Advertising
Advertising

No Debts! Eight Simple Ways to Save for an Emergency

No Debts! Eight Simple Ways to Save for an Emergency

Most people amass huge amounts of debt during their youth, which they are unable to pay off for many years. There are some who manage to keep their debt in check, or even remain debt free, but once a disaster strikes and there are suddenly some hefty unexpected bills to pay, they too can find themselves in a deep financial hole that’s difficult to dig out of. This is why it is important to have some money squared away for rainy days.

An emergency fund can help you deal with things like your car breaking down, you or someone you love getting seriously ill and spending a lot of time in the hospital, or being invited to an out-of-the-bloom wedding. However, once you have paid the bills, made your credit card and other payments, and spent a large chunk of your salary on groceries, there is often not much left for your emergency fund. Well, fear not my friend, there are plenty of ways to get a bit of extra money and build up a decent emergency fund.

1. Sell your junk, and some of your valuables

Yard sale

    A quick rummage through your basement, attic and garage can reveal plenty of fairly useful stuff that just sits collecting dust. Just because you don’t have any use for it doesn’t mean that you won’t be able to find someone who will. Take all the junk out and organize a yard sale. You can also look at some of your valuable items that don’t have a lot of emotional value for you–things like paintings, home décor, some jewelry, that relatively new tablet that you barely use, and so on. You can use websites, like Ebay or even some forums, to sell virtually anything that you have lying around.

    Advertising

    2. Make a big shopping run once a week

    The quickest way to burn through your salary is to use your credit card for small purchases throughout the day. It’s very difficult to keep track of how much you’ve spent–hint, it’s a lot more than you think–and you’ll constantly think of something else you need or want. If you only go on a big shopping spree once a week, with a carefully crafted list, and use cash for any minor purchases during the rest of the week you will be able to control your spending much more effectively. Buying things in bulk can often save you some extra money on different items as well.

    3. Avoid overpriced big-name brands

    Stone vs iPhone 3G

      While it’s worth investing in more expensive high-quality models when it comes to shoes, electronics and cars, for example, a lot of the products out there are very easy to manufacture and utilize cheap active ingredients and materials–that which makes them work. Such items include toothpaste, shampoo, soap, a variety of skin care products, simple t-shirts, most drugs and workout supplements.

      In order to find the best deals and the most cost-effective options, you just need to be patient and dedicated when shopping. Take your time and really look around. With a bit of trial and error, you will soon find out which items you can and can’t cut corners on. By sticking with the basics and going for functionality over marketing hype, you can cut your shopping costs in half.

      Advertising

      4. Look for another job

      An additional source of income can really help make things easier if you want to save for emergency, without sacrificing much in terms of comfort. You can make use of any skills you might have, or just go with a simple job that doesn’t require a lot of skill.

      Even if you don’t have any particular skills, you have plenty of opportunities to get some free training for a bunch of different professions, from web designer to teacher to nurse aid. These are all jobs that can help you earn a decent amount of money on the side. Be sure to contact your friends, family and acquaintances to see if there are any positions open where you would be a good fit–a bit of networking can yield some impressive results.

      5. Do freelance work

      Freelance work

        If you can’t find the time or energy to work two jobs, you can consider doing some freelance work from home. Even after a long day at work, you can find the energy to sit down at the computer and clock in another 3-4 hours at the computer. Most of us end up spending as much time on the computer playing games or updating our social media profiles anyway, so it’s easy to make a shift to doing something a bit more productive.

        Advertising

        Check out websites like Elance or Freelancer, and you will quickly find tons of available jobs for anything from writing, data entry, editing and translation, to website and app design. If you’ve got a bit of talent and skill, you can make a quick buck. You won’t get enough to support your family with a few work hours a day, but it will be more than enough to quickly build up a respectable emergency fund.

        6. Monetize your hobby

        Another great way to secure some extra income that you can save for an emergency is to find a way to earn money from your hobbies. You may be able to sell all manner of handcrafted décor and jewelry on Etsy, hold martial arts classes in your garage, teach people how to sing or play piano on Skype, sell some unique collector’s items and so on. You can even pick up a new hobby as a means of becoming proficient in a certain area, say woodcarving, with the ultimate goal of earning some extra money out of it. Almost any hobby can be monetized one way or another, particularly if you’ve acquired a good deal of skill over the years.

        7. Start obsessing about your carbon footprint

        Eco conscious

          Even if you aren’t much of a hippie and don’t care about the environment, which you should, there are plenty of hidden benefits to being an eco-warrior, namely cost reduction. You see, the way we get our energy isn’t all that clean or good for the environment. Even electricity is produced in power plants which are responsible for around a third of all U.S. greenhouse gas emissions.

          Advertising

          Our cars pollute the environment, we use up a huge amount of natural resources and create incredible amounts of garbage that gets thrown out. You get the gist of it. Once we start being more eco-conscious we stop leaving the lights on in rooms when we leave, turn off the devices when not in use, never leave the water running longer than it is necessary and use our cars less often.

          A few simple changes around the home can help save a whole lot of money in the long run. Installing and programming a decent thermostat can shave about 25% off your heating bill, while improving your home’s insulation by caulking up windows and doors, using draft stoppers and window insulation film will bring the cost down even more. Invest a bit of time and effort into converting your home into an eco-friendly zone, and try to reduce your carbon footprint as much as you can. This can make a big difference in how much money you spend every month.

          8. Start making good use of piggy banks in your home

          When people say that every penny counts, they are being quite literal, and quite right. Loose change, one dollar bills and a few fives and 20s here and there–you can spend these without even realizing it, or you can put them into your little savings box each chance you get. It is not something that will reduce your quality of life–in fact, you probably won’t even notice it at all–but all this leftover change and a few larger bills will slowly add up.

          Get a big enough container and put a little something in there each day–even just the loose change in your pocket at the end of the day. After several months, when you open it and pour the money out on the table, you will be pleasantly surprised. It’s not uncommon to see people save up a few hundred dollars this way, without any special effort.

          Staying out of debt is a matter of being responsible with your money and being prepared for unforeseen circumstances. A good emergency fund will help you get through tough times. Anyone can save up a decent amount for money for their emergency fund as long as they heed some of this basic advice.

          More by this author

          Ivan Dimitrijevic

          Ivan is the CEO and founder of a digital marketing company. He has years of experiences in team management, entrepreneurship and productivity.

          40 Amazing Date Ideas for Valentine’s Day 50 New Year’s Resolution Ideas And How To Achieve Each Of Them 8 Fun and Unique Birthday Party Ideas for People in Their 20s 50 Cleaning Hacks for Your Home That Will Make Your Life Easier 9 Unexpected Benefits Of Foot Massage That Make You Want To Have One Now

          Trending in Money

          1 How to Set Financial Goals and Actually Meet Them 2 25 Killer Sites For Free Online Education 3 10 Recession-Proof Debt Consolidation Tips 4 The Definitive Guide to Get out of Debt Fast (and Forever) 5 25 Easy Tips on How to Save Money Fast

          Read Next

          Advertising
          Advertising
          Advertising

          Last Updated on September 2, 2020

          How to Set Financial Goals and Actually Meet Them

          How to Set Financial Goals and Actually Meet Them

          Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

          In this article, we will explore ways to set financial goals and actually meet them with ease.

          4 Steps to Setting Financial Goals

          Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

          1. Be Clear About the Objectives

          Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

          It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

          Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

          2. Keep Goals Realistic

          It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

          It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

          3. Account for Inflation

          Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

          Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

          For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

          Advertising

          4. Short Term Vs Long Term

          Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

          As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

          By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

          How to Achieve Your Financial Goals

          Whenever we talk about chasing any financial goal, it is usually a two-step process:

          • Ensuring healthy savings
          • Making smart investments

          You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

          Ensuring Healthy Savings

          Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

          This is the focal point from where you start your journey of achieving financial goals.

          1. Track Expenses

          The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

          Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

          If you’re not sure where to start when tracking expenses, this article may be able to help.

          2. Pay Yourself First

          Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

          Advertising

          Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

          The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

          Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

          3. Make a Plan and Vow to Stick With It

          Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

          Nowadays, several money management apps can help you do this automatically.

          At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

          Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

          You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

          4. Make Savings a Habit and Not a Goal

          In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

          Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

          • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
          • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
          • If you go shopping, always look out for coupons and see where can you get the best deal.

          The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

          Advertising

          5. Talk About It

          Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

          Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

          6. Maintain a Journal

          For some people, writing helps a great deal in making sure that they achieve what they plan.

          If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

          When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

          Making Smart Investments

          Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

          1. Consult a Financial Advisor

          Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

          Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

          2. Choose Your Investment Instrument Wisely

          Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

          Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

          As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

          Advertising

          3. Compounding Is the Eighth Wonder

          Einstein once remarked about compounding:

          “Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

          Use compound interest when setting financial goals

            Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

            Start saving early so that time is on your side to help you bear the fruits of compounding.

            4. Measure, Measure, Measure

            All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

            If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

            Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

            The Bottom Line

            Managing your extra money to achieve your short and long-term financial goals

            and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

            More Tips on Financial Goals

            Featured photo credit: Micheile Henderson via unsplash.com

            Reference

            Read Next