10 savings and investment tips for every age

At a time when inflation has fallen but fears of a recession still loom, many Americans are looking for ways to put more money toward their savings and investments. Two key ways to do this are to increase your income and cut your expenses.

Whether you’re a young adult ready to start building a retirement fund, an adult in your 50s looking to pay off your mortgage, or a retiree living on a fixed income, these saving and investing tips can help you build savings, reduce debt, increase your income, and invest wisely.

1. Pay yourself first

Save a portion of your monthly income as soon as you receive it instead of putting the rest aside.

One way to make paying yourself a priority is to set up automatic transfers from your checking account to a savings or investment account.

“Take a percentage of your paycheck or any number and have it done automatically. Don’t think about it. Don’t think back about it. Just let it do it,” says Ronit Rogoszinski, CFP and founder of Women+Wealth Solutions in Carle Place, New York.

2. Save for emergencies

An emergency savings account is the foundation of sound financial planning. But what exactly is an emergency?

A true emergency is something you have little to no control over, such as a serious illness or job loss. An infrequent expense that you can foresee, such as a car repair or a trip to see family, is not an emergency but a separate category of expense that you should also save for.

As a rule of thumb, you should save enough to cover three to six months’ expenses.

If you have a habit of dipping into your savings unnecessarily, put the funds in separate savings accounts so they aren’t depleted when you need them.

Fewer than half of U.S. households have enough savings to cover a $1,000 unexpected expense, according to a recent Bankrate survey, with many feeling that inflation is affecting their ability to save for emergencies.

If you have a habit of dipping into your emergency reserves unnecessarily, transfer those funds to a separate savings account so they aren’t depleted when you need them.

3. Create a spending plan

A spending plan, also called a budget, is a list of your monthly income and expenses. It can help you see how much money you spend on necessary and discretionary expenses, and you can make changes as you see fit. A budget can be created using an app, a spreadsheet or cash envelopes, says Charlie Bolognino, ChFC, CFP and founder of Side-by-Side Financial Planning.

Both regular and one-time expenses should be accounted for in your budget, Bolognino says. “Proactively identifying even a few one-time expenses throughout the year — like property taxes, car registration, college tuition, back-to-school purchases, etc. — and including them can make a big difference in the accuracy and reliability of your plan.”

4. Spend less, save more

This is easier said than done, but saving often starts with spending less.

Of course, there are things you can’t stop spending money on – for example, you need to keep paying your rent or mortgage, buy groceries, and pay off any debts you may have. However, most people can reduce certain expenses.

If you’re trying to spend less, you should start by taking stock of your current spending and how you’re allocating your money. It’s easy to spend money without really tracking where it’s going. There are a few ways to learn more about your own spending habits.

One way is to get a copy of your recent credit card and bank statements and go through them thoroughly. Make note of any large expenses as well as frequent purchases. For example, you may find that you spend a lot more on takeout than you expected or go to the movies more often than you thought.

You could also subscribe to a budget app. These apps track your spending for you and create easy-to-understand reports and charts that you can review to see what you’re spending your money on. Some apps also help you save by helping you negotiate your bills or cancel unused subscriptions.

Once you’ve collected this data, try to categorize your spending into needs and wants. Things like groceries, debt payments, and rent are obviously needs; takeout, going to the movies, vacations, and the like are wants.

Finally, think about the money you spend on your desires. Are you spending more on something than you expected? If so, find ways to reduce that spending. Is the money you’re spending really making you happy, or would you rather spend it somewhere else?

You don’t have to completely stop spending money on fun things like food and entertainment. Going out occasionally is good. However, it’s just as important to consider your financial health by cutting back on your spending.

When you cut back on spending, don’t leave your newfound savings in your pocket, wallet, or bank account, where you’re likely to spend the money on something else. Instead, put the extra money to good use by paying off a debt or putting it into a savings account or certificate of deposit (CD) where it’s out of your reach.

“Try cutting down on a spending habit you don’t necessarily need and put the savings in the bank or use it to pay off debt,” advises Rogoszinski of Women+Wealth Solutions. These days, it’s easier than ever to make your money work for you. Many online banks offer high-interest savings accounts or certificates of deposit with over 4% interest per year. You can even automate your savings by setting up regular transfers from your checking account to grow your savings balance.

Paying off debt can also free up money that you can save or invest. Make a list of your debts and pay off those with the highest interest rates or lowest balances first.

5. Get creative to make more money

For example, you can earn more money by taking a part-time job and selling things you no longer need.

While working longer hours may seem burdensome, taking on a second job—even if only temporarily—to meet certain savings goals can be a smart strategy. According to a survey by Bankrate, U.S. workers with a second job earned an average of $996 per month.

You can start a side hustle by figuring out what skills you have and what tools and resources are needed to turn it into a profitable business.

Another way to generate cash for savings is to sell items you no longer need, such as an extra car, used designer clothing, collectibles, musical instruments or jewelry. Consider using a website like eBay, Craigslist, Poshmark or Facebook Marketplace to connect with potential buyers.

6. Save in small steps

If you find saving a challenge, try saving just $100 or $500 for a specific purchase or expense at first. Even after you’ve successfully saved and made that purchase, continue to save that amount (or more) so you can pay for other things you need with cash instead of credit.

If you can’t save money for major purchases and long-term investments, you may be living beyond your means. Some small budget changes can help, or larger changes might be in order, such as finding cheaper housing or transportation.

7. Allocate your fixed assets

Some investments have a relatively low risk-reward ratio, while others are more volatile.

In general, younger people should invest more aggressively, while older people should be more conservative.

If you are a novice investor, start with a basket of investments, such as a mutual fund or assets you select yourself. The goal should be to diversify without making your portfolio too complicated or too narrow.

Whether you are a novice or an experienced investor, your investment strategy should be based on factors such as your time horizon, risk tolerance and personal financial situation.

8. Understand the investment costs

Whether it’s stocks and bonds, mutual funds, brokerage accounts or 401(k) retirement plans, virtually all investments have fees or commissions that investors should be aware of.

“Sometimes the employer will subsidize part of the cost of a 401(k), and sometimes they’ll pass it all on to the employee,” says Cheryl Krueger, CFP, a financial adviser at CGN Advisors in Inverness, Ill. “It’s helpful to go to (your supervisors) and let them know you’ve noticed.”

If your employer-based retirement plan has exceptionally high costs, you may want to invest only enough to receive the employer’s share and make additional investments outside of that plan.

9. Stick to an investment plan

For reliable investors who want to expand their portfolio, a drop in stock prices can be a good buying opportunity.

Review your investment strategy once or twice a year and don’t let headlines throw you off track when allocating your funds.

“The goal should be that this is an ongoing process that cannot be stopped or restarted based on current news,” says Rogoszinski of Women+Wealth Solutions.

A long-term investment strategy and a diversified portfolio can help you weather market fluctuations without making decisions based on emotions.

10. Don’t be afraid to ask for help

Some investors may be unsure where to start when it comes to things like choosing stocks and ensuring a balanced portfolio. Don’t be afraid to ask a financial advisor for advice. You can choose a traditional financial advisor, who typically charges a fee of about 1 percent of your assets. You can also turn to a robo-advisor, who typically charges lower fees and helps you build your portfolio based on algorithms.

–Freelance writer TJ Porter contributed to updating this article. Freelance writer Marci Geffner contributed to an earlier version of this article.