reserve. But borrowing money can be costly, especially if you have bad credit. To avoid interest charges, keep an emergency fund stocked with at least six months worth of expenses. If that goal seems out of reach, aim to have at least $2,467 saved. That’s the amount economists say is necessary to reduce your risk of falling into financial hardship.Avoid High-Interest Debt
If you do end up needing to borrow money, you should compare your options carefully. If you have excellent credit, a 0% introductory APR credit card, personal loan, or home equity loan will likely be your best bet for a low rate. But if you can’t qualify for those products, you should avoid certain bad credit loans, like payday loans and title loans. Payday loans have an average APR of 391 percent, while title loans have APRs around 300 percent. It’s also not uncommon for title loan borrowers to have their vehicles seized due to default. If you need a no credit check loan, consider an installment loan with a longer term and a lower interest rate. Some installment lenders report your on-time payments to the three major consumer credit bureaus, so an installment loan can help you build credit and qualify for lower interest rates in the future. Still, ensure you have a plan to pay back what you borrow. You’ll need to reevaluate your budget to make room for monthly payments.Pay Down Debt Faster
Paying off a loan early can help you save money on interest in the long run. If you can afford to make more than the minimum payment on one of your debts, apply the debt avalanche strategy. Make the required payments on all loans, and then devote any extra cash you have towards the loan with the highest interest rate. Once that loan is paid off, you can move onto the next. Another way you can repay your debts faster is by consolidating your debts with a personal loan or taking advantage of a balance transfer offer for your credit card debt. However, you’ll only qualify for these options if you have at least fair credit. If you took out high-interest loans and your credit has improved since then, you may be able to get a lower interest rate on a personal loan and use the money to pay off your debts.Refinance Your Home Loan
Current mortgage interest rates are much lower than they have been in years past, so it’s likely you could save money on your monthly payment by refinancing your home loan. However, pay attention to closing costs and other fees, and do the math to make sure you’ll be saving money over the life of your loan.Shop Around for Insurance
Since insurance rates are based on several individual factors, it’s important to compare quotes to find the best rates. Most insurance companies offer online quotes, or you can use an insurance comparison tool to pull several quotes at once. You might also be able to save money on car insurance by taking a driving course or bundling your policies. And some insurance companies offer savings based on your driving habits or mileage.Buy in Bulk
Buying bulk packaged products or shopping at wholesale stores can save you a significant chunk of change. Even if you don’t have a large family, you can store items out of sight and keep perishables in the freezer for use later on.Use Cashback Apps
Several apps provide you with rewards or cash for shopping at certain stores and buying certain products. Some of these apps require you to select coupons before you shop or scan your receipt after you shop, while others allow you to spend with a linked card or click a link before you shop online to earn rewards automatically. There are cashback apps you can use for gas, groceries, clothing, dining, travel, and more. Values can range from one percent back up to 20 or 30 percent back for some travel deals.Use Rewards Credit Cards
Rewards credit cards typically save you anywhere from one percent to five percent on your purchases. Some retail cards offer the reward as an automatic discount, but most credit cards offer the reward in the form of cash back or points towards gift cards or travel purchases. Either way, you’ll save money if you use a rewards card for every purchase. Some rewards cards are designed for specific categories, while others have a flat cashback rate on every purchase. If you can qualify, it’s a good idea to have a few credit cards that you can strategically use for different purposes. You can also take advantage of welcome bonuses to get a little extra money in your pocket.Buy Second Hand
Furniture, cookware, clothing, electronics, and other items can be purchased at thrift stores or online second hand retailers at a significant discount. You can also use online resale stores to sell items you no longer need and put the money towards essentials.Buy Reusables
Reusable items may be more expensive than disposables at first, but they’ll save you money in the long run. Opt for washable rags over paper towels, silicone bags over disposable plastic sandwich bags, and dryer balls instead of dryer sheets. Not only will these items save you money and save you a trip to the store, they’re also more environmentally friendly.Pool Child Care Costs
Paying for each individual child’s daycare can be costly — the average cost was $340 per week for a childcare center in 2020. Hiring a private nanny is even more expensive. But if you have multiple children or can pool the costs with a friend and neighbor, you may be able to save money on child care by hiring someone to come to your home.Take Advantage of Major Sales
You shouldn’t go on a shopping spree just because it’s Black Friday, but you can plan large purchases around major sales. For example, mattresses tend to be cheaper around Memorial Day and Labor Day, and televisions go on sale during Black Friday and Cyber Monday. You can also buy clothing, home goods, and holiday supplies during the off-season to save money.Cancel Your TV Package
Most people have multiple streaming services and don’t need to be paying for cable or satellite TV service. If you haven’t yet cut the cord, consider cancelling your TV package and opting for standalone, high-speed internet instead. Then, decide on a streaming service that’s most important to you.Use Your Local Library
Local libraries don’t just allow you to borrow books. Most libraries also work with a streaming service that provides a limited number of free movies and tv shows or have apps you can use to download ebooks or audiobooks. Your local library is also a great resource for finding other discounted entertainment, such as free days at museums in the area and public, kid-friendly events.Cancel Your Gym Membership
While taking care of your health is important, there are plenty of free fitness activities you can do outside of the gym if you’re strapped for cash. A pair of hand weights or resistance bands can go a long way in helping you build muscle at home, and there are plenty of free videos you can complete with no equipment other than a yoga mat. You can also elect to run or bike outdoors. If you still feel you need equipment to get good results, look into community recreation centers, which often offer cheaper rates.Use Coupons and Rebates
Look for manufacturer coupons and rebates before you visit the store and install a browser extension to help you find savings when you shop online. Coupons can also significantly reduce the cost of prescription medication, whether or not you have insurance. Before you go to the pharmacy, use a price comparison site to find the best offer on the medication you need.Invest in Tax-Deferred Accounts
Putting your savings into a tax-deferred account will reduce your taxable income so you can save money come tax time. You won’t be required to pay taxes on the income you deposit into these accounts, nor will you pay taxes on the interest earned, until you take distributions. You have several options for tax-deferred accounts:- A traditional 401(k), 403(b), or 457 plan: These are the most popular employer-sponsored retirement accounts. Some employers may even match the money you contribute to the account, which can help you grow your net worth faster. Consider enrolling in automatic contributions so you save before you spend.
- A traditional IRA: If you don’t have an employer-sponsored retirement plan, you can open an Individual Retirement Account on your own. You can contribute up to $6,000 each year (or $7,000 if you’re age 50 or older).
- SEP IRA: If you’re a business owner or sole proprietor, you can contribute up to 25% of your income or $58,000 to a SEP IRA, whichever is less.
- FSA or HSA: If you contribute to a Flexible Spending Account or Health Savings Account with pre-tax dollars, you can save money on your tax bill. You’ll be able to use the money for eligible health expenses.