When financial “gurus” start advising everyone to alter their strategies and save EIGHT months worth of expenses (or more) in their emergency fund, most people look at it as an impossible task and write it off. For a couple earning $50,000 per year AFTER taxes (approximately $75,000 pre-tax), saving 10 percent per month would take them over 6 years, assuming today’s dismal interest rates and that they didn’t have to tap their fund for an emergency.
So how do you save for an emergency fund when you’re already stretched to the limit? Here are 52 potential ways you could save a few bucks. Each one might not apply to you and each one might not amount to that much cash, but taken as a whole, they can really add up in a hurry!
1. Get back to basics. Cancel all the extra services on your landline that you don’t need, such as call waiting, caller ID, call forwarding and three-way calling. If you almost exclusively use a cell phone, cut the land line!
2. Call 411 for free. Do you make a lot of 411 calls from your cell phone? Typically, cell phone providers charge a fee every time you call 411. Instead, you can dial (800) GOOG-411, or (800) 466-4411, to get the listing you want for free. I have it as a speed dial on my cell phone.
3. Stop going the distance. Drop your long-distance carrier altogether if you make infrequent long-distance phone calls. Instead, use a prepaid phone card, a dial-around service or even your cell phone if you’ve got the minutes.
4. Examine your cell phone usage. Are you exceeding your allotted monthly cell phone minutes each month or using far fewer minutes than your plan allows? Re-evaluate your calling plan and make changes according to your needs. If you’re paying for a household of users, consider whether everyone really needs his or her own line.
5. Lose the huge tax refund. That annual $2,400 tax refund may feel great, but you’re depriving yourself of $200 every month of the year. Don’t give Uncle Sam an interest-free loan! Adjust your withholding allowances so that you’re keeping an appropriate amount of money for yourself each month, then put the extra money in a high-yield savings account to make it work for you throughout the year.
6. Pay with cash. Unless you’re in the habit of paying your credit card bill in full each month, don’t use the cards for anything you can eat or wear. Try to pay in cash to make yourself aware of how much you’re spending.
7. Live one pay raise behind. Rather than spending that 3 percent cost-of-living raise, add it to your emergency fund. And the next time you get a raise, increase your disposable income by the amount of your last raise — half of it if you’re really hard-core!
8. Shop smarter. Select articles of clothing you can use to make multiple outfits, in versatile colors that are easy to mix and match. Buy items that serve a dual purpose, such as work and weekend wear, if possible.
9. Minimize dry cleaning costs. Stick to buying wash-and-wear clothes when you can, and save the dry clean-only clothes for special occasions. If possible, try not to buy clothes that need alterations, as those costs can add up quickly.
10. Turn unworn clothes into money. Take the clothing you or other members of your family no longer wear — that’s still in good condition — to a consignment shop. Or have a garage sale.
11. Plan your errands. Combine errands into one trip and plan your stops for the most-efficient route. You’ll save yourself time and money.
12. Buy retread tires instead of new tires. Retread tires are cheaper, safe and environmentally friendly.
13. Take it nice and easy. Your vehicle will burn less gas if you accelerate and brake gradually.
14. Analyze your homeowners coverage. Check if there’s any coverage you have that you can do without. Consider raising your deductible to save money on your premiums.
15. Compare health plans. Working couples can reduce out-of-pocket medical expenses and premiums by carefully comparing the costs of the benefits offered by each employer to find the best deal.
16. Behave and get a discount. Ask about discounts if you’ve gone a certain number of years without an accident or ticket or drive fewer than a certain number of miles each year.
17. Keep a good credit rating. Many insurance companies use your credit rating to determine whether to insure you and how much to charge.
18. Get rid of private mortgage insurance. If you have 22 percent equity in your home, you could qualify to start saving that money.
19. Adjust your auto coverage. If the kids have left for good, take them off the policy. If they are simply away at college, ask about a distant student credit.
20. Good grades can pay off. For students who keep cars on campus, some insurance companies offer “good student” discounts to students who maintain a certain grade point average.
21. Look for new restaurants in town. They may offer grand opening specials. You could always use Restaurant.com to get $25 gift certificates to great restaurants for $10 or less!
22. Hunt for discounts. Check your local newspapers for advertisements of lunch and dinner specials, as well as early bird specials; look for coupons, too.
23. Cut back on your caffeine costs. Stop buying coffee at the fancy coffee shop. You can get 40 cups of coffee from a pound of beans. Even the gourmet ones can be purchased for $8 per pound. If you’re spending $2 per day on coffee — easy to do in most workplaces — you’ll go from spending $500 a year to about $50 by making your own. For the best savings (and flavor), buy whole beans and grind them yourself.
24. BYOB. Take cans of soda or bottled water to work instead of buying them out of the vending machine. Bottled water can sell for as little as 14 cents a bottle at a big-box grocery store, and soda goes for as little as 16 cents a can (less for off-brands). Compare that to the 75 cents or more that you’ll spend at the machine, and it’s a no-brainer.
25. Have fun staying home. Tell friends to each bring over a dish and host a potluck, game or movie night. Nothing like a smokin’ hot game of Monopoly amongst friends!
26. Read not, waste not. Cancel subscriptions to magazines and newspapers you haven’t been reading. Or see if the publication has an online version you can access for free.
27. Evaluate your cable package. Do you really need 300-plus channels? Do you have time to watch those movie channels you’re paying a premium price for? Switch to basic cable and save a bundle each month.
28. Rent movies economically. Either cut down the number of times you rent movies or try an online rental service like Netflix that charges a flat rate each month to rent a certain number of movies.
29. Visit the library. Besides books, you can borrow movies, music CDs and even exercise videos from the library. Check the selection available at your local library and keep yourself entertained for free — well, really not for free, you’ve already paid for it in taxes.
30. Put savings on autopilot. Have your savings automatically deducted from your paycheck before it even hits your checking account. It’s easy and most banks will let you set it up online.
31. Put bills on autopilot, too. Set your fixed bills to be deducted, either through automated debit or online bill pay, so you’re not tempted to touch the money. The added bonus is you’ll never get hit with late or missed payment penalties.
32. Let the payments continue. Maybe your finances are tight due to a big car loan or credit card payments. Once you’ve paid off these debts, shift those payments to your emergency fund.
33. Have your own “Rule of 72.” There aren’t many things we truly can’t live without and waiting 72 hours before making a major purchase will help you avoid buyer’s remorse.
34. Leave the credit cards at home. People spend between 12 percent and 50 percent more when using a credit card versus cash.
35. Plan ahead. It’s okay to budget for fun! It really makes your savings strategy work, and keeps you from going overboard when the itch for fun cranks up.
36. Make things interesting. Draw down no-interest checking accounts and move the money into higher-interest savings accounts. Most Americans keep too much money in checking accounts that earn zero percent interest.
37. Learn to save short-term splurges. Defer your desire for a latte splurge until you’ve saved up enough for a nice dinner. This way you’re retraining yourself away from giving into immediate gratification and into saving for your real desires.
38. Reward yourself. Allow yourself little extra perks for reaching savings goals like a long weekend without plastic. Rewards sweeten the medicine and the savings you’ll achieve from altered habits far outweigh the cost of the long weekend.
39. Remove the temptation. Just like dieters don’t do well sitting in a bakery sniffing mouthwatering treats all day, stay away from those areas that tempt you financially. Why put yourself in the position to fail?
40. Treat it like a friend. Treat your emergency fund the way you treat your friends: Don’t abuse it and don’t use it except when needed.
41. Keep them separated. Keep your savings in a different account than the one from which you pay your bills, maybe even going so far as to keep your checking account and savings accounts at different institutions. This strategy makes your savings just slightly less accessible because of the waiting time on fund transfers, and maybe that lag is just long enough to help you cool off your spending impulse.
42. Enjoy compounding for a change. Being on the right side of compound interest is a rewarding experience. Instead of the negative compounding (paying interest on interest) that often occurs with credit cards, you can watch your money grow effortlessly.
43. Treat it like taxes. Most people are used to having taxes deducted from their paychecks, accepting both the mandatory nature and regularity of the contributions. So it might be helpful to think of saving to your emergency fund as a taxation that benefits you.
44. Can the cigarettes. The average price for a pack of cigarettes in the United States is $4.54. Pack-a-day smokers burn $1,660 a year. Weekend smokers? Buying a pack once a week adds up, too: $236.
45. Don’t drink your emergency fund either. Alcohol prices vary based on the location, but assuming an average of $5 per beer including tip, buying two beers per day adds up to $3,650 per year. Figure twice that for two mixed drinks a day at the local bar. That’s not chump change.
46. Filing down the fund. The average cost of a manicure is $20.53. A weekly manicure sets you back about $1,068 per year.
47. Wash your own car for fun and profit. The average cost for a basic auto detailing package is $58, according to Costhelper.com. The tab for getting your car detailed every two months: $348 per year.
48. Love the brown bag. Nine dollars will generally cover a decent lunch most work days. If you buy rather than pack a lunch five days a week for one year, you shell out about $2,350 a year.
49. The coins go in and the candy comes out. The average vending machine snack costs $1. Buy a pack of cookies every afternoon at work and pay $260 per year.
51. Interest charges on credit card bills (ouch). The median amount of credit card debt carried by Americans is $6,600. Rate tables indicate that fixed interest rates on a standard card average 13.44 percent. Making the minimum payment each month, it will take 250 months (almost 21 years) to pay off the debt and cost $4,868 in interest. Ouch!
52. You really aren’t going to the gym … are you? The monthly service fee at gyms averages between $35 and $40. At $40 per month, an unused gym membership runs $480 per year.