3 Essential Steps To Start Saving For The First Time Ever

So you did it. You finally decided that you need to think about your future and establish some sort of savings plan. The problem is – especially if you never done that before – you probably have zero idea of how to go about starting to save. That’s where we’ll start – I’ll try to explain a few basic principles to help you start establishing some savings.

1. Break down your finances

The hardest part is to sit down and take a hard look at the situation. What is your income like? Do you have any debt? How big are your expenses? Take a piece of paper and write all of these down neatly. Break them down further with the following questions:

Where is your income coming from?
What exactly are your expenses (how much is rent, food, bills, and commute)?

An easy way to determine this is to assign them to ‘need’ and ‘want’ categories – for example, you might think that you need to buy yourself lunch every day at work, but you could easily prepare it at home. You think you need a 2-bedroom apartment for all your stuff, but you could de-clutter a bit and live in a studio.

It’s really important that you don’t forget anything or even hide it from yourself. Take your time with this step and simply calculate or find out income and expenses and if needed, use bank statements, payslips, and bills to get an accurate amount.

2. Make a budget

Next step is to make a simple budget. I know, it sounds scary, but I promise you it’s not. Start by subtracting expenses from your income. If there’s enough money left (at least ~20% of your income) you can skip to step 3.

If not, you need to decide how you’re going to fix your current financial mess. According to the ‘need’ and ‘want’ categories, decide which expenses can be cut out or at least lowered.

You can either start cutting back (move to a cheaper apartment, spend less money on unessential things) or make more money (change jobs, ask for a raise, pick up a part-time job, sell your stuff). Set up a concrete plan for how much are you going to spend every month on what. If it helps, hang this plan on the wall so you don’t forget about it.

I suggest you start by applying this very simple technique: after paying the bills (that are a fixed, non-optional expense) and putting a percentage of income into savings (also fixed), how much is left for food and other expenses? Split this amount into weekly amounts and start using cash to make these purchases to gain more control over money. It’s important you make paying off debt and putting money into savings a priority and not leave it ‘for the end of the month’.

3. Start saving

To ensure nothing unplanned in the future doesn’t turn your world around, you need to have some sort of emergency fund. This is what I suggest you start saving for first. Pension, a new car, and a house on the beach will wait – a new baby or a job layoff won’t. Decide on how big should your emergency fund be – generally it’s a good idea for it to cover at least 3 months of living without an income. Now that you’ve done your budgeting, it should be easy to calculate this amount!
If you’re anything like me, you’ll find a different excuse every month just to avoid putting that cash into your savings account. That’s why I recommend you set it up so it gets deposited automatically.


To go through these principles again very briefly:

1. First you need to look at the situation objectively and realistically. Write down expenses and income.
2. Determine if your current financial situation is even allowing you to put money into savings. If it’s not, make a very simple budget that you can refine further down the road, when you’ve already implemented it.
3. Automate the depositing process and put savings first. Start by saving for an emergency fund and set a realistic, but concrete goal.

How about you? How did you start saving, and if you still don’t, what’s your biggest hurdle?

Author Bio:
This post was written by Heidi from ThriftyTricks, blog with awesome tips for twenty-somethings on saving money and living on their own. Head over there to learn more about the easy budgeting method and to grab the FREE EBOOK named “How to save money when going out without making your friends hate you”.


3 Essential Steps To Start Saving For The First Time Ever — 16 Comments

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  2. All three steps are essential to take control of your finances! I think saving is more important than investing – get this one right, you’ve already won half the battle!

  3. Great tips. The key is correctly identifying needs and wants. It seems many of us have blurred the lines between the two and think that wants are really needs. Cable is a want, not a need. Same goes for eating out. Make sure you are honest when it comes to needs and wants for the greatest impact on your savings.

  4. Good and essential tips. At least 6 months of earnings should be saved for emergencies and that is a bare minimum these days. With employment still shaky in America, this would seem to be a must. Once you get this amount saved putting money into no-load mutual and index funds on a diversified basis would be the next step.

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