New Year's Resolution: Create an Emergency Fund.
At no time of the year is frugality so highly praised. Everyone is recovering from the hang over of the holidays and most of us still look at our accounts and bills with more than a little disappointment. So you meal plan for a few weeks, clip some coupons, skimp on extras... but then you get tired, and you fall back in to routine. Cutting back is hard, and saving when you don't have a lot to begin with is even harder. With my son growing, and hopefully more in my future, I need a strategy for just that. Getting more for less, and putting something aside at the same time.
A tall order, but if there's anyone who values a bargain more than me, I'd like to meet them, so I've got a plan. It's a three part-er, and it goes back to the core of saving smart since our grandparents time; spend less than you make, pay yourself first, and a penny saved is a penny earned.
Spend less than you make
The first step to living within your means is know exactly what that amount is. Most people don't. Sure you might know your hourly wage, or your pre-tax annual salary, but do you know how much you actually have to spend on a monthly basis? Take a look at a few months' bank statements or pay stubs to figure out your family's actual income and you might be surprised, but it's better to know. Next, use an excel program, interactive worksheet, or even just a piece off paper to list every fixed expense you have. Things like your rent or mortgage, your utilities, your car payments, your cable package, etc. They add up very quickly. It's a lot of work, but it can be done in a few hours with dedication, and it is worth the trouble. Now is a perfect time to also list somewhere so that you can predict your payment schedule and not be caught off guard when something big is deducted from your account.
The income less those fixed expenses is always much less that you were hoping for. Remember, what's left still has to stretch over all your variable needs from groceries to gas money, so it might be much tighter than you can manage. If so, it's time to take a hard look at your lifestyle to see what you can cut down or out. You might want to consider this, even if you are not as pinched. Paying less on hydro and internet is never a bad choice (see our tips here), and the more money you have to work with for the next steps, the easier your saving lifestyle will be.
Pay yourself first
Once the reality of your budget is clear (or even if you would rather remain in the dark), you now have to carve it even further. A portion of that money, no matter how small, has to be set aside for savings. Think of it as another bill - an obligation to your future self in case you-know-what hits the fan. You can never predict when the transmission is going to break, or when family is going to stop in for a visit (both of which happened to us this December), so you have to plan ahead.
You might not have a whole lot to spare, but $25 every two weeks over a year is $650 plus any interest and spare change you're able to throw at it. A very good step in the right direction. Put it somewhere that you know will be reserved for those unexpected emergencies. The bank can help you with a vehicle like a Tax-Free Savings Account (TFSA), or simply an account that you do not have access to with your bank card. A big piggy bank will do just as well, if you have the willpower. The point is, this is for you, don't cheat.
A penny saved...
Once you start to hear the heavy jingle of that piggy, or can see the progress of your online account, work hard to keep it growing. You might not have the patience for coupons or the time to wait for a mom swap, but there are ways to cut back this week without feeling the pinch. This is where you might have to think a little outside the box, but it's worth it.
- Learn the art of the casserole; skip a week's groceries and put your reserves of cans and frozen goodies to use with a little help from Pinterest.
- Buy an almanac; before we could get whatever whenever, our grandparents had to know what was in season. It's still the very cheapest and healthiest way to eat!
- Go local; enjoy time with your family at a park or community event. You'll get some exercise and new perspective on your city!
- Count it out; if you think you need a new shirt or sweater, start by counting the number you have. You might find some you forgot you had, or just realize your drawers are stuffed!
How do you keep your family on budget? We're always looking for ways to save a buck! Join the conversation on Facebook at www.facebook.com/wiydb