14 ways to save money on a tight budget

Finding ways to budget and save money seems harder every year for Americans. A new Bankrate survey reveals that 59 percent of those surveyed are uncomfortable with their level of emergency savings. Inflation is the big culprit holding people back from saving more, with 63 percent saying skyrocketing costs cause them to save less for unexpected expenses.

There is no “one size fits all” solution to increase your savings while living on a tight budget. In most cases, it takes dedicated effort and a combination of approaches. These 14 tips provide some of the best actionable strategies to trim costs and grow your savings, even on a limited income.

1. Focus on small changes in various budget categories

Being on a tight budget means every spending decision adds up, but you can start saving money by making small changes. For example, the money saved by making lunch instead of buying carryout or eating out can easily add up. The same is true with brewing your own coffee rather than stopping for a cup at a coffee shop.

Some other potential changes include:

• Turn lights off when you’re not using them.
• Cut the cord on cable and opt for cheaper streaming services. Streaming services often have shared or family plans that you can split between multiple people to lower the cost even more.
• Avoid impulse purchases. One way to do this is to implement the 30-day savings rule. Whenever you’re tempted to make an impulse purchase, wait 30 days before deciding. Use the time to evaluate whether you need the item and if it’s worth sacrificing your savings goals.

2. Keep a budget

To take advantage of the right savings opportunities, you first need to understand where your money is going. Budgeting can help you plan your spending and assess what money you have to spend.

Looking back at your previous month’s spending can help you decide how much you can budget for the next month in different categories. Making a budget can reveal areas where you didn’t realize you were spending a lot of money.

A budget might also help you catch recurring expenses for services you’re not using. Consider canceling a monthly gym membership at a gym you never visit or streaming apps and other subscriptions you no longer use.

One way to budget is to use the 50/30/20 rule, which means allocating 50 percent of your income to essential expenses. The remaining half — known as discretionary income — goes to things you want (30 percent) and savings or debt repayment (20 percent).

Many people use budgeting apps (like EveryDollar, You Need a Budget and PocketGuard) to simplify spending tracking. Most budgeting apps have a free basic plan, so you can try them out before deciding on a paid monthly or annual version.

3. Take stock of food spending

Food can be one of the most expensive categories in your budget, but it’s easy to control spending by making smart choices at the grocery store.

Saving money on groceries can be as simple as making a meal plan before you shop so that you don’t spend money on food you don’t need. Use your phone’s calculator to add up the total as you shop to keep you from going over your budget.

Buying items in bulk, opting for generic brands over expensive name brands and joining your grocery store’s loyalty program are all realistic ways to save money.

4. Use cash-back apps

Cash-back apps help users save money by offering rewards for everyday purchases. For instance, Ibotta allows users to earn cash back on groceries by adding offers to their lists and then uploading their receipts after shopping.

Rakuten provides cash back for online shopping at thousands of popular retailers, with payments issued via check or PayPal. In 2023, the average cash back per Rakuten member was $90.16. Upside is great for cash back on gas and convenience store purchases, while Dosh focuses on cash back for shopping and travel-related purchases.

5. Get a bank bonus

Some banks offer a bonus for opening a new account and meeting a few basic requirements like setting up direct deposit or maintaining a minimum balance. Some of the best bank bonus offers let you earn about $250 or more within a few months.

Read the fine print before signing up to know how to earn the bonus and how long you need to keep your account open. Also, watch out for minimum balance requirements that might make it difficult to open or maintain your account, as well as account fees that could eat away at your bonus amount.

6. Earn interest on your checking account

Look for an interest checking account (also known as an interest-bearing checking account) that doesn’t have any minimum balance requirements or monthly service fees. For a competitive yield, you might have to have a minimum direct deposit, make a certain number of debit card transactions or meet another requirement.

7. Automate your savings into a high-yield savings account

It’s easy to forget to save. That’s why automating the process is the best way to save money.

“Trying to save when there is little or nothing consistently left over is challenging, so flip that around and do the saving first,” says Greg McBride, CFA, Bankrate’s chief financial analyst.

McBride recommends setting up a direct paycheck deposit into a high-yield savings account. “While saying ‘you won’t miss what you don’t see’ sounds cliché, it’s true,” says McBride. “Anybody I’ve ever counseled to do this that followed through came back and sang the praises of how well it works.”

Some mobile banking apps have automatic savings features. But if not, you could always download a third-party savings app, such as Chime, which estimates how much you can save each month and moves that money into your savings account.

8. Shop around for insurance rates

It’s smart to compare prices on auto and homeowners insurance every few years. An accident-free discount or other loyalty discounts may help you save by staying with your current company. Double-check that you’re receiving any discounts you’re entitled to, such as discounts for insuring multiple cars or being a safe driver.

Sometimes, however, you’ll save more by switching or merging auto and homeowners insurance with the same company.

9. Find cheaper ways to travel

If you’re planning a trip, establish a budget ahead of time to avoid splurging.

You may be able to save money on air travel, for example, by booking a red-eye flight or flying with a budget airline.

You can also save by staying at a budget-oriented hotel or an Airbnb, picking up some groceries instead of eating out for every meal, and using a credit card that doesn’t charge foreign transaction fees.

10. Look for a way to save on rent

Renters may want to consider moving to a smaller place or a less costly area to save money. Since housing expenses are often the largest expense in a household’s budget, moving to a cheaper place could shave big bucks off your monthly expenses.

You could also try negotiating your rent or the lease term to save money.

“People who rent an apartment or house, they may not know it’s possible to negotiate their next lease when the landlord makes an offer to renew,” says Malcolm Ethridge, CFP®, executive vice president and fiduciary financial advisor with CIC Wealth Management. “This is especially true for those who rent from an individual or a smaller property manager.”

Ethridge points out that it’s a good idea to try and lock in a longer lease if you plan to be there for a while. “The landlord will likely be even more flexible on rate if they know they have you locked in for 24 or 36 months instead of 12,” he explains.

11. Refinance your mortgage

Refinancing is an opportunity for some people on a tight budget to save money and could save thousands of dollars over the life of the loan. Refinancing your mortgage might be worth considering if you can reduce your mortgage interest rate by 0.5 percent or more.

When deciding if refinancing your mortgage is a good idea, include additional costs you might incur, such as closing costs and loan origination fees. See how much you could save with Bankrate’s mortgage refinance calculator.

12. Check your paycheck withholdings

Getting a tax refund each year may feel like found money, but the truth is you’re overpaying the amount you owe in state or federal taxes. That money could be put to better use during the year, by paying down high-interest debt, building an emergency fund or adding to a rainy day fund.

Check with your accountant to see whether changing your tax withholding makes sense.

13. Use those three-payday months to save more

Generally, for those who receive a paycheck every two weeks, there are two months of the year where you’ll receive a third paycheck in a month. Because you’re likely used to living on two paychecks a month, consider allocating some of the money from the third paycheck toward paying off high-interest credit card debt and growing an emergency fund.

14. Take advantage of pre-tax savings options

Set up automatic contributions to your employer-sponsored retirement plan, such as a 401(k), which uses pre-tax dollars to fund your retirement and can lower your taxable income. What’s more, some employers offer to match employee 401(k) contributions, providing essentially free money to help build your retirement savings. Employer-match programs typically require workers to contribute a minimum amount to qualify.

“I think there are two things you must do to save while on a tight budget, says Malik S. Lee, CFP®, CAP®, APMA®, managing principal and founder of Felton & Peel Wealth Management. “One, you need to stay on budget and eliminate impulse purchases. Two, you need to utilize pre-tax employee benefits. Saving to vehicles like 401(k)s and HSAs pretax via your paycheck allows you to hit your savings goals while keeping more in your pocket vs. saving after-tax.”

The bottom line

By making small adjustments in your daily habits, you can significantly contribute to your savings. Over time, these minor changes accumulate and become some of the most effective ways to budget and save money.

Taking a few minutes today to automate your savings through automatic transfers into a high-yield savings account is one of the easiest things you can do to ensure saving becomes a priority. User-friendly tools like budgeting and cash-back apps help motivate you to stay on track as you begin to see the financial rewards of all your efforts.