Aspiration & Struggle
The Importance of Saving Money While Struggling to Make Ends Meet
It’s a mantra used by personal finance experts and parents alike: “Save your money!” But the importance of saving money often feels pointless when you’re struggling just to make ends meet. Many put off saving for when they start earning more. But the necessity of starting your savings now couldn’t be more prudent. And with many starting salaries for entry-level positions being so low, how is it possible to save when all of your money is already dedicated to bills and living expenses? The first step is to make a simple list.
The All-Powerful Budget
Take an hour to organize your financial situation. Draft up a list of your debts and mandatory bills such as rent, utilities, cell phone, and cost of transportation. Leave no stone unturned, no matter how small. If you pay $8.99 for a monthly Netflix account, add it to the list.
Then insert how much you earn each month and subtract your expenses. The money remaining is for living expenses and savings. If you’re in negative, it’s time to figure out where to start slashing.
Living in the red? It’s time to make some tough calls. Analyze your monthly payments and debts to see how you can free up some money.
For example, do you have an expensive phone plan? Try switching to a provider like Republic Wireless. It may mean giving up your fancy iPhone, but could result in contract-free phone plans between $5 and $40 a month, which is perfect when you’re paying off debt.
Slashing your monthly expenses may also include ditching cable and switching to an Internet-only package. Still in the red? Try consolidating your high-interest rate credit cards and debt payments with a personal loan or utilizing a zero percent balance transfer offer.
The money you save each month needs to be applied directly to your debts with a small fraction (even just five dollars a month) going into savings.
Pay Yourself First Strategy
One of the best tricks to save money is to tuck it away before it gets deposited into your checking account. Set up automated savings deposits with your employer to get a percentage of each paycheck put directly into a savings account. If automated savings isn’t an option, you need to have the willpower to do it yourself each time a paycheck rolls in.
You can increase how much you save once you start earning more or paying down debt.
Save Unexpected Money
Get a nice windfall of unexpected cash recently? Whether it’s your tax refund or a $20 birthday check from grandma, this money should be split between debt repayment and savings. A good rule of thumb: Put 75 percent towards debt and 25 percent towards savings.
Build an Emergency Fund
The importance of saving money when you’re in debt becomes clear when an emergency arises. And an emergency will arise: A car part may bust, a bone may break, or a job may be terminated. The unexpected can easily send you deeper into debt unless you have a savings cushion.
You don’t need to have three to six months of living expenses tucked aside while you’re paying off debt. However, prioritize having $1,000 saved up for when the unexpected occurs.
Try to Increase Earning Power
It’s easier said than done, but do your best to pick up extra shifts, find a side job, or even just sell items you don’t need anymore on sites like Tradesy, ebay, craigslist, or Threadflip. Split the extra money 50/50 between debt and savings until you hit your $1,000 savings goal. Then put it all towards debt until you’re out of the hole.