It’s no surprise why more than 80% of Americans are living paycheck to paycheck. After mortgage/rent, utilities, car note, insurance, school loans, groceries, cable and internet, etc., your take home pay is nearly spoken for. And this doesn’t take into account any unexpected expenses that are bound to pop-up.
While many of us have good intentions when it comes to savings, roadblocks can often impede our savings goals when bad spending habits and emergencies happen.
Here are five ‘solutions 2 save’ you from derailing your savings plan and a few tips to get back on track when you stumble.
Solution #1: Creating a Clear Budget and Savings Plan
Don’t leave your budget nor your financial goals to chance. By creating a clear savings plan that is aligned with your budget, you are more likely to stick to it. It’s like the age-old adage, “If you fail to plan, you plan to fail.”
Our R.E.A.L.I.S.T.I.C Budget Method is a clear, inexpensive, five-step process that helps you accomplish two goals in one: a realistic budget AND a savings plan that provides space to set aside earmarked funds for you discretionary income (or money left over after expenses).
Solution #2: Planning for Emergencies
Most Americans have not saved enough to cover a $1,000 emergency. This fact alone supports why many people have an over-reliance on credit. When you can’t afford to pay for emergencies, many resort to ‘robbing Peter to pay Paul.” This cycle of borrowing keeps many people in the credit trap, constantly paying late fees and/or causing rifts in relationships due to inability to repay loans.
While there are many rules of thumb for how many months of savings you should strive for when planning for emergencies (e.g., 3, 6, 8 and 12 months), the most important thing is to GET STARTED. Even if you are allocating $100 per month for emergency savings, starting now will get you at least $1,200 in one year. And you can continue building from there.
When life happens (and it will), you will have the funds to tap for emergencies. When replenishing your fund, consider using small windfalls of cash (e.g., bonuses, tax refunds, etc.) to reboot your savings while continuing your monthly contributions.
Solutions #3: Allocating Funds to Pay Off Debt
Paying off debt, such as credit cards and car loans, can lessen your ability to save in the short term. However, allocating funds to pay off debt directly within your budget lessens the blow and can be a wonderful strategy for accelerating your debt repayment when done as a snowballing strategy.
Using our FREE R.E.A.L.I.S.T.I.C Budget Method Companion Tool, you can use the second tab to list of all your debts and their associated interest rates. By following a simple repayment strategy, either working to pay off the debt with the highest interest rate first or starting with the smallest debts, you can systematically knock down your debits and use the monies freed up from paying off the first to snowball the second, third and so on.
Solution #4: Avoiding Unneeded Sales Items
Rationalizing purchases by saying, “But it was on sale,” adds unneeded and unwanted expenses to your monthly budget. Buying toiletries in bulk will save on your pockets and keep your pantries full. Instead of buying those unneeded items on sale, consider tossing those savings into a jar and watching your coins add up.
Solution #5: Making Memories vs. Making More Debt
With the holiday season just around the corner, many people are already making their lists and checking them twice. But, for many holidays, it’s the thought that counts. Consider ways to make memories vs. racking up more debt. Simple things like homemade meals or photos framed with artistic embellishments are inexpensive and special touches to any occasion.
And with Halloween, Thanksgiving and Christmas only a few months away, consider bulk shopping for candy and reusing old crafts for decorating. Also consider bargain trinkets ($5 and below) vs. $50+ gifts. Gift swaps and giving circles are also ways to save during holiday season. You can also swap décor with a friend when looking to add a different look and feel to your home.