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How to Save Money Fast: 7 Scientific Money Saving Tips

How to Save Money According to Science
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Common money-saving tips like bringing your lunch to work, brewing your own coffee and buying generic brands can help you cut your daily spending, but they aren’t powerful enough to make a big difference in your long-term financial picture.

In this article, you’ll learn seven money-saving strategies that are backed by data and rooted in human behavior and psychology. Research has proven these strategies effective at helping people make progress towards their financial goals.

Tip #1: Focus on the Big Three (Housing, Transportation and Education)

Did you know: When TD Ameritrade did a study to figure out how some households are able to save 20% or more of their income, they found that the single biggest factor was how much they spend on housing. These so-called “Super Savers” spend just 14% of their income on housing, while the average household spends 23%.

Not only are houses, cars and education the largest line items in your budget, they’re also often financed with debt. While using debt isn’t bad in and of itself, there are two key debt-related issues to be aware of:

  1. We’re bad at predicting whether we can afford something. In what’s known as optimism bias, people tend to overestimate the likelihood of positive events (such as a future salary increase) while underestimating the likelihood of negative events (like a car breaking down). 
  2. We confuse what lenders tell us we qualify for with what we can actually afford. When a lender says you can get a $300,000 house or a $50,000 car, those figures are based on a formula that identifies the largest amount of debt you can manage with a reasonable chance of paying it back. Why? Because that’s what’s most profitable for the lender. Your goal should be to take on only the amount of debt you can comfortably afford based on your financial situation and goals. 

Do this: Measure your current expenses against the 50/30/20 budget, which says to allocate 50% of your income for needs, 30% for wants, and 20% for savings and financial goals. This will tell you which areas of your finances are out of balance (and thus, which ones you should focus on first). 

Tip #2: Track Your Spending

Did you know: In one of the largest-ever studies of millionaires’ financial habits, researchers found that more than half still follow a budget.

There are dozens of free apps that automatically track your income and expenses. These apps make it easy to monitor your recent transactions and account balances. What’s interesting is that some people are able to save more than others by changing how they use these tools.

In researching for his book Willpower, Florida State University professor of psychology Roy Baumeister found that users who set budgets and goals saved the most:

“[…] spending was further tempered if they used the information to set up budgets and goals […]. The biggest effects were observed in people’s spending on groceries, restaurants, and credit card finance charges.”

Instead of using a budgeting app just to monitor your transactions, take advantage of the extra features that are often available:

  • Set up budgets for specific spending categories.
  • Use goal setting features to help monitor your progress toward your financial goals, whether that’s building an emergency fund, saving for a vacation, or paying for a home. 
  • Get notifications that alert you when you’re close to your budget or when you’re making progress toward a certain financial goal. 

Do this: First, track your spending via one of the many free personal finance apps. My favorite is Rocket Money because of its clean interface and ease of use. But don’t stop there; set budgets, goals and alerts to help nudge you into making good choices. 

Tip #3: Build a $500+ Emergency Fund

Did you know: One study found that low-income families with $500 or more in an emergency fund were less likely to experience financial and psychological problems than moderate-income families with less than $500.

There are many benefits to having an emergency fund, which you can use to help pay for unplanned expenses. The biggest benefit, however, is that an emergency fund can help prevent high-interest debt like payday loans and credit cards.

The Federal Reserve found that $500 is the magic number in helping people experience less financial and emotional difficulties. While you’ll want to save more than that one day, $500 is a great starting goal.

If it seems like there’s no extra money in your budget to set aside in an emergency fund, try the proven technique of paying yourself first. Set up an automatic transfer that occurs the day after your paycheck arrives, moving a small amount of money from your checking account to your savings account (even if it’s only $25). 

Making this transfer automatic ensures that it happens, and setting it for immediately after you get paid ensures that you don’t spend it or allocate it to some other financial goal. 

Pro tip: Review your monthly budget. If your income exceeds your expenses, use the pay yourself first technique to automatically transfer the difference into a savings account to begin to build your emergency fund. The idea is to treat your emergency fund as a monthly bill that must be paid. If your income isn’t greater than your expenses, try the cash envelope budgeting method, which makes it very hard to overspend. 

Tip #4: Create a Plan to Pay Off Your Debt ASAP

“He who understands interest earns it. He who doesn’t understand interest pays it.”

— An unknown ad copywriter

Much of our financial success (or lack thereof) comes down to compound interest. If you save and invest your money correctly, it will go to work on your behalf. 

Have a lot of debt? That debt is working hard too. Unfortunately, it’s working very hard against you. So saving money comes down to eliminating that debt as fast as possible

For example, let’s say you have $6,000 in credit card debt with an average interest rate of 18% and a $240 minimum monthly payment. 

Payment AmountTotal Interest PaidMonths to PayoffYou Save

Paying $100 more than the minimum payment saves you $554 over the next two years. Paying $300 more saves you $963 in just 13 months. 

Do this: Start rolling a debt snowball, where you list your debts from smallest to largest balance and focus on paying off the debt with the smallest balance first. This is the method research shows has the highest likelihood of success

Tip #5: Track Your Financial Freedom Date

In a study published in the Journal of Financial Planning, titled “The Sentimental Savings Study: Using Financial Psychology to Increase Personal Savings,” researchers found that people saved 73% more money when they had a specific goal and could track their progress. They called this the “sentimental savings” effect. 

When I read this study, I couldn’t help but think of the Financial Independence Retire Early movement — often referred to in personal finance circles as FIRE. 

If you’re unfamiliar with FIRE, the idea is to save a large percentage of your income — we’re talking in the 30% to 80% range — so that you can retire early.

The FIRE community has its own language. If you ask someone what their number is, they’ll say something like “48.” This number is the age at which their investments will be able to sustain their current standard of living for the rest of their lives. 

For me, it’s this focus on the very exciting and specific goal of early retirement that helps explain why so many people in the financial independence community are able to change their situations for the better.

Of course, for many people, a mountain of debt makes the idea of retiring early the last thing on their mind. But I think the concept is still powerful in cases such as those. 

For example, when you’re struggling with debt, one effective tactic can be to track the date you’ll become debt-free.

I find this concept so powerful that I created a free Google Sheet (link goes to the instructions for how to use it) that allows you to determine exactly when you’ll become debt-free based on your current situation. 

All you have to do is input some top-level financial information, like your income and monthly credit card bills. Then the calculator shows you the exact number of months it will take you to pay everything off. You can then update the spreadsheet each month with the goal of improving your number.

Do this: If you have high-interest debt, use our free debt payoff spreadsheet to calculate your debt-free date. If you’re currently investing for retirement, make it a point to track the age at which you can become financially free. Here are our three favorite (free) early retirement calculators to help.

If you want to learn more about setting financial goals, we have a free workbook that walks you step-by-step through the entire process:

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Tip #6: Save More For Tomorrow, Tomorrow

Research shows: In a 2004 academic study, participants who committed in advance to saving a portion of their future raises ended up saving more than three times as much as those who didn’t.

It’s easy to think of an excuse for why you can’t save more this month. But do you know what’s also pretty easy? Making a commitment today to save more money in the future — e.g., a year from now.

In the study mentioned above, behavioral finance researchers Richard Thaler of the University of Chicago and Shlomo Benartzi of the University of California found some surprising results:

  • 78% of participants agreed to save a portion of their future raises.
  • Of those participants, 80% stayed in the program after their fourth pay raise.
  • The average saving rate of participants increased from 3.5% to 13.6% over the course of 40 months.

Do this: Check if your employer-sponsored saving plan has an automatic escalation feature, which allows you to automatically increase your 401(k) contributions based on parameters you set. For example, you can automatically increase your savings rate by X% every 12 months.

If your plan doesn’t have an auto-escalation feature, consider these two options:

  1. Commit to increasing your savings rate every time you get a raise.
  2. Set a calendar reminder to increase your contribution percentage to your employer-sponsored plan by 1% every quarter. Yes, it’s a small number, but that’s the entire goal — you won’t even realize the money is missing from your paycheck. 

Tip #7: Create a “To Buy” Waiting List

Did you know: In one study, participants who told themselves “not now, but later were less likely to splurge on a chocolate cake in the minutes, hours and days ahead.

Instead of declaring that you’ll never make an unnecessary purchase again — an unrealistic goal, since we all give in to our impulses occasionally — give yourself permission to dream by saying “not now, but later.” 

Whether it’s to eat a dessert or shop online, there’s nothing wrong with the impulse in itself. What gets you in trouble is when, 10 minutes later, your shopping cart is full, or the order is placed without a second thought. 

Do this: When it comes to impulse purchases, you can create a “to buy” list — a list of things you want to buy in the future. If an item is still on your list after 30 days, and you have the money, give yourself permission to buy it. 

What’s fascinating about “to buy” lists is that not only do they reduce impulse purchases, research has shown that they eliminate the urge to buy something altogether.

Roy Baumeister, the leading willpower researcher we mentioned earlier, explains:

“[…] telling yourself I can have this later operates in the mind a bit like having it now. It satisfies the craving to some degree.”

How to Save Money Fast: Final Thoughts

Most “money saving tips” articles are about what you can’t spend money on. No lattes, no eating out, skip brand-name items at the grocery store, forgo that dream vacation and take a staycation instead — the list of simple ways to rein in your spending habits goes on and on.

And while these simple ways can help you cut your living expenses, you already know these recommendations. 

But you may not know that there’s a long line of research showing that willpower is a limited resource. Telling yourself “no” repeatedly can have harmful impacts across many different areas of your life.

So, consider the smarter path instead of making things no more difficult than they have to be. You’ll find that the techniques and strategies in this article are easy to implement and far more effective in helping you reach your financial and savings goals.

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R.J. Weiss
R.J. Weiss, founder of The Ways To Wealth, has been a CERTIFIED FINANCIAL PLANNER™ since 2010. Holding a B.A. in finance and having completed the CFP® certification curriculum at The American College, R.J. combines formal education with a deep commitment to providing unbiased financial insights. Recognized as a trusted authority in the financial realm, his expertise is highlighted in major publications like Business Insider, New York Times, and Forbes.


    1. I never thought I would Build an Emergency Fund. But after reading this article, I think I will start right away. My mother said that when I was young, people were less concerned with risks, only thinking about good things. I’m not young anymore, I have to start taking care of myself

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