Doubling your savings may not be as hard as it sounds. There are a handful of simple habits you can start today that could make all the difference with your money.
But don’t take our word for it. We rounded up six tried-and-true strategies from early retirees and super-savers that don’t require much time or effort. If it worked for them, it could work for you.
If you want to save big, you have to know where your cash is going in the first place.
Many early retirees started their journey to financial independence by analyzing their spending habits and figuring out where they could cut back. “Knowing how you spend lets you determine whether you get value for your dollars, and where you might be able to focus efforts to reduce expenses further,” says Justin McCurry, who banked more than $1 million in a decade to retire in his 30s.
Try tracking your purchases in a spreadsheet or use an app like Mint, You Need a Budget or Personal Capital.
Automating your financial life — or sending your money directly from your checking account or paycheck to investment accounts, savings accounts and creditors — is a popular strategy used by early retirees and super-savers.
“It stops you from sabotaging your own progress,” says 26-year-old Richard Meadows, who banked $100,000 in three years. “If you run out of willpower and you blow all the money that you meant to save on a big night out or new shoes that you didn’t really need, then you’re never going to get anywhere.”
However, if you automatically set aside money in a retirement account or for bigger savings goals like a home or car, you’ll never be tempted to skimp on savings.
Early retiree Chris Reining, who built a $1 million portfolio by age 35, will tell you that the key to saving half your income is to start small.
“I know there are some people out there that say you shouldn’t worry about the $5 latte, but the more I think about it, cutting out the $5 latte was a good place to start,” he tells CNBC Make It. “Because if you try to downsize your house, get rid of all yours cars and make all of these drastic changes, it’s so overwhelming and you’re not going to do any of it.”
After foregoing his morning coffee, Reining eliminated the $15 lunches he bought every day. Next, he cut out the bigger things, such as the $1,000 a month he spent flying airplanes. “The small changes will lead you to be able to make the big changes,” Reining says.
“If you’re not measuring something, then you don’t have that feedback loop. You don’t know whether you’re heading in the right direction,” says Meadows, who tracks his net worth with a custom spreadsheet.
He’s in good company. Grant Sabatier, who went from having $2.26 in his bank account to $1 million in just five years, says a crucial step he took was monitoring his net worth: “I look at my net worth every day when I wake up in the morning and have my morning coffee. There are few greater motivations than seeing this number rise over time. No matter where you start from.”
You won’t get very far without the right mindset. Commit to saving big starting now.
It worked for Matt of “Distilled Dollar,” who prefers to remain anonymous, and his fiancee. The Chicago-based couple saves 60 percent of their income and plans to be financially independent by age 35.
“We stopped a nasty habit we had of reading about great tips and then failing to implement them,” Matt writes on his blog. “Avoid our mistakes. … Literally, do something today … and start saving money.”
As one early retiree, Steve Adcock, tells CNBC Make It, “just saving money doesn’t get you rich.” If you’re looking to create substantial wealth or double your savings, the key is to make your money work for you by investing it.
“Instead of keeping your savings in your bank account, which is definitely better than nothing, put that money in the market,” Adcock says. “Over the long run, that compound interest is going to add up.”
Compounding makes a sum grow at a faster rate than simple interest, because in addition to earning returns on the money you invest, you also earn returns on those returns. It causes your wealth to snowball over time and means that you don’t have to save as much to reach your financial goals.
A good starting point is to invest in a retirement account, such as a Roth IRA or traditional IRA. Next, read up on low-cost index funds, which Warren Buffett recommends, and online investment platforms known as robo-advisors.
This is an update of a previously published story.
Don’t miss: 8 tips to save a fortune, from everyday people who are retiring before 45
Like this story? Subscribe to CNBC Make It on YouTube!
