Most of us are familiar with the typical advice of professional financial advisors and authors telling us how to save money. Pay yourself first, save 10 percent or more of your income, even saving $5 a month can add up but start saving anything is the important habit to form now. Many reading advice offered in the many financial books out there feel it does not apply to them; after all you have to have money to save money. When dealing with a lifestyle of living paycheck to paycheck, there simply just is not any money that can be saved. After all you can not squeeze blood out of a turnip….or can you?
While it may be much harder on a low income, it still is possible to build up a savings of some sort. Now you may say, well yeah but every time we get a certain amount built up something comes along and wipes it out every time. That may be true, Murphy seems to know when we have money set aside, but where would you be if that savings would not have been there at all? Hopefully with perseverance and some ingenuity, you can start building a savings larger than our friendly visits from Murphy. Yet when income equals the exact amount of expenses each month, how would one go about establishing a savings at all?
Starting To Save When Money Is Tight
When money is beyond tight, start with a sealed jar or two or three and give them a labeled purpose such as a new car fund, emergency fund, home repairs or what ever you feel is of high importance to you. These are funds that you deem as important but just do not seem to see any way to fit them in your typical monthly budget. Decorate the jars anyway you wish, clearly labeled for their purpose and seal the lid on it with duct tape where money goes easily in but not easily out. Some like clear jars such as a large gallon pickle jar so they can see the money build. Some like a solid container to where they are surprised when they do break them open, how much they saved. Use whichever you prefer and will work best for your needs. You could also open an online CIT Bank account with subcategories if you like; the idea is simply to make it easy to put money in but harder to get it out. Now what money will go into these sealed jars?
- Create a budget – this is the first step to knowing where extra money will come from. You can enlist the help of a friend or create it yourself. If your paychecks fluctuate a little then use an average amount they normally are. For example if they fluctuate from $420 to $500 a pay period, than either use the lowest amount or compromise with say $450. Also look at your budget keeping in mind what your typical utility bills are and what you normally spend in food and entertainment each month.
- The first thing now is each time your paycheck is more than your budgeted amount, put the difference in the jar.
- Find ways to earn extra money such as Google Adsense, selling items on Craigslist, a Garage Sale, returnable cans, gather up scrap metal laying around to cash in, anything you can think of and put extra earnings into the jars or your CIT Bank account.
- Now challenge yourself to find ways to create savings. Set goals to reduce your electric bill by 10%, reduce your food bill by $20 a month, or change phone plans if possible if it creates a savings. Cut entertainment or eating out by $10. Start small and each time you find a way to save money and reach your cutting back goals, it goes in the jars or CIT Bank account . Start small and each time you reach the goals, set new ones for the next month for even larger savings. Constantly challenge yourself to reduce expenses to free up the extra cash.
- Found money, bonuses, gift money – all extra money you never would have used goes into the jars or CIT Bank accounts .
If you use these methods, even when money seems beyond tight, you will be surprised at how much and how fast these funds will build. In some cases it may be quite a substantial savings. Now all that is left is setting the date in which to be able to use the funds depending on what your goals are. You may want to save for a year for an emergency fund and then put it into a savings account you don’t touch except in case of emergency. A family vacation may have you set the date of savings for one year and then plan the vacation around the amount you managed to save. A down payment for a home might be an open jar date of 3 or 5 years. The goal you establish for the funds will determine the open date for when you want to use it.
Carrie Hetu is not a financial expert, but has been passionate about finances since the age of 19 years old when a neighbor introduced her to taxes. From that time, she has made a point to increase her financial literacy into areas of frugal living, investing, real estate, budgeting and passive income. She currently blogs at Poor to Rich a Day at a Time and Simply Homeschooled.