Take on a hobby that you can translate into dollars. Can you walk a
neighborhood dog? Teach basket weaving? Host a dining room? Baby-sit for
your sister’s kids? Do Computer graphics? Consider which of your talents might
be worth a few extra bucks and then go out there and do it.
Take on a part-time job. The holidays are soon coming up, and many
people supplement their salaries with part-time retail jobs. Just don’t spend it
all on holiday gifts and be sure to bank it into your savings.
Spend more wisely. We all have our own ways of wasting money. Now
see how you can eliminate the ones that you wouldn’t miss. Just saving the
dollar you would normally spend on that cup of coffee each day adds up.
Borrow from a trusted friend or relative. The interest rate is low to nil,
the cash is quick—but guilt is even higher. Be sure you have a plan for how
you’re going to pay back the loan even before you approach them.
Nowhere to go but up
You can spend your precious time crying in your milk wondering why you have
been singled out in this way or you can get busy and look at how this could have
happened to you in the first place. You will need to face some touch answers if
you want to avoid future financial crises.
Suffering a serious financial crisis is an excellent time to self-assess. Ask
yourself where you went wrong, where you’re not paying attention—and how
you might be setting yourself up for future financial setbacks. Understanding
the answers to these important questions will help you out next time around
should the same befall you.
Be prepared before the crisis starts. You won’t be able to anticipate every time
a financial burden lands in your lap, but, if you want to be cushioned against it,you have to anticipate the unanticipated.
Be very careful. An emergency fund is set up for . . . emergencies. It’s not
supposed to be depleted on a whim and every month. Take a closer look at your
expenses these last few months, and if you have had to lean heavily on your
emergency account to pad your budget, it’s time to rethink your money
management issues and in a hurry.
Pay special attention. Take a page out of this lady’s book…she noticed that her
towels were slightly singed when she took them out of the dryer one day.
Instead of calling the repair guy, she shrugged it off—until the next load caused
her entire house to go up in flames. We all have these same moments where we
glimpse a potential crisis hovering on the horizon and do nothing until it is all
too late. Pay attention to the smaller details and avoid the larger calamities.
Plan further ahead. Your clutch is likely going to give out every 80,000 miles or
so. The roof can give out every 5 to 20 years. A vacuum cleaner might give up
the dust in as much as five. Avoid the obvious and pay excessively later. It is
your call.
Your five-year-old desktop is getting creaky. You could wait until it dies.
However, according to Murphy’s Law of Money, it will expire at the worst
possible moment. Either way, paying for a new computer might not be part of
the budget so planning ahead gives you some control over when you take the
hit. Start to plan today for what you know will be coming—come hell or high
water. Plan smartly for the inevitable.
Start to Build your Emergency Fund
Finding money during an emergency can be very difficult if you fail to plan.
Establish emergency savings in both good times and in bad. The chance is very
good that you will be called upon to put out a sum of money on the spot and
when you least expect it.
It is a very good rule of thumb to sock away three to six months’ living
expenses. You can also use this same money when you’re faced with major,
unplanned expenses such as a car that breaks down or much needed college
funds.
The purpose of this type of savings plan is to put the money away consistently,
and then tap into it for true emergencies. The success of this type of long-range
savings plan will depend less on the rate of return than on, day-by-day, putting
the money away and then leaving it there for a true emergency.
Lock it away and then hide the key.
People who are living on a fixed-income will have the toughest time setting
aside money for emergencies. If you can manage to just squeeze out another
$0 or $20 each month and sock it away into a money market account, it’s
worth doing.
If you decide you need $2,000 in an emergency fund, look at what you can
afford to sacrifice each month from your current budget and then look at that
sum of money as a bill to pay yourself. Decide on a monthly amount and then
put that same amount aside every month and then watch it grow.
Once you have reached your goal of $2,000 you’ll now be in the habit of putting
away that extra set amount each month. Keep on doing it.
Financial planners echo the idea of treating your emergency fund as a bill. Put
the money away each month, but don’t be tempted by the latest sale. You are
not to touch the amount, except for in an emergency.
Putting money aside on your own is hard. Retirement plans are successful
because the money comes out of your paycheck before you can get your hands
on it and because there are taxes and penalties for early withdrawals.
Stashing money away in an easy access money market account takes discipline.
Limit your access to the emergency fund. You can have immediate access to
some of the money, but not all of it. The bulk of the fund is to be used, strictly,
for emergencies and nothing else.
Once you have saved up about two months of living expenses, move one month
of expenses to a one-month CD. When the CD matures, roll the principal and
interest into another one-month CD. Your savings will grow well this way.
As you continue making regular payments to the emergency fund money
market account, you will soon have another month of living expenses that can
be used to invest in a two-or three-month CD. If you are wishing to set aside six
months of expenses, continue the process until you can comfortably purchase
a six-month CD. Your savings will accumulate quickly this way.
Building your Emergency Fund
Before you start stashing away your money for an emergency, the first step in
building your emergency fund is to figure out just how much money you have
to put aside in the first place.
People often don’t know where they’re spending their money. Once you can
account for every penny, it’s a lot easier to decide where you can cut back and
start to save.
You can’t always account for emergencies so it is more critical to build the fund
as fast as possible.
Say Good-bye to Credit Cards
One of the best ways to save money the fastest is to clip up all of those
expensive credit cards.
Credit cards are perhaps one of the most expensive forms of money. A very
good rule of thumb is, unless you pay off your credit card bills each month,
don’t use the cards for anything you can either eat or wear.
Another good rule of thumb is to consolidate your debt. If you have several
credit cards, each at different rates of interest, why not fold them into a home
equity loan and then write off the interest payments? This is a good way to
begin an emergency savings fund.
Here are some good suggestions for budget trimming that can work for
just about everyone:
When mortgage rates are especially low—consider refinancing your mortgage
and, while you’re at it, your car loans, too.
When you live in an area that has good public transportation, see if you can get
by on one car instead of two.
Make your current car last. With good maintenance, you will be able to replace
it every six to eight years instead of every three years.
Do a periodical energy check on the house. Replace all essentials such as
cracked storm windows and renew the weather stripping.
Cancel subscriptions to magazines or newspapers that you’re not reading.
Eat out less often and learn to be creative using leftovers. If you stop for a
morning cup of coffee at the local Deli, make coffee at home.
For the kids weekly allowance cut it back. Explain to them that every member
of the family needs to contribute to the emergency fund for it to work.
Remember, too, that you will be teaching your kids to be frugal and to
develop good spending habits.
Saving money on your own brings many rewards, and like most other things, it
becomes easier over time. In the end, your entire family will have peace of
mind that comes from knowing you have financial resources set up and ready
for when times are the toughest. The sacrifices you make now will be realized
when you need the most comfort as a family.