The average American household pulls in about $75,000 in pre-tax income, according to the Bureau of Labor Statistics. But the average American also spends about 90 percent of that income, leaving little wiggle room for unexpected expenses or achieving goals like buying a home, traveling and planning for retirement.
The solution, of course, is to spend less and save more, but that can feel overwhelming. Instead, it’s helpful to break down attempts to change the spend-save cycle by creating bite-size, one-week goals. Here’s an eight-week plan to help you uncover money, stop mindless spending and watch your savings account grow.
Week 1: Check your credit score... really
Good news: Many people (57 percent) do it — but that still leaves more than 40 percent who don’t. Experts recommend a yearly check from one or all of the three credit bureaus (Equifax, Experian, TransUnion). Bonus: It’s free. (If you check your credit score, it doesn’t hurt your number; if a lender or credit card issuer does because you’ve applied for a new card, it might.)
How you’ll save: Credit score checks can turn up mistakes, including bills that you’ve already paid. In addition, if you can improve your credit score and you’re planning a big purchase this year, you can save by snagging a better interest rate. Or if you’re trying to lower credit card debt, a higher credit score may get you a lower credit card rate.
Week 2: Automate a regular savings total
Save $5, or $50 — whatever you can afford on whatever schedule you like. To reinforce your savings habit, consider scheduling a specific day to put money aside. For example, on paydays, or every other Friday.
How you’ll save: With automation, a savings account grows without any effort at all on your part. But where savings really start to shine is when you see the growth, thanks to compound interest. And the earlier you start these habits, the more time your money has to grow before you need it.
Week 3: Track one spending category for one week
If you’ve never set up a budget, then you might only have a rough idea of how much you’re spending on necessities such as utilities and extras such as clothing. But establishing a budget can be overwhelming. Instead, do you really know how much you’re spending on groceries or clothes or gas?
How you’ll save: Count up your clothes budget. If you’re like many Americans, you spend about $150 each month. Trim it by just about $20 and add that to your emergency fund. (Experts recommend about six months of salary stashed away for unexpected expenses.)
Week 4: Spend 60 minutes on tax time
Alleviate part of the mad January scramble: Gather and organize receipts and figure out the deductions you have so far. Think about possible charitable deductions and tax-advantaged contributions.
How you’ll save: If you avoid overreporting charitable contributions, you’ll save a headache and potential fines if the IRS finds you in violation of established rules. And if you know how to deduct contributions, including obtaining written statements, then you’ll make sure to have the documentation you need in order to reap the most tax-time rewards.
Week 5: Binge on canceling
Magazines, cable service: Pick one thing and live without it. For example, be ruthless about examining your cable-provider bill. How many stations do you really watch? Could you live with a smaller package?
How you’ll save: The average satellite cable bill is about $100. Trim it by just one-fifth and you’ll save several hundred dollars a year. Remember: Turn in any boxes you don’t use, too.
Week 6: Give yourself a challenge
One we like: the 30-day nonessentials rule. Put an item back on the shelf and only buy it a month later if you decide you still truly want it.
How you’ll save: Money you don’t spend is money you can decide to do something else with. To make the results of the challenge tangible, record the dollar amount of the thing you wanted to buy and transfer that total into your savings account.
Week 7: Program your thermostat
Many of the best things for your finances are also the most adultlike— oil changes for your vehicle and thermostat programming. Maintenance pays off.
How you’ll save: Set up times that boost your home temps in the summer and lower them in the winter when you’re gone, and you can knock about 10 percent off your utility bill.
Week 8: Eat out one less time this week
The average American spends over $3,000 a year dining out — about $58 every week. Try your hand at meal planning and prep, which might save time and last-minute scrambles.
How you’ll save: Trim just one week a month and pop it into a savings account and you’ll have almost $700 — enough for a pretty nice airline ticket.
