Most financial experts agree that one key to a solid financial plan is having an emergency fund in place for when Murphy shows up at your door. The first of Dave Ramsey’s baby steps is to save $1,000 for a starter emergency fund with the idea of bumping that up to 3-6 months after you have taken care of your debts.
To many folks though even saving $1,000 seems pretty daunting. A 2011 CNN money article indicated that only 36% of Americans could cover a $1,000 emergency out of savings.
So if you find yourself among the other 64% and the thought of saving $1,000 seems a little overwhelming where do you start? Well there are really only two ways for improving your financial situation: You either need to find a way to get more money coming in or else you need to reduce the amount of money going out.
Increasing Your Income
Volunteer for overtime
If you have a position where overtime is an option, take advantage of all the overtime you can get. I’m not suggesting you work 60-80 hour weeks forever, but could you do it for a short time with the goal of committing everything extra coming in to your savings?
Get a part-time job
Deliver pizzas. Walk around your neighborhood and see if anyone needs their lawn mowed or their gutters cleaned. Is there a business in the area that might need some seasonal help? Do something to pick up a few more hours each week.
Ask for a raise
If you have been at your current position for a while, ask your boss if it would be possible to get a raise. Be respectful and courteous. Come prepared with concrete examples of how you have saved the company money or how your efforts have helped to bring more money in. Naturally, if your company is not doing well then this might not be the best time and be prepared also for the boss to say no. You might just be surprised though.
Inventory your skills
Consider what skills you have. Are you a teacher? Perhaps you could do some tutoring. Can you fix most anything? Offer to do some part-time handy man work. Good with computers? Start a small business fixing other people’s computer problems. We all have unique skills. Get creative and find a way to earn a little extra money using those skills.
Have a garage sale
Another great way to bring in some extra money is to have a garage sale. Most of us have things sitting around in our homes that collect dust and we’d be just as glad to be rid of them. Have a garage sale. Get rid of some of that stuff. You can always go get more. We are often much better at accumulating stuff than getting rid of it.
Check out eBay and Craigslist
EBay and Craigslist are great places to sell your items too, especially if you have items that are of more value. The benefit of these sites over a garage sale is you have the opportunity to get a lot more people viewing your item.
Sell some gold
Do you have old jewelry laying in a drawer that you haven’t worn in years? Sell it to convert it to cash. The price of gold is down from what it was a few months ago, but you still might be surprised what you could get.
Did you get a large tax refund?
If you got a large tax refund you could use that to jump-start your savings. But better still if you typically get a large refund talk to your HR person at work and see how you can adjust your withholdings. If you got a $2,400 tax refund, that’s $200 a month you are loaning the government interest free.
Track your spending for a month
Commit for one month to track every penny you spend. See, the problem is those little $1 or $2 impulse buys we make don’t seem like much at the time. But added up over the course of a month or a year they can be significant. If you track everything you spend for 30 days and then add it up, you may be surprised at what you find.
Brown bag it
Take your lunch to work. That $5 to $10 a day spent going out to lunch adds up quickly. Plus, taking your own lunch will probably be healthier than fast food.
Could you completely eliminate cable at least for a few months? Think of how it would feel to have the peace of knowing you had money stashed away for a rainy day. Does that trump knowing who got kicked off the island? (Plus you won’t have much time to watch TV while you are temporarily working that extra job or that overtime anyway!)
Talk to your utility companies
Many utilities have special programs that help their customers save money. Call and see what options you have.
Coupons and sales
You don’t have to be an extreme couponer to save money. My wife and I typically save between 25%-30% on our grocery bills simply by watching for coupons for items we frequently buy and checking the sales flyers each week to see when those items go on sale. It really doesn’t take much effort to have a significant impact on your grocery budget.
Shop resale stores
Second hand clothing stores are great ways to save especially for kid’s clothing. Most often this clothing is almost like new for a fraction of the price. Kids grow so quickly that it’s not like they will get years of use out of an item of clothing anyway. And trust me, little Johnny’s psyche will not be permanently scarred by wearing gently used clothing. Many of these stores will also offer store credit if you bring in your own kid’s clothing to sell. Clean out the kid’s closets, get rid of all the things they’ve outgrown, and trade them for “new” clothes.
Check out the library
The library has thousands of books, movies, and music and it’s all free. Save those entertainment dollars you would have otherwise spent.
Save a $1,000 one dollar at a time
I heard someone ask recently how you eat an elephant. The answer is one bite at a time. The same is true of saving money or getting out of debt.
Chances are there isn’t one of these suggestions that will magically put $1,000 in your hands this week. But, a combination of these steps faithfully applied over a short period of time will do it.
Is it easy? No, of course not. It requires sacrifice and perhaps changing some habits. But keep the goal always in mind. Just imagine how good it will feel knowing that if something bad happens, you have the money saved to take care of it. That is financial freedom.