Securing your financial future is achievable if you adopt practical, tried-and-true strategies. However, many people fall short of their savings goals because they don’t have a methodical approach to conserving funds for the long term.

This article will cover practical savings strategies for breaking negative spending patterns and building lasting wealth.

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6 effective ways to save & build wealth

Saving money isn’t simply a numbers game. If it were, everyone would save — but more than one-quarter of Americans are living paycheck to paycheck. That figure only rises (37%) when we consider the number of Americans who can’t afford to pay for an emergency expense upwards of $400. Even more pressing, 40% of the U.S. population aren’t confident in their retirement’s financial security. 

If you want to know how to start saving money or to improve your existing habits, progress starts with becoming systematic. The goal isn’t to save at random — it’s to follow a methodical path. 

These money-saving tips will help you optimize your financial planning.

1. Track and categorize your spendings

You can’t save if you don’t first know where your money is going.

Begin tracking your money using an Excel spreadsheet, grouping each transaction by spending area — like groceries, utilities, and entertainment. This is a great starting point, as you can clearly see where your money is going and think about potential saving opportunities. 

There are also helpful tracking apps like EveryDollar and Expensify. Both are free and let you automatically monitor, categorize, and visualize your spending in real time. 

2. Build a budget that works for you

You may have heard of the popular 60-20-20 rule. It suggests allocating 60% of your income to essential living expenses, 20% to savings, and 20% to discretionary spending. The problem with the 60-20-20 rule is that it doesn’t properly account for individual circumstances. A more effective budgeting method ensures you proportionately dedicate every dollar toward your unique priorities.

If you’re struggling to save and the primary challenge is a lack of consistency, consider automating your savings transfers. This is where tracking expenses and budgeting is helpful. If you know exactly how much is coming in and where it’ll be spent, then you know what you can automatically set aside. Both mentally and practically, this strategy has proven effective for the 17% of Americans who use it. 

3. Build an emergency fund

If you don’t yet have an emergency fund, that’s the first priority. Aim to save 3–6 months of expenses. That way, if you lose your income source or face an unexpected financial burden, you’ll be financially prepared. 

One option is to keep your emergency fund in a high-yield savings account. If you have a higher risk tolerance, you could also consider parking funds in a money market fund, where your money is relatively liquid but can potentially earn a higher return.

4. Pay down debt

It can be tricky to decide whether to first pay off debt and save later or to do both simultaneously. Generally, the sooner you’ve paid off debt, particularly high-interest debt, the better positioned you are to maximize your long-term savings. 

That said, if you have interest-free debt like student loans, it may be better to pay it off in small increments while allocating your extra funds to financial products that generate returns. Hypothetically, you have $20,000 in savings and $10,000 in interest-free student loans. In that case, making only the minimum payments on your loan and contributing the remaining $10,000 in a low- to mid-risk savings account can yield better financial outcomes. The returns from your contributions could potentially outpace the cost of keeping the loan, growing your wealth while maintaining manageable debt.

But remember, increasing savings is just as psychological as mathematical — and this is particularly true when it comes to paying down debt. That’s why it’s helpful to debt snowball, a motivating strategy where you: 

• List all your debts in ascending order of balance, regardless of interest rate.
• Make minimum payments on every debt except the smallest one.
• Focus any extra money on paying off that smallest debt first, and then “snowball” the amount you were paying into the next smallest debt — repeating this process until every debt is fully paid off.
  

5. Consider lifestyle factors and income strategies 

The “best” ways to save money largely depend on your current circumstances. Consider how you can adjust your lifestyle to improve your savings potential, asking yourself the following questions:

• What can I realistically do to minimize my living expenses? I.e., can I relocate to a smaller apartment? Can I cook more, rather than eat out? 
• How can I maximize my earning potential? I.e., while I’m building an emergency fund and paying down debt, can I take on extra shifts? Do I have a skillset that would allow me to start a side business, alongside my full time job? 

6. Invest strategically

Once you’ve built an emergency fund, paid down your debts, and optimized your earning potential and lifestyle choices, you’ll be in the best position to maximize your savings through investing.

Try to avoid holding your savings in a standard bank account, as inflation typically reduces your purchasing power by around 2–3% each year. Instead, consider contributing in a historically reliable place that consistently outpaces inflation. As you think through your options, it can be helpful to sit down with a trusted financial professional. With them, you can talk through your:

• Risk tolerance: The level of risk you choose should depend on your time horizon, age, dependents, and health status. As you approach retirement, it’s generally best to choose financial products with low risk and stable returns. 
• Savings routine: Consider creating a routine (such as monthly or quarterly) for distributing contributions, remaining consistent regardless of short-term market swings. This practice, often called dollar-cost averaging, helps mitigate the impact of market unpredictability over time.
• Tax implications: To set yourself up properly and get the most out of your savings, ask your financial advisor about taxation on different types of financial products.

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How to maximize your savings: Typical saving options

The following money-saving ideas fall into three primary categories: historical reliability, credible backing, and high, inflation-resistant returns (in that order). 

Certificates of deposit

Certificates of deposit (CDs) are specialized deposit accounts offered by banks or credit unions. CD holders must generally lock in their funds for a set term, ranging anywhere from a few months to several years. In return, they gain an interest rate that’s typically higher than standard savings accounts but lower than other saving vehicles, like annuities.

CDs offer reliable interest rates and are backed by FDIC insurance for deposits up to $250,000 per depositor, per institution. This is why many consider CDs among the safest strategies to save money — they ensure conservative yet steady growth, without significant risk.

Index funds

Index funds are mutual funds or exchange-traded funds (ETFs) that passively replicate the performance of a market index. In other words, they aim to match the market index’s returns instead of outperforming it.

For example, S&P 500^® index funds track America’s largest 500 companies. They’re inherently diversified as risk is spread across each company, not a select few. Since its 1957 inception, the S&P 500^® has returned an average yearly interest rate of approximately 10% — or just over 6% when adjusted for inflation. 

With an average annual return of 10%, contributing $440 monthly over a 30-year horizon would grow to more than $1 million at retirement. However, keep in mind that contributing in index funds, like S&P 500^® index funds, does require some risk tolerance because of short-term market unpredictability. 

Annuities 

An annuity is a contract with an insurance company offering a steady income stream throughout retirement, either for a fixed period or life. This fixed income comes in exchange for a lump-sum payment or a series of contributions.

There are several types of annuities to suit individual preferences. If your priority is to grow your savings steadily and predictably, consider a fixed annuity. They offer a guaranteed interest rate, meaning your money will grow regardless of market performance. That way, you gain peace of mind knowing your savings are secure and growing. Alternatively, you can opt for an indexed annuity, which offers a way to grow your savings based on the performance of a market index, like the S&P 500^®, while protecting your principal. If the market does well, your earnings increase up to a set limit. If the market performs poorly, your principal is protected, and you won’t lose money. This makes indexed annuities a good option for those who want some growth potential with less risk than investing directly in the market.

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This communication is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice.