Some people think you can eat whatever you want as long as you exercise enough. But that’s a myth. The old adage “you can’t outrun a bad diet” is true: overeating has implications for your weight and health that no amount of exercise can compensate for.

The same holds true for saving and spending. You can’t save your way out of a spending problem. That’s because at some point there are no more areas in which to cut back.

Humans also tend to treat money differently depending on the source. This phenomenon is known as mental accounting. We view “extra” income like tax refunds, cash gifts differently, or even $100 that we saved from cutting a subscription than we view earned income, and we tend to be more careless with the former.

That’s why we don’t think twice about taking $100 of our tax refund and blowing it on a fancy dinner — something we’d be much more hesitant about if that money was coming from our paycheck.

But a dollar is a dollar no matter how you obtain it or save it. Every dollar has the same value, and every dollar gives you the same opportunity.

If you want to improve your long-term financial picture, it’s important to use your savings wisely.

Smart Money Move #1: Identify the Highest and Best Use for Your Savings

What are your financial goals? Paying off credit card debt, saving for retirement, and/or saving for a home? You want to use your savings to help you meet your goals, and you want to get the best possible ROI (return on investment) for your money.

If you have high-interest debt (like credit card debt), using your savings to pay that off will almost always give you the best ROI because that debt is costing you more than most investments will return.

If saving for retirement is your priority and you like free money, your savings are best used to contribute the minimum to your 401(k) required to get matching funds from your employer, and then up to the maximum amount they’ll match each year. Never turn down free money!

Maybe buying a home is on your list of financial goals. Ideally, you’ll save at least 20% for a down payment. Putting down 20% or more allows you to avoid private mortgage insurance (PMI), which does nothing for you but protects your mortgage holder (i.e., the lender). PMI generally costs between 0.5% and 1% of the entire loan amount on an annual basis, so when you use your savings to build your down payment, you’re multiplying the overall return.

Smart Money Move #2: Automate Your Savings Plan

When you see those savings in your checking account, it can be tempting to spend them — even if you know what they’re earmarked for. In order to eliminate that temptation, don’t count on yourself to put that money to its intended use. Our willpower waxes and wanes. Instead of relying on your ability to resist temptation, let automation remove the temptation altogether.

If you’re using the money to pay off debt, the fix is easy: log into your bank account and increase the amount of your monthly payments from the minimum to the minimum plus whatever you’re looking to save each month. This will help you reach your debt payoff date much quicker by increasing the payment amount and automating the higher payment in the background from your bank account.

If you want to give yourself a little added motivation, use a debt payoff calculator to see how much money you’ll save by paying the debt off more quickly.

If you’re investing, increase your monthly contribution. Your ultimate goal is to max out your retirement accounts.

If you’re saving for a short-term goal like a down payment or a wedding, set up an automatic transfer from your checking account to your savings account.

Out of sight, out of mind.

Smart Money Move #3: Work to Grow Your Gap

One of the best ways to evaluate your personal financial health is to measure the gap between how much you make and how much you spend. The bigger the gap, the better. If you need money now, cutting expenses will put dollars in your pocket fast. And you’ll often be amazed at how fast and easy it is to save money at first. Most of us spend more than we realize and can make spending cuts that are relatively painless.

But eventually, you’ll optimize your spending and there won’t be any more savings to find. We all have mandatory expenses like housing, transportation, and food. And we all have the right to spend some of the money we work hard for on things we enjoy. So, we have to look for ways to make extra money that will help us maintain the momentum saving has provided and keep us moving towards our financial goals.

Two quick ways to bring in some extra cash are selling stuff you don’t use (using sites like eBay, Craigslist and Facebook Marketplace), and picking up some additional hours at work (especially if you’re eligible for overtime pay). Just a few hours of overtime each week can really add up.

There are also so many good side hustles these days that there’s something for everyone. You can tutor, teach ESL, become a virtual assistant, answer surveys, and much more. If you want to meet your financial goals, you should have at least one source of income apart from your regular job.

But of course, our regular jobs are where we spend most of our time. So, it makes sense to optimize that realm. When is the last time you had a raise? Are you being paid what you’re worth? Your resume should always be ready to go and you should always be on the lookout for the next opportunity. There are a lot of legit online jobs available so you don’t have to limit your potential to a physical office. Keep in mind that those who spend more than two years at a job will make 50% less over the course of their career than those who change jobs more frequently.

Summary

Saving money is a great tool in your personal finance toolbox, but it’s just one tool. Know where to put those savings so they’re working hard for you. Use automation to remove temptation and to make life easier. And be sure to look for ways to make extra money and increase your income. All of these things taken together and put into action will go a long way in helping you to reach your financial goals.

Written by, R.J. Weiss, the founder and editor of The Ways To Wealth, a Certified Financial Planner, husband and father of three. He’s spent the last 10+ years writing about personal finance and has been featured in Forbes, Bloomberg, MSN Money, and other publications.