Finding Money for Emergency Savings
My Story: Just Start
6 Squirrely Ways to Save
It's Just Not There
We live from paycheck to paycheck don't ever seem to get ahead. So when you talk about emergency money, I go "Arg!" How do I manage to find the money to set aside for emergencies? Help!
Direct Deposit Into Savings
My husband and I have money direct deposited from his paycheck into a savings account specifically for emergency or unexpected expenses. Carefully select an amount you can live without and you'll find that if you don't see that money then it's a lot easier to live without. We live on a tight budget, paycheck to paycheck as many families do, but we manage to put $200/month into savings. As long as I never see it... I'm okay. Pick an amount that you truly can live without because it won't do any good if you have to take it out and use it!
Finding "Found Money" Trick
Here's a trick that I learned from a book called "Own Your Own Life" that had many smart ways to handle your money in it. Figure out what you normally spend for all of your various bills and write down that amount. Some people call it a "budget", but that can be a scary word, so I won't use it here. If at some point in time your utility bill turns out to be a few dollars less than your normal, written-down amount then quickly deposit those extra dollars into a savings account. Get them out of your checking account and leave them in their new spot. Since you were already expecting to spend that amount anyway, you didn't have to find extra money to save.
Transferring money between accounts can be easily accomplished over the phone or with online banking accounts. You can transfer as little or as much as you want to since there are no requirements as to specific dollar amounts. Here a little and there a little. It's a good way to get yourself started on a savings program, and you might find even more of these "found dollars" in other parts of your household spending as you practice this.
Actions to Have Positive Savings
I also live paycheck to paycheck. I was laid off from my job a month and a half ago, and I was in total shock. I'm 34 and had been working since I was 16. I had never been let go from a job. I stayed in bed for two weeks. Anyway, I got a temporary job and was determined to start saving some money. I have a lot of credit card and student loan debt, and had nothing in my savings account. I decided to start saving money three ways:
- All money that I make, or is given to me, I automatically put 10% into my savings account.
- I no longer spend my change. A couple of months ago I decided to start keeping my change and put it into a jar every night. A few weeks ago, I went to my local grocery store where there is one of those coin-counting machines. It charges 8 cents for every dollar counted. When the smoke cleared, I had $81! Since my bank was also conveniently located in the same grocery store, I immediately put that into my savings account.
- I save a dollar a day. I have wasted more than a dollar a day on junk, so I just decided to save a dollar a day, and at the end of the month I also put that into my savings.
These are all fun ways for me to save and I used to think I could never manage to save anything. I have less than $200 in my savings account right now, but that's a long way from the negative balance I used to carry.
Using Savings Instead of Credit Cards
As a single mother of three with no child support, I struggled with this for years. I tried a lot of different tactics and finally found one that works for me.
First thing, out of sight is out of mind. I opened a second savings account in a different credit union than my primary checking and savings accounts. Credit unions usually require only $25 - $40 to open a savings account, and they don't typically charge fees for this. With the money in a separate institution with a separate statement, it doesn't seem as accessible. This is especially true because it is a savings account and you cannot get at the money with a check. Also, most Pay-Point systems want to access a checking account and will not let you use your ATM card to pay the bill. So once I put money into that account, it was gone, just as though I'd used it to buy an ice cream cone.
Where do you find money to put into this account? I scraped up nickels and dimes, using coupons and refunds, taking lunch to work, cooking inexpensive cuts of meat, every trick imaginable. I had an additional handicap in that my mother had taught us so many frugal tricks and techniques that is rare for me to find a hint anywhere that I'm not already using! One that I came up with on my own is in your budgeting technique. It is absolutely essential to have a budget to save money. All those people who keep telling you this are right! My trick is, when you budget for bills that vary from month to month, such as your electric bill, get out a year's worth of receipts and budget to pay the highest bill. I figured that if I could pay that much once, I should be able to pay it at least most of the time (say ten months out of twelve). The difference between the budgeted amount and the actual amount paid goes into the second savings account.
Write a check out for cash for whatever measly amount you've saved this week and deposit it. It is just as though you had spent it on that electricity bill. I never did have enough money to 'pay myself first' with 10% or whatever of your pay, but using this method I was able to save up a few hundred dollars in the first year. I put tax refunds, birthday gifts and 'found' money in there also. This is sufficient to pay for unexpected car repairs or plumbing bills.
There is a lot of discussion about using this money to pay off credit cards because the interest you earn is so much lower than the interest you pay. I budgeted money to pay credit card bills but did not use the savings account. Psychologically, it gave me more of a thrill to be able to pay an emergency bill without resorting to the credit cards which is how I got into this mess in the first place. The credit cards were paid off as planned, slow and steady, because I did not have to charge emergency expenses on them. Once you have a plan that you can stick with, you worry less about money and enjoy life more.
Set Up Small Savings Goals
I save emergency money the old fashioned away. I put away a little money each month in an envelope in the back of a cupboard. Now I am being more diligent. I went to your website with the calculators. The one where it shows how much money you need to save each week if you want to have a certain amount of money saved in a specific time. I make a small goal of how much I want to save in 4 months. The week by week amount is great and it is encouraging. Even if it is just $7.00 a week. At the end of three months you have almost $ 100.00. If you won a hundred dollar cash prize would you claim it or say too small not worth the effort? You would claim it. That's how I assess the small savings goal. I also write on the envelope the date and the amount I add to the envelope; this way I can track the progress.
This money is also off limits. I am not allowed to dip into it for change or anything else (not even Christmas). It is real emergency money and not that I ran out of milk and I don't want to go to the bank. I can always put in extra dollars if the opportunity allows itself but I have to keep the minimum payment each week, as if it were a type of loan.
The key is to have a small goal. That way you will feel positive and encouraged as see yourself reaching the goal.
I think most of us on this list have been in that exact place more than once and that's why we're here talking about it. We don't want to be there, in that "out-of-control" place ever again and that's why we keep coming back. When I first started out there was no way in the world I thought I could squeeze another penny out of my income to get out of this downward spiral but here are a few things I did and it got me started down the road to financial recovery.
Take a look around you. Take note of the real situation, sit down and have a good cry about it and then resolve within yourself to only let it get to you once every 2 weeks after that. Write down all of your expenses, take note of what you are spending on everything, especially little nickel and dime things. I recommend a debit card for your checking account even if only temporarily and try and go a week or two with *very little* cash. I did this for a whole month and was amazed at the 75c and $1.25 purchases I had made. The check card allowed me to see this quite clearly and that added up to $30 to $50 a month sometimes!
Then, I went through all of those little nickel and dimers and wrote down what I wouldn't do/buy next month that I did the previous month. Now, here is the most important step. I took that amount out and cashed it! I then waited to see if the sky was falling. If it did, then I put what was needed back in right away. If it didn't, I kept it. It may have been $10 a week but that was $40 a month! I used the money monthly and applied it as "extra" to the principal of our smallest interest bearing debt. Once the smallest one was gone, then I started our emergency money by combining the saved income with the smallest debt payment I was already making and started alternating. The debt went down slow and the savings went up slow but it was moving. I was reversing the cycle!
The latest thing we are doing is turning our hobbies into cash rather than an expense. Not all hobbies work this way but ours do. I love martial arts and I've worked hard to achieve my black belt. So, rather than pay for lessons I decided to open a community education self defense course. I make enough money doing this to pay for my continued lessons and contribute a little extra to our debt reduction. My wife loves crafts. She used to spend quite a bit on some things, especially bath products. So, we decided to start making our own. They are much higher quality than what she was purchasing and they are almost 100% cheaper. Now, she sells some to other people by *word-of-mouth* advertising and gives them as gifts at the office for holidays. It is growing pretty well and making as well as saving money.
I, like you, spent a long time, way too long, with my head in my hands totally overwhelmed by the debts that surrounded us. They were draining us emotionally, financially, relationally - everything. We had to take a good long day or so and really grieve the situation and then start making plans, targeting things that destroy what tiny income we spent on small things, leveling the guns on the smallest debts while making absolute minimums on everything else, knowing that their day would come, soon! Putting the leash on interest, we had to actively start planning to take control of it rather than letting it control us. It was hard at first, really hard but the farther we went the easier it got. When you are going in one direction it takes more energy to stop, turn around and go against the flow. If you can save $10 a week and slap it in the bank it will be $40, $80, $120, $160 and before you know it you'll have that emergency money almost there. And then, the unthinkable will happen, there will be an emergency! Gosh darn-it there goes all my planning and work! But wait, this wasn't a crisis at all. All of my bills are paid and we have money for groceries. Financially, you realize that this emergency was only a bump in the road when it could have been a train wreck. Then, you start over again, a little wiser and a little happier with yourself and your new habits knowing that you have just a little more control over your situation than you did before. That's what it's all about. Tiny baby step lead to victories over of debt.
A Book to Help
A book The Wealthy Barber
covers this problem quite well. I found it in paperback on the web. Good luck! Try finding it in a used bookstore just for beginning!
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