It’s happened to many of us. You’re happily living your life, minding your own business, then life throws you a gigantic lemon that hits you right in the gut. Something has happened and deep down inside you know that you’re not in a good position – financially – to handle it.
Whether your car broke down, an appliance stopped working, or you’ve found yourself in a depressed financial market (which seems to be more common than it should be – hey, 2008!), what will it take for you to turn that lemon into lemonade? Save more money and create an emergency fund.
Here are 5 ways you can boost savings by cutting back on normal expenses:
- Start with a budget.
A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis. But that’s something only large corporations need to do, right? WRONG.
Creating a personal budget will allow you to visualize how much money you have coming in (revenue), how much money you have going out (expenses), and how much you have left over. That amount left over can be used for many things, like savings. What’s great about a budget is that you’re in charge and it can be flexible. It’s unlikely that any two months will be exactly the same, so don’t put too much pressure on yourself to get it right the first time.
- Assess needs and wants.
Now that you have a budget put together, areas in which you’re over-spending should be staring you right in the face. Now it’s time to figure out what it is you actually need to keep in your budget and which wants can be set aside for a later date.
Start with these four needs: shelter, utilities, transportation and food.
Then, add in other recurring monthly expenses that are crucial for your productivity. Anything that doesn’t contribute to your success in this moment can be removed from the budget and added back in once you have your emergency fund built up. That might mean not getting a new outfit and instead “shopping” your closet. It might mean declining an invitation to a night out that could cost hundreds, and instead cooking at home and watching something on tv.
These little sacrifices now will pay off in the future because once you have your emergency money set aside, you can spend more confidently on things you want.
- Sell your stuff.
Now that you’re no longer buying things you don’t need, it’s time to clean house. Do you have clothes you no longer wear? Have an old kitchen appliance you no longer use? Have a gift from 3 years ago that you’ve never taken out of the box?
Selling items you don’t use can quickly add up to a nice deposit into your savings account. And selling online has never been easier than it is now. Thanks to the digital age we’re in, there are many different apps you can download that allow you to list anything you want to sell. You can request/receive payment in the blink of an eye using one of the many money transfer apps out there.
Take a good look at what you own and no longer use. Say goodbye to whatever you can part with and say hello to some extra cash.
- Plan your meals.
Food will be a significant expense every month, but there are ways to manage it responsibly. First, shop your pantry, refrigerator and freezer. Take an inventory of what you have (that isn’t grossly expired) and can be used for future meals. Then, plan out your meals for 3-5 days at a time. Be sure to prioritize using food you have on hand so when you go to the grocery store you can go with a specific list. This will help reduce spending on food you don’t need or duplicating spending on food you already have.
- Ditch the plastic for paper.
I’m not talking about ditching plastic bags. I’m talking about starting to use cash instead of credit/debit cards. How many times have you swiped a card and walked away not knowing how much you spent?
Spending with a card is so easy that we don’t pay attention to how much we spend. Studies have shown that people also spend more when using a card because focus is given to the benefit of the product instead of the cost. If you have cash in hand you, know exactly how much you have and actually focus on the price of an item to make sure you can buy it.
A lot of expenses are automated or done online and that’s fine. Choose a few categories in your budget and commit to using cash.
When it comes to finances, by doing all of these things you’ll set yourself up to be in a position of financial strength the next time one of those lemons comes your way.
About Jason Ewing
Jason Ewing is a corporate finance professional but enjoys helping others improve on personal finances. He advises small business owners and individuals, only sharing advice or techniques that he has tested and found success. He enjoys connecting with new people and can be reached on Twitter and LinkedIn.