In preparing for this article, I asked five friends this question: How do you save money? ‘Buying things on sale’ was the most common answer. ‘Bringing lunch to work,’ and ‘Finding the cheapest gas’ were other responses. But only one person got it right: ‘I put it in a safe place.’ Bingo!

Cutting expenses is the way to spend less so you have money to save, but unless you are actually putting it aside for some future use, you’re not really saving at all. You’re just spending less.

Since 1985 Americans have gone from saving 11 percent of their disposable income to zero. Zip. Nada. In fact, we’ve slipped into the hole by one-half percent. A negative savings rate means we’re not just spending every penny, we’re spending more than we earn by reaching into our savings or borrowing money just to get by every month.

The truth is that no matter your situation—whether you are financially comfortable or in debt up to your eyebrows and living paycheck-to-paycheck—you need money in an account that has your name on it for lots of reasons. Saving money quiets the Must-Have-Everything-Now monster that runs so many of us ragged. It settles our spirits and calms our fears. Saving money is the best insurance against impulse buys. Having money in the bank promotes contentment.

Even if you cannot save a great deal of money right now, that’s okay. It’s not the amount you save that matters as much as the fact that you make saving money a regular habit. 

Ideally you want to be saving 10 percent of your net income. If you can’t do that right off the bat, save 5 percent or whatever amount you can start with—even if it’s only a dollar or two each week stashed in an envelope in a drawer. Keep putting at least that amount into your account week after week. You won’t believe how quickly you’ll figure out how to make it three dollars, then five, on to ten and beyond. Soon you’ll be hooked on saving.

It sounds like a no-brainer, but cutting costs without sacrificing your lifestyle or causing some other area of your life to collapse is the way to grow a savings account on your current income. Here’s a set of spending behaviors to help guide you into thinking in new ways so you can really step up your savings.

Grab all the discounts. Many mortgage lenders and student loan companies offer incentives for their customers who set up automatic payments for their monthly payments. It’s worth knowing you’ll never be late, and if you can get even 1/4 of a point reduction in the interest rate over time that will really add up to be something significant. Automobile insurers give discounts to good drivers, non-smokers, good students, cars with particular safety-equipment and any number of other situations. But you have to ask. A quick phone call to learn which discounts you can qualify for may net you a serious reduction in your premium. Ditto for your homeowner’s coverage. Ask for a breakdown of all the discounts offered, then see how many apply to you. How many could you qualify for if you only made a few changes? Simply installing a “spark arrester,” which is a 25-cent piece of metal screening, to my chimney cut my semi-annual premium by $25.

Set dollar limits. Okay, so this sounds curiously like “budgeting.” It is. Deciding ahead of time the amount you are willing to spend for anything is to impose important limitations on yourself. Sure there’s a little part inside all of us that would much rather have no limits at all, but that’s not realistic nor is it very smart. Setting the limit is the easy part. Sticking to it—no matter what—is the hard part. But each time you pass the test you build character. That makes it easier to stick to your limit the next time and the next. Still, it’s not always easy to walk away when your set limits suggest that’s what you need to do. Here’s a way to make it easier.  Give yourself a 24-hour cooling off period. This is enough time to go home, think it over and reconsider the limit you’ve set. Time has a marvelous way of bringing things into clearer focus. I’m going to predict that more times than not, you will not go back. You’ll stick to your guns and you’ll be better for it.

Window shop. For me, window shopping with no intention of buying anything is like a diet that allows for one piece of chocolate now and then. It’s a great way to avoid feelings of deprivation, but also a binge waiting to happen. That’s why it’s important to use window shopping as a tool, not a set-up for a mighty fall. First, check your internal barometer. If you’re bored or depressed, forget it. Take a hot bubble bath instead. You’re just too vulnerable, and we all know how buying something fabulous can quickly change one’s mood temporarily—but later turns to feelings of remorse and dread. If on the other hand you really are anxious to check the season’s latest fashions, get ideas for ways to redecorate the bath or just enjoy the beauty of retail ambience, go and have a good time. Research tells us that simply exposing yourself to new merchandise you haven’t seen before—not necessarily buying it—produces pleasurable feelings of euphoria. Just leave the money and the plastic at home!

Look in unusual places. Sometimes you can spend less for the same product if you look farther than the normal stores. Take breakfast cereal. The usual place to buy cereal is the grocery store. The unusual spot is Target where the regular price of breakfast cereal is about half. At Vons supermarket  (southern California chain owned by Safeway) Kellogg’s Apple Jacks, 20 oz. size is $4.74. At Target it’s $2.54. Quaker Rice Cakes at Vons are $3.99; at Target the identical product is just $1.99. I discovered by accident that milk is a bargain at Walgreens drugstore compared to the supermarket located right across the street. I can always count on bananas priced 3 pounds for a dollar at a local dollar store—half the supermarket price.

Fee yourself. Banks and credit-card companies don’t seem to have much trouble socking us with unbelievable fees, so take a lesson from them and fee yourself. Every payday impose on yourself a self-tax equal to one-hour’s pay. Consider it the price for having a job and put it straight into your savings account. Give yourself ample warning that upon your next raise, the fee will jump to two-hours’ pay.

Every time you make a withdrawal from the ATM or you write a check, charge yourself a set fee of $1 by recording the actual amount plus a buck. Deposits? A $10 fee for each deposit sounds about right, which means the deposit you actually record should be entered minus $10. When you’ve collected $50 or $100 in fees from yourself, settle up and transfer the whole amount straight to your savings account.

Embrace cheaper substitutes. Have you given the store brands at the grocery store a chance? If not, you should. The pay-off will be significant, and you could be pleasantly surprised to discover just how many items are identical to the name brand—only the label and the price are different. Paula Begoun, author of The Beauty Bible, and creator of www.cosmeticscop.com says that seductive marketing and opulent packaging have trained consumers to believe that expensive means better in the world of beauty—but it’s not true. Drugstores, she contends, are filled with “doubles” of pricey department store health and beauty products—comparable in every way but for the price. Paula says you can stop paying $45 for Clinique Repairwear SPF 15 Intensive Cream at the department store and opt for its double, Dove Fresh Radiance Moisturizer SPF 15 for just $9.99 at the drugstore, thereby adding $35 to your savings account. Switch from Bobbi Brown Eyeshadow ($19) to Prestige Cosmetics Eyeshadow ($5) at the drugstore, and you’ll have $14 for your savings.

Get reacquainted with currency. Some of the cheapest gas stations take only cash or ATM/debit cards. Buy your gas at the cheapest gas station you can find then play it safe and pay with cash. Fraud experts tell us that because of the big turnover of employees at these kinds of stations, ATM card fraud can run rampant. And don’t worry that the gas will be inferior. All gasoline in this country must meet the same strict federal standards required by the EPA.

There are other benefits for living with cash. Some small, independent merchants will give you a discount for paying with cash because they do not have to pay the steep merchant fee when customers swipe the plastic—experts say about 30 percent less, when paying with cash, not plastic.

Play with your money. Make a decision that from now on you will never spend another dollar. That means all your $1 bills go into a stash. Or get really brave and make that $10 bills. Whatever you decide, remove that particular denomination from your wallet regularly. When you get this routine into full swing, take the game to the next level by adding all rebates, refunds and coins to what you will never spend. Get your spouse in on the fun and you won’t believe how often you’ll be making cash deposits to your savings account. And for your monthly bonus round, transfer whatever is left in your checking account at the end of the month to your savings. Now you won’t go into the new month thinking you have extra money to spend.

Choose to buy less. It’s so easy to get carried away in the face of a good deal. After all, if one is a bargain, two or three should just improve the deal, right? Consider this before you answer too quickly: In the U.S. there are 51,223 self-storage facilities with more than
2.2 billion rentable square feet of space, boasting $22.6 billion in annual revenues. The way I see it, if you have to rent storage space because your stuff will not fit into your home, you probably have too much stuff. The message is simple: Stop buying so much stuff. Before you make the decision to buy something, ask yourself if you don’t already have something that will do just as well. Or if you won’t use it often, is this something you could rent or borrow? Sure the shoes are adorable, but isn’t your closet already bursting at the seams? Pare down, cut back. You’ll simplify your life and have money in the bank, too.

Don’t be afraid to haggle. Whether it’s a dental treatment, service to unclog a drain or spay job on your pet, learn the price from several providers. Once you know your prices—and if you want to stick with a provider you know and trust but doesn’t have the best price—present your dilemma. You may be surprised how easy it is to get them to match the price. Paying cash to an independent retailer or service provider? Ask for a discount equal to the fee he would’ve paid had you pulled out the plastic. Before you say yes to buying that new appliance, go for the gold by requesting that the price include delivery. Right there you could easily lop another $50 off the net cost.

Compare, compare, compare. The advent of the Internet has given consumers research tools beyond compare! Before you bid on an online auction or agree to the price of something at the mall, take a minute to find out what this item costs in many locations. Websites like www.froogle.google.com and www.bizrate.com will give you the information you need in just a click of the mouse. It’s so easy to compare prices there’s no reason you should ever wonder if you’re getting the best deal or not. Of course you need to always allow for tax, shipping, handling and delivery charges.

Dreamwash every purchase. Whatever your goal—$1,000 in your savings account, a new house, an all-cash wedding, a trip to Spain—whatever it is, “dreamwash” your mind so that you think of every purchase you make in light of this goal. You will find yourself passing up impulse buys and all those small, meaningless purchases. If the goal is something tangible (like a house) print out a picture that represents it and hang it in a prominent place in your home to remind you. Make a copy to keep in your handbag or to tape on the front of your check book. Put a price tag on your dream and determine that you will reach it no matter what. Make a clever sleeve from construction paper or an envelope that slips over your credit card and requires you to see your dream each time you reach for it. Add a few questions like Do I really need it? How often will I use it? Is it worth postponing my dream?

No matter how much or how little you have to save right now, you can develop a saver’s attitude. The things we tell ourselves about money and the attitudes we choose have a powerful effect on our behaviors. I’ve watched people with quite ordinary incomes do extraordinary things simply because they stopped feeling entitled and became habitual savers.

That has made all the difference. 

© 2007 Debt-Proof Living. All rights reserved. Used with permission.

 "Debt-Proof Living" was founded in 1992 by Mary Hunt.  What began as a newsletter to encourage and empower people to break free from the bondage of consumer debt has grown into a huge community of ordinary people who have achieved remarkable success in their quest to effectively manage their money and stay out of debt.  Today, "The Cheapskate Monthly" is read by close to 100,000 Cheapskates.  Click here to subscribe.