In tough economic times, having an emergency fund in case the worst happens is a vital part of preventing the worst case scenarios. While you might not expect to lose your job, having at least one year or more of living expenses saved up ensures that you will never need to worry about getting fired, a sudden medical expense or any other potential emergency that might arise. It is particularly necessary in a time when the job market is slow and if you lose your job, it might take as long as a year to find a new job.
For some, saving money is not challenging, particularly when they make enough money to far exceed their living expenses. For anyone who is living from paycheck to paycheck or only has a little extra each month, managing to save money is more challenging that it sounds.
Looking at the Finances
Break down all of your normal monthly expenses. You might need to keep all of your receipts for a few months to determine where you spend and how much you are spending.
Write down the expense name and the amount next to it. For example, you might write “Rent = $1,500” to show how much of your income goes into your housing. When you get to groceries, look at the receipts and highlight any extras you might have purchased. Extras might include chips, candy, gum or soda that you do not need, but like having in the house. Other extras in your spending might also include buying a daily coffee at the local donuts shop or the other small luxuries.
Subtract the total amount of all your expenses from the amount you make in pay checks for the month. This will show how much you are able to set aside based on current spending habits. If you are short near to the end of the month then you can always look at payday loans as an option.
Lowering Expenses
Saving money often requires taking action to lower your personal and family expenses. Depending on your spending habits, you might have numerous extras you can cut or you might have options available to lower your expenses without cutting out the little luxuries.
One method of lowering expenses is through lowering your utility bills. Buying energy efficient light bulbs, turning off the lights and unplugging appliances when they are not in use will dramatically lower the electric bill. Furthermore, turning off the air conditioner or turning down the heat when you go out of the house, even if you only plan to go out for a few minutes, results in lower electric or gas costs.
Turning off the water while you brush your teeth or taking a shorter shower will gradually lower your water costs if you pay for water. For those who buy bottled drinking water, buying a filter and using the tap water in the filter will cut back on the cost while still providing safe drinking water.
The other method of cutting back on expenses is through giving up some luxuries. Look at the extra you’ve noted from your monthly receipts and cut back on the extras. For example, if you buy a cup of coffee for three dollars every morning for five mornings, you are spending $15 a week or $60 a month. Cutting back to drinking coffee outside once a week will save $12 a week, which adds up to $576 extra in the bank at the end of the year. Bringing your own coffee from home saves even more.
Conclusion
Adding to your savings account does not mean you need to sacrifice all of your luxuries. Instead, it means keeping the luxuries as a special treat or lowering other expenses, like the amount of electricity, gas and water you use.