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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.

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    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.

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      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.

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        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.

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          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.

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          Ivan Dimitrijevic

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

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          Last Updated on August 20, 2019

          How to Set Financial Goals and Actually Meet Them

          How to Set Financial Goals and Actually Meet Them

          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. And 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 on how to set financial goals and then actually meet them with ease.

          5 Steps to Set Financial Goals

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

          1. Be Clear About the Objectives

          Any goal (let alone financial) 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 is for. It could be anything like kid’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, however small they may be, that you foresee in the future and put a value to it.

          2. Keep Them 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 out of the line will definitely hurt your chances of achieving them.

          It’s important that you keep your goals realistic in nature for 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”. And this quote sums up the best what inflation could do your financial goals.

          Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

          For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

          4. Short Term vs Long Term

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

          As a rule of thumb, any financial goal, which is due in next 3 years should be termed as 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.

          More on this later when we talk about how to achieve financial goals.

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          5. To Each to His Own

          The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

          It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

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

          11 Ways to Achieve Your Financial Goals

          Whenever we talk about chasing any financial goal, it is usually a 2 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. So let’s get down to ensuring healthy savings.

          Ensuring Healthy Savings

          Self realization is the best form of realisation 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 monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

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

          2. Pay Yourself First

          Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

          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 then manage all the expenses from the rest.

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

          Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

          3. Make a Plan and Vow to Stick with It

          Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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          Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

          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. Rise Again Even If You Fall

          Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

          If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

          Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

          All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

          5. 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 counter intuitive to many but there are some deft ways of doing it. For example:

          Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

          If you are travelling buff, try to travel during off season. Your outlay will be much less.

          If you go out for shopping, always look out for coupons and see where can you get the best deal.

          So 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.

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          6. 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. And it would be rather easy to lose the grip over your discipline.

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

          7. Maintain a Journal

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

          So 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.

          Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

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

          At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

          Making Smart Investments

          Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

          8. Consult a Financial Advisor

          Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is 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.

          9. Choose Your Investment Instrument Wisely

          Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

          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.

          Do you remember we talked about bifurcating financial goals in short term and long term?

          It is here where that classification will help.

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          So 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 as compared to equity instruments.

          10. 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.

          So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

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

          11. 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; taking stock of how our investments are doing.

          If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

          If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

          Do 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

          This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

          As you can see, all it requires is discipline. But guess that’s the most difficult part!

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          Featured photo credit: rawpixel via unsplash.com

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