How to save money (and have fun doing it)

No "ultra frugality" tips, no guilt. Just actionable ways how to save money in the real world. Get the exact strategies and scripts to save money today.

Ramit Sethi

People often conflate my dislike of ultra-frugal advice and penny pinching lifestyles with a dislike of saving money — which couldn’t be further from the truth.

In fact, I’m here to say that saving is an essential cornerstone of living a Rich Life. It allows us to invest and help our money grow, as well as do the things we want in the future (e.g. college tuition for your kids, going into space with Jeff Bezos, a down payment on a home, wedding expenses, etc).

We’ll Discuss 8 Ways to Save Money

The psychology of saving money
The best way to save money
Money saving win #1: Automation
Money saving win #2: Negotiation
Money saving win #3: The A La Carte Method
Money saving win #4: Lower Your Rent
Money saving win #5: Prepay Your Debt
Next steps: How to Implement the Big Wins


What I actually dislike (read: hate with the white hot passion of a thousand suns) is the masochistic “advice” people often find when searching for money saving tactics.

A few examples:

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Yes. These are ACTUAL money saving tips that people have apparently implemented.

Aside from the fact that spending two hours a week separating toilet paper by hand might get you committed to a mental institution, there’s another inherent problem with advice like this — and it can be found in our psychology.

The psychology of saving money

It’s easy to get bogged down by all of the noise from friends, family, blog posts, and pundits screaming at you to “keep a budget!” or “cut back on spending!”

Like this weirdo:





As much as they mean well, a lot of the advice is just downright awful. And thanks to Google and SEO, it’s often hard to separate the good advice from the bad.

However, the way to recognize the scams is to remember one thing:

Bad money-saving advice relies purely on willpower.

What do I mean? Take for example, buying lattes; sweet, delicious $4 lattes crafted by the loving hands of a liberal arts major/actor.

Many frugality “experts” will tell you to stop buying lattes/espressos/coffee/whatever in the morning so you can save $3 or $4 a day — amounting to about $700 a year.

While this advice might seem like a good way to save money, it’s actually complete unmitigated bullshit.

For 2 reasons:

    1. We have to make this choice EVERY DAY. Regardless of how much we love Starbucks caramel double lattes, consciously denying yourself makes us feel stressed, or if we drive by the coffee shop on the way to work, we have to use our limited willpower first thing in the morning, every day, forever. The result of which looks something like this:

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  1. Even if we’re “successful,” we don’t invest the money we’ve saved. Congrats! You’ve skipped morning coffee every day for 365 days. You have 700 more dollars, right!? Probably not. $3/day is not significant enough that you’ll “see” the savings at the end of the month. Unless you physically put aside the $3 every single day – adding more work and stress to your life.

Which brings us back to point #1. And even if you do save $3 a day, how do you invest it? What account do you put it in? It’s easy to see how this becomes much more complicated than putting grounds in your coffee maker.

The good news is, you can save money — much more than $700/year — without the guilt and daily frustration.

The best way to save money

When we demonize the Small Things in life we enjoy, we ignore the Big Wins where we can save and earn the most.

If you want to save money without demonizing the small things in life you truly enjoy — like lattes or Uber rides — there are two things you need to focus on:

  1. Automating your finances – eliminate the stress of figuring out what to do with your savings
  2. Earning the Big Wins – it’s way easier to earn an extra $30 a day than to save $3/day

Without a doubt, those are the two biggest game changers when it comes to saving money — not clipping coupons or driving across town to find a cheaper gas station or whatever.

When you automate your finances and focus on the Big Wins, you’ll see explosive growth in your savings and earnings almost instantly. And the best part: You can do all these things in a few hours and then you never have to think about them again.

Here are 5 money saving wins that incorporate one or both of those aspects.

Money saving win #1: Automate your finances

One reason we don’t regularly save money is due to the pain of putting money into our savings accounts each month.

And so, just like cutting out luscious, perfectly foamed 12 Corners lattes, we might put away money for savings once or twice — but if we have to make the decision EVERY paycheck, we’re setting ourselves up to fail.

That’s why automated finances work so well. You can start to dominate your finances by having your system passively do the right thing for you. Instead of thinking about saving every day – set it and forget it.

To do this, you need just one hour today to follow these steps:

Step 1: Set up your bills so they’re sent to you on the 1st of the month

This is assuming you’re being paid on the 1st of the month. If not, just adjust the day accordingly.

Call your credit card, electric company, internet service provider, Netflix, whatever, and have them bill you on that date. This streamlines the process and allows you to know when exactly your bills need to be paid. There may be a couple of months of odd billing as your accounts adjust, but it will smooth itself out after that.

Step 2: Put money into your 401k

Before your paycheck even arrives into your checking account, make sure that you have your 401k plan set up with your employer and that you’re at least putting in enough money to collect the employer match. It basically means that for every (pre-tax!) dollar you contribute your company will also throw in five cents, ten cents, etc.).

This ensures that you’re taking full advantage of what is essentially free money from your employer. Let them help you save more money for retirement.

Step 3: Automate your checking account

Once your paycheck actually arrives into your checking account, the money will now go into 4 different places:

  • Roth IRA: Like your 401k, you’re going to want to max it out as much as possible. The amount you are allowed to contribute goes up occasionally. Currently you can contribute up to $5,500 each year.
  • Savings account: Here, you should use “sub-saving accounts” for long-term goals like your wedding, vacation, or down payment on your house (more on this later). Many banks provide the option to create smaller sub-accounts in your normal savings account — perfect for goal setting.
  • Credit card: Make automatic payments for recurring services like Netflix, Birchbox, and gym memberships using your credit card. Also, if you’re maxing out your 401k and Roth IRA, you’re going to have plenty of guilt-free spending money in here for things like the occasional night out or fun purchases you want to make.Log into your credit card’s website and set up automatic payments with your checking account so your credit card bill is paid off each month. You can rest assured that you will have enough money in your checking because you’ve already set up automatic payments with everything else.
  • Misc. bills: These are for bills that can’t be paid off with a credit card such as rent, electric, water, and gas.

Set it up so that your checking account automatically sends funds to these four areas on your bank’s website — or you can just call your bank and have them do it for you. Or you could go to the bank in person, sort out your accounts and make a new friend.

For a more detailed explanation, you can check out my 12-minute video on how to automate your finances here.

Bonus: I wrote a huge, free guide to personal finance and how to manage your money that goes into even more detail on the strategies described here.

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Money saving win #2: Negotiate your bills

Once you have your finances automated, the next step is to negotiate for lower prices on your bills.

That’s right. With just a few one-time, 5-minute phone calls, you can save HUNDREDS a month on bills for your:

  • Car insurance
  • Cell phone plan
  • Gym membership (less likely but still possible)
  • Cable
  • Credit card

It’s simple too — there are only 3 things you need to do to negotiate with these companies on fees and rates:

  1. Call them up.
  2. Tell them them, “I’m a great customer, and I’d hate to have to leave because of a simple money issue.”
  3. Ask, “What can you do for me to lower my rates?”

Of course, you’re going to want to adjust this formula for whatever company you’re calling. Check out my video on negotiating your bills for more on this topic.

Bonus: For the exact word-for-word scripts that I used to negotiate my bills, download the Ultimate Guide to Personal Finance.

Money saving win #3: Implement the A La Carte Method

This is a GREAT method to save money on services for which you have a subscription like:

  • Netflix
  • Gym memberships
  • Spotify
  • Amazon Prime
  • Magazines

“But Ramit, how am I supposed to give up my Netflix account or Amazon Prime?!”

Well, chances are you’re WAY overpaying for these things anyway.

In fact, a conservative estimate shows that we spend over $1,800/year on subscriptions alone.

The convenience is undeniable — subscriptions are automation in its purest form, and we all know I love automation more than anything because I’m practically a robot.

BUT in this case the automation is working for THEM and not for YOU.

When was the last time you scrutinized your monthly subscriptions and cancelled one?

Probably never. Yet compare this to any time you went out shopping, saw something you liked, but didn’t buy it.

Read that again. It’s the key to cutting your spending through your subscription items you’re probably not getting very much value out of.

Which is why I suggest the A La Carte Method.

The basic idea of this system is to cancel all your discretionary subscriptions — magazines, Spotify, Netflix — and buy what you need a la carte.

  • Instead of paying for a ton of movies and shows you’ll never watch on Netflix, but only the shows you want to watch on Amazon or iTunes for $1.99.
  • Buy a day pass for the gym each time you go (around $5 – $10).
  • Buy songs as you want from Amazon or iTunes for $0.99 each.

This FORCES you to be conscious with your spending — like my friend who spends $21,000 a year going out. By utilizing the same principles that make automating your finances great, you will have to actively think about each charge you make when it comes to buying a song or TV show.

Of course, this isn’t for everyone. I encourage you to use this if you find yourself short on cash and wondering why you can’t save more money each month.

If after about two months, you find yourself spending enough money on these items to justify the subscription, by all means pick it up again. If not, then you’ve saved yourself some major cash.

Money saving win #4: Lower your rent

Remember: Your rent is NOT fixed and beyond negotiation. Like your bills, rent can be negotiated and lowered too. This is one of the biggest misconceptions there is to renting.

The key to that is going into it with the right mindset and preparation.

Here are 5 steps you can start taking today to lower your rent:

Step 1: Determine the exact rent reduction you want

Before you even call up your landlord, make sure you have a goal in mind — whether it be a certain price or percentage you would like to see negotiated.

When you know what you want, not only can you communicate that crisply to your landlord, but you can also demonstrate WHY they should accept less.

Step 2: Have something ready in return

You can’t just tell your landlord, “I want to take $200 per month off my rent” and expect them NOT to laugh in your face…you have to be ready to offer something in return.

Why would your landlord benefit from your lowered rent?

Here are a few things many landlords will happily lower rents for:

  • Prepay months in advance
  • Sign an extended lease
  • Offer to extend the termination notice from 30 days to 60 or 90 days
  • Offer to give up your parking space if you don’t have a car
  • Promise not to smoke in the apartment thereby saving the landlord money when you move out
  • Promise not to keep pets even if they’re allowed.
  • Make a deal for referrals if they have low occupancy

If you know what they want and can offer it to them, your chances of succeeding in negotiation increases significantly.

Step 3: Practice. Practice. Practice.

Meaning, if you’re new to negotiations, don’t try to go against a reluctant landlord — yet.

Negotiation is a skill, and like any other skill, you need to practice to get good at it. I suggest you negotiate your credit card and bills before tackling this.

Once you’re ready, you can get my word-for-word rent negotiation scripts here.

Money saving win #5: Prepay your debt to save thousands

If you have student loans, you can actually save thousands of dollars each year — by spending more each month.

“Uh, Ramit. How can I possibly save more by spending more?”

Well let’s say you have a $10,000 student loan, at a 6.8% interest rate and a 10-year repayment period.

If you go with the standard monthly payment, you’ll pay around $115/month.

But check out how much you can save per year if you paid just $100 more each month:

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Even prepaying $20 more per month can save you HUGE amounts of money.

If you can prepay even a small amount more per month, the benefits can be significant. See for yourself by calculating your savings using this calculator.

What’s next?

So you have all the savings basics nailed down — automated your finances, lowered your bills, negotiated your rent…what do you do next?

First off, congratulations!

You’re ahead of 90% of your peers when it comes to your personal finance. But that doesn’t mean you should get complacent.

In fact, from here I’d suggest doing two things:

  1. Set up a 10-year savings strategy
  2. Focus on Big Wins

10-year savings strategy

This is the next level of saving — the one that’ll take you from amateur penny-pincher to pr savers. Once you’ve gotten the basics taken care of, you can now start implementing a 10-year strategy.

This involves asking people ten years older than you what they wish they’d saved for — and start saving for it.

This sounds obvious, but it actually requires admitting that — despite your superior financial acumen — you’re still going to have the same expenses as everyone else.

Yeah, it’s nice to imagine you’re going to be a millionaire one day, sipping pina coladas from a beach while your investments make money for you…but reality will be ready to smack you upside the head with things like:

  • Wedding expenses: And don’t even begin trying to tell me something like “I just want to have a small simple wedding.” Shut up. Your wedding will be nice and and it will be expensive like everyone else’s.
  • Kids and their expenses: If you plan on having a child one day, you can bet you’re dropping A LOT of money on them.
  • Down payment on a house: You’re definitely gonna want to save for this if you plan on owning a home one day.

Remember when I talked about sub-accounts in your main savings accounts? Well, you’re going to start setting up sub-accounts for any and all of these goals.

Then you’re going to automate your checking account so it sends funds into the accounts as soon as you receive your paycheck.

This may seem simple — and it is — but you can’t just scoff at this for being too easy and do nothing. I challenge you to consciously choose 1 of 3 options for this today:

  1. I’m going to do this within the week
  2. I’m not going to do this because I’m going to do another strategy within the week
  3. I’m not at this stage yet…I’m going to pick up your book (or another book, or just do it) and get there

The 7 Big Wins

Next time you hear the same old tired advice on saving money — keeping a budget, or cutting back on $3 lattes — ask yourself: Has that really worked for the millions of people who’ve tried it?

Are they really not “trying hard enough”?

Or is there perhaps a systemic problem urging people to waste their limited willpower on near-meaningless tasks with little reward?

Should we instead focus on high-leverage areas that will result in massive payoffs?

There are just a few Big Wins in life where — if you simply get them right — you almost never have to worry about the small things. If you can focus on the 5-7 Big Wins, rather than 50 little things, you can have an insurmountable edge in life.

Here are the 7 wins I suggest you tackle ASAP — and we’ve already covered a few of them.

  1. Automate your finances
  2. Start investing early
  3. Improve your credit score
  4. Land your Dream Job
  5. Negotiate a raise
  6. Make money on the side

Put another way — how can we focus on using Big Wins so we can save money… AND get on with doing the things we truly love?

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