When you start making money, the last thing you probably want to do is save it — despite having probably been told at some point or another that saving is important.

Even if you’ve been making money for a while, there just may not be “enough room” in the monthly budget for savings.

So a lot of people put it off, thinking they can always “save later.”

But that’s a very dangerous mindset to have — and the sooner you figure that out, the less damage it can cause.

Let’s get something else out of the way: saving money does not mean you’re cheap, and it does not mean you have to deprive yourself.

When you’re young, you can have just as much fun and save money at the same time. Wasting a little bit of money here and there is one thing, but a routine that involves knowingly wasting most of your money is just dumb — unless you have so much that you will never run out (which isn’t even the case for people who win the lottery).

Saving money is just about being smart – and while it may require some changes, changing a few things about the way you live now can drastically improve the way you live later. And change isn’t necessarily a bad thing, because some day, you will want more than what a wasteful spending routine has to offer.

In the real world, there is no “perfect” time for anything and no one ever really “figures their life out.” If you want something, you just have to start taking steps to make it happen. Because you know what, no one else is going to do it for you.

Why you need to start saving

How often do you reach the end of the month and realize you spent the money you had planned to save?

Nearly half of Americans are living paycheck-to-paycheck — and many of them are making a good salary. But without any idea of what they’re actually spending on, many people end up wasting a lot of the money they could be saving, and on top of that, they rack up big credit card debt just to maintain their current lifestyle.

A recent survey asked Americans how they would pay for a $500 unexpected expense — and 46 percent of people said they would have to borrow the money or use a credit card to cover it.

And according to Bankrate, “More than four in 10 Americans either experienced a major unexpected expense over the past 12 months or had an immediate family member who did. … This proves that an emergency savings cushion is more than just a personal finance cliché, yet most Americans are ill-prepared for life’s inevitable curveballs.”

There’s a lot of talk out there about why people should enjoy the money they have, rather than save it. But here’s the thing, it doesn’t have to be one way or the other — you can do both.

Of course you should enjoy the money you make — to a point — but if you continue to spend everything you have, you’ll never be able to do the bigger things in life you have planned. Unexpected expenses will always come up, and if you’re forced to put them on a credit card, $500 here and there can easily spiral into thousands of dollars of debt.

If you prepare for unexpected financial shocks, it will prevent you from sacrificing your other goals in life.

The ultimate goal of saving money is financial freedom — the ability to make your own decisions when you want to make them, without having to rely on someone or something else.

Money may not be able to buy you happiness, but it can buy you freedom. And that’s just as powerful as anything else in this life.

How to start saving money

People put off saving for a variety of reasons — maybe there just simply isn’t enough money in the budget or maybe you feel like you have a good handle on your money for the time being. Not good enough. There is always room in the budget – you just have to prioritize things.

Here 5 things you need to know to start saving more money and keep yourself on track:

1. Set goals

The first step to saving more money is figuring out why you’re doing it because if you don’t, then it will likely get put on the back-burner.

If you aren’t quite sure what your goals are, that’s OK. Just start thinking about what’s important to you — both now and down the road — so you can start prioritizing your spending and your saving.

Here are a few goals to consider:

• Emergency savings
• Rainy day fund
• Paying off debt: The longer you owe money, the less you can save for your own goals in life.
• Buying a car
• Buying a house
• Retirement savings

Everyone's goals are different, so these are just a few things to keep in mind when you start thinking about why you're saving. Even if these things are 3, 5 or 10 years down the road, you need to start thinking about them now to make sure you're on track to reach each goal, when you want to reach it.

Getting to the point when you’re ready to buy a house and realizing you’re nowhere near as financially prepared as you need to be – that’s not a fun situation to be in. Saving for future goals can be difficult, especially when you can’t quite see the light at the end of the tunnel, but you will – and the only way you will is by making the decision to get started.

So identify what your big goals are and then start taking steps to reach them!

2. Make a plan: Figure out how much money you should set aside each month for each goal

Once you know what your goals are, you need to figure out how much money you’ll need for each of them. It doesn’t have to be an exact number, but having a rough estimate can help you figure out how much you should be putting toward each goal every month.

It’s also important to prioritize your goals. Start by setting aside more money each month for the most important immediate goals, while still saving for the others. And then as you build up each fund, you can start putting more money toward your longer-term goals.

Let’s look at a few of the examples from above.

Emergency savings: Bottom line: shit happens, and if you don't prepare for it, you're just shooting yourself in the foot.

Saving for an emergency should be an immediate priority. When you’re forced to put unexpected expenses on a credit card, it just sets you back even further and prevents you from making progress on all of your bigger savings goals.

The best way to save for unexpected financial shocks is to have two separate emergency funds: a rainy day fund and an emergency fund. A rainy day fund is cash you can dip into for an unexpected expense, while an emergency fund is a bigger sum of cash, in case you lose your job, can’t work for whatever reason or something else comes up that requires a good amount of money.

Check out our Emergency Savings Guide on how to start building these funds.

Paying off high-interest debt, like credit card debt: When you're trying to save for both short- and long-term goals, paying off debt should be an immediate priority — because the longer you owe money, the longer it'll take you to save up enough for each of your goals.

And we’re primarily talking about consumer debt, like credit cards. This doesn’t mean other debts like student loans aren’t important, but credit cards typically carry very high interest rates, so carrying that debt around will cost you a whole lot more money over time.

The way you handle credit card debt also has an impact on your credit score than some other types of debts – so the longer you carry credit card debt, the harder it will be for you to get bigger loans down the road (like a car loan or mortgage).

Buying a car, buying a house & other short-term goals: If these are things you want to do in the next five years or so, it's important to start saving for them now — and to put the money in a safe place where it's not at risk.

So for these short-term goals (around five years or less), your best bet is to keep the money in the bank. With a savings account, you don’t risk losing any of it (like you would if you were to invest the money), and you also don’t face any penalties or fees when it comes time to withdraw the money.

You can set up a separate savings account for each goal if you think you may be tempted to dip into the money if it’s all together.

If you have an idea of how much car or house you want to be able to afford when the time comes, figure out how much you should be setting aside for each of those goals every month. And if you can’t afford to save as much as you’d like to at first, start small and revisit each goal every couple of months.

Once you pay off debt, you will free up extra money that can go toward these other savings goals. Also, reducing your expenses can do the same (we’ll get more into that below).

Retirement savings: It's so easy to put off saving for retirement — especially when you're young and retirement seems like a lifetime away, or when you're barely able to save enough for everything else in your life.

But here’s why it’s so important to start now: the earlier you start saving, the more time your money has to grow and the wealthier you’ll be in retirement.

Clark often talks about a chart that shows how a 15-year-old could save just $2,000 a year for 7 years – and then, never saving another penny again, the money would grow to be $1,000,000 by age 65 – thanks to the magic of compounding.

• Compound interest is an extremely powerful force that allows you to earn exponentially larger gains on your money over time — so the money you save now is worth a lot more than the money you save later. Here's a simple example: You invest $1,000 today and earn an annual 5% gain, so $50. That $50 is added to the principal amount of your investment, and then next year, you earn a 5% gain on $1,050, so you earn $102.50. And so on… So, the earlier you start saving, the more your money will grow over time!
• How to start saving for retirement: If you're saving nothing right now, it's OK to start small. Start by saving one penny out of every dollar you make. That's 1% of your income. Then every six months, step it up by 1%. In 5 years, you'll be saving 10% for retirement and making a huge impact on your future.

When it comes to saving for retirement, your best bet is to have the money automatically deducted from your paycheck so you never even see it in your account. That way, you won’t miss it.

If you have a 401(k) at work, start saving money through automatic withdrawals each time you get paid. If your employer offers an employer match, that is essentially free money, so try to contribute enough to get that match.

Check out our 401(k) Guide for more on how to get started and how much to save.

3. Continue paying off debt

When you’re facing debt, reducing your expenses should be a motivation to get that debt paid off quicker!

If you have credit card debt, do whatever you can to pay more than just the minimum monthly payments. If you can find the extra money in your budget, pay as much as you possibly can every month toward that debt to get it paid off as quickly as possible.

Here's how: Make a list of your debts in order of interest rates. Start with the credit card that has the highest interest rate first — and put as much money toward that debt as you can each month, while still paying the minimums on other debts and also setting aside money for your rainy day and emergency funds. Then once that card is paid off, move to the card with the next highest interest rate, and so on.

One way to reduce credit card debt is to transfer the balance to a card with a lower interest rate or to a card that offers a 0 percent interest period. But you should really only do that if you know you can pay off the total balance during that initial 0 percent interest period.

Important note: When you pay off a credit card, do not close the account — that will hurt your credit score. So once the card is paid off, just let it sit at a balance of $0.

4. Reduce expenses and increase your income

Reaching your goals can seem impossible at first, but once you make a few changes, you’ll have a whole new outlook on things.

One of the best ways to start saving more toward each of your goals — and to get your debt paid off quicker — is to reduce your expenses. Eliminating unnecessary and wasteful spending can free up a lot of extra cash.

Go through your statements from last month line by line. List out every single expense, including your fixed costs — like rent/mortgage, insurance bills, debt payments etc. – as well as every other purchase you made – every coffee, movie rental, bar tab, grocery bill etc.
Start with the expenses you can easily reduce. You probably can't change your rent or mortgage any time soon, so look at the things you can control, like subscriptions, groceries, car insurance, your cell phone bill and more.

Here’s a full guide on how to reduce your monthly expenses.

5. Keep it separate and make it automatic

If you haven’t heard the phrase “pay yourself first,” it will change your life.

If you don’t automate your savings, you’re much more likely to reach the end of the month and realize you’ve spent what you had planned to save.

Once you cut back on your spending and start to have some spare cash, it’s important to keep it in a safe place so you won’t spend it — because no matter how disciplined you are, if it’s there, it’s tempting.

So if you don’t already have a savings account, open one. Having a separate account for each goal can also keep you more disciplined and help you keep tabs on everything.

Then budget out how much extra money you will have each month for each goal and set up an automatic direct deposit from your paycheck. Have each specific amount sent directly to each account — that way the money is put into savings before you have a chance to spend it.

After just a few months, you’ll be able to see your savings really start to grow!

3 more quick tips to save more money

1. When you pay off a debt, keep making the payment — to yourself!

The obligation of paying off a debt each month — like a car loan or credit cards — isn’t very fun. But there’s a way to turn that monthly habit into one that benefits your future.

Getting a debt paid off can free up a lot of extra cash, depending on how much you were paying each month, and that cash can be turned into savings. So once you get a debt paid off, instead of spending the extra money, keep making the monthly payment — but from now on, make it to yourself.

Take the money you were previously putting toward debt and have it automatically taken out of your paycheck and deposited into savings.

2. Tax refunds, bonuses and raises

If the money is in your account, you will probably spend it — or at least some of it. If you really want to save more money, take any extra cash that comes your way — in the form of gifts, bonuses, tax refunds or even extra money from a pay raise at work — and put it directly into savings.

If you get a raise at work, live on the same amount you were already getting by on and put the extra cash away for the future. You’ll be glad you did when it comes time for a big purchase or when you start to see that money really grow in a retirement account.

3. Save spare change

OK, so it may not make you rich, but every little bit counts. Take any spare change you have in your pockets, purse or wallet at the end of each day and put it into a savings jar. And don’t touch it! Then at the end of the month, take the money to the bank and deposit it into savings!

Final thought

Keeping track of your budget and savings goals can be a whole lot easier with a little help! There are tons of great apps and websites out there that will track your spending and savings for free — so you can keep tabs on each area of your budget and where every dollar is actually going.

You can also make it a friendly competition, maybe with your spouse, family member or close friend!

When you're young, saving may not be super cool, but when you finally recognize the fact that you're an adult, I promise it will be a lot cooler to have money in the bank than a bunch of Instagram photos of everything you wasted all your money on.

Clark.com