The loss of an income, emergency or any catastrophic event can be devastating to finances. Most experts recommend enough funds available to cover at least three months worth of bills. Despite this, many people live paycheck to paycheck and don’t have any money set aside for emergencies. They may believe that they cannot afford to put money back or do not know where to start. However, there are a few small tips that almost anyone can use to help them get started.
Review the Budget
Reviewing the current budget is a must to get started. Some consumers are not even aware of where there money is going. Evaluating the budget is a necessity because it allows the person to see how money is being spent, how much and gain a general idea of the amount that can be afforded to an emergency fund. Put your budget in writing or use a budgeting app to help you get started.
Cut Unnecessary Expenses
Cutting unnecessary expenses can be a great way to begin saving. Even if you have not sat down and taken a good, hard look at the budget, you may still initiate this step. For example, reducing the number of restaurant meals, brown bagging lunch and skipping the expensive cup of coffee on the way to work can really add up. Some people love to go out to movies or games on weekends. These types of entertainment expenses also add up quickly. Set aside a small budget for entertainment and once it’s gone, it’s gone.
Be Mindful of Credit and Debt
This is a necessity. Review debts and obtain a credit report. Errors on these documents can cost big time, taking real money that could otherwise be saved. If you have a lot of debt, you might be spending quite a bit of money on just finance fees or interest rates. Those with significant debt problems may want to consider contacting a trusted credit repair company to start working out payments and improving their credit.
Have a Plan
Money will not save itself and without a plan in place, most individuals will not either. Coming up with a specific plan as to how much money needs to be saved with a time frame can help. Then, further break it down into how much should be tucked away each paycheck in order to reach this goal. Look at your budget and decide how much you can safety put into savings then have that amount automatically deposited into a separate account and don’t touch it!
Get Everyone on Board
Those that have a family should get them all on board with the program. When everyone is on the same page, they can contribute as well. In addition, allowing them to make suggestions and pitch in can make saving money something that involves everyone. The whole family being involved is vital. If one person sets a good budget, but the other ignores it and spends money elsewhere, then your savings plan won’t work.
One of the last and most important tips to getting started with a savings plan is committing to do so. Saving money is not necessarily an easy feat. Sometimes it can be difficult to put needs ahead of wants. Therefore, in order to kick-start a rainy day fund, it is important to make this into a real commitment. Once you have your budget in writing, agree to stick to it!
Even if you have been living paycheck to paycheck, there are most likely spending habits that you can revise. Take a close look at your income and spending. Cut spending where possible and you will be well on your way to having a decent rainy day fund.