In the last article we looked at where to save money for an emergency fund. Now that we have a good idea about what to do with money we’ll be saving for an emergency, the next step we should look at is where are going to get this money?
The first thing I want to mention (and it might be obvious), but in order to fully fund your emergency fund (and financial security is REALLY important, believe me) you may have to make a few changes in your current lifestyle. If you really want to achieve a goal (like funding an emergency fund) I think you should go full throttle and knock it out.
Unfortunately, in order to save a year’s worth of expenses in a reasonable amount of time you’re probably going to have live a little smarter and make a few changes.
- Do I really need this?
One of the most powerful things you can ask yourself when it comes to personal finance and savings money is “Do I really need this?”. Before each and every purchase I just ask myself if I really need this item? Is it a want or a need?
Is this important?
If you’ve taken the challenge to furiously save an emergency fund then the answer is absolutely, it’s very important. So, we need to differentiate between wants (things we’d like to have) and needs (things we can’t do without.)
Obviously the big three are needed (food, clothing and shelter) but what kind of clothes and how often you go out to eat is where we need to take a hard look at. I will be going through about 20 areas that you can either increase the money coming in or decrease the money going out.
Not all of these items will apply to everyone and I’m sure there’s a million more things that you think of (so leave a comment below with your ideas so everyone could benefit from them.)
- Get a 2nd job
This may be one of the least popular ideas on this list, but it’s also a sure-fire way to increase your income. Moonlighting as a pizza delivery man or working weekends at the home depot may not seem like too much fun, but you have to think of the big picture. The end results.
You’ll find that a fully funded emergency fund and many nights of restful sleep because little “bumps in the road” financial problems won’t affect you the same way is 100% worth the extra effort it took to establish your emergency fund.
- Sell crap you don’t need
Now that we’ve addressed the wants vs. needs on future purchases, let’s go through our stuff and analyze whether we really need all the crap that we have. Let’s put everything we don’t use in a pile and figure out what we can actually sell.
Ebay it or garage sale, it doesn’t matter just get rid of it and bring in some money. I usually start with Ebay (because I hope it would fetch a little more than a garage sale would) but for anything I can’t sell on Ebay I’d have a garage sale or find someone I know who is having one and sell me crap there. My theory is that if I don’t need something and nobody is using it, selling it will not only get you some cash but will free up some clutter around the house as well.
You may want to get a couple of quotes from different companies. There are usually a couple hundred-dollar differences between companies. (Just make sure you have your policy in front of you while you speak to them to make sure you get the exact same coverage).
Also, bundling your policies under one company can save you some dough.
- Finance charges
If you use credit cards and run a balance at the end of the month you are probably paying ridiculously high finance charges. This is a savings and investing killer. It’s almost impossible to consistently earn as much on your money as credit cards charge in interest.
Here’s my simple rule: Pay it off or pay in cash!
- Do I really need this?
- Cable and Satellite Television
Can you cut premium channels, video rentals and on-demand programming from your monthly cable bills? The answer is yes you can.
Before you go crazy missing your favorite series on a premium channel get quotes from competing cable/satellite companies, maybe you can switch companies and get locked in at a great rate for a couple of years.
- Cell Phone
Cell phone plans are changing all the time. Determine if you are really using all of the minutes that you pay for? Do you need internet and texts? Maybe you do but maybe you can trim your plan and save a few bucks each month.
If your contract is up maybe you can see how much other company’s plans cost or if you really only have a phone for emergencies look into getting a pre-paid phone so you can eliminate the monthly bill altogether.
Do you need a land line phone? Look at #6 above and see if you can bundle your home phone right in with your cable provider.
- Internet Provider
Look at #6 above and see if you can bundle your internet service right in with your cable provider.
- Refinance Your Home
Some of us own homes. You should take a look at the interest rate you are currently paying because current interest rates are at historic lows. If you find your mortgage interest rate over 1% greater than the current market rates you should look into refinancing your mortgage. (You’ll have to do the math and factor in closing costs, or maybe you could keep the same payment but knock some time off your loan.)
- Credit Card Rewards Points
Now do not even think about this step if you don’t pay off your credit cards in full each month. If you are disciplined enough to pay credit cards in full then you should put everything on a card that offers you at least 1% cash back. I mean everything, cable bills, groceries everything!
You’ll be surprised how much that cash rewards start to build. Deposit each check into the bank to help with your emergency fund. It might be small amounts but it’s like free money because you were going to have to pay for those things anyway.
Just remember my simple rule: Pay it off or pay in cash!
- Utility Bills
Try to minimize utilities, don’t run the water while shaving, take a quick shower, keep lights and electronic turned off when not using them. There may not be too much to cut here but just a couple of things to think about.
- Movies (Entertainment)
If you must go to the movies try a matinee, they usually cost less and are usually not too crowded. Plus bringing snacks from home and avoiding the concession stand will save you big!
- Renting Movies
If you don’t need to see a movie the day it comes out then get a membership to Netflix, it costs less than the price of a movie ticket to rent movies by DVD and streamed directly to your TV. Plus, they have like a million selections to choose from (ok, I’m slightly exaggerating here.)
I’m all about the coupons and I love reading the circulars for the sales for the week. Stick to these items and you’ll save a bundle on groceries. Plus buying the store brand can save you a lot, just compare the ingredients to your favorite brand to make sure it’s similar.
- Pack your own Lunch
Now a days a slice of pizza costs $2.50, so eating lunch out can really start adding up. Packing a good quality nutritious meal can usually cost half as much as a meal purchased at a fast-food type of place. Plus, you’ll be eating a lot healthier.
- Eating out
The same holds true for eating dinner at restaurants. Cutting back on eating out can save you a lot especially since we’ve clipped coupons and shopped for sale items at the grocery store. Plus, you can eat a lot healthier.
I’m not saying never eat out but make it a special night rather than the norm.
Instead of buying books, magazines, music and even DVD’s, visit your local library and renew your card. The library is a tremendous resource that’s there for the taking. It’s like a Barnes & Noble, Tower Records and a Blockbuster all rolled into one (and it’s all free.)
I can even reserve and request items online and then I get an email when it arrives.
The library has come a long way.
- Energy Efficient Light Bulbs
Here’s an idea that I did in my house. You won’t see immediate, huge savings but you will get a little savings each month over time. I wouldn’t get rid of my working regular light bulbs, but I’d think about replacing them with energy efficient one’s when they finally do burn out.
- Drive a cheaper (fully paid off) car
Instead of buying a new car (or worse leasing a new car) why not just pay a few bucks for a reliable used car. Granted it probably won’t be a “Chick Magnet” but instead of looks and speed we’re concerned with reliability and gas mileage. This is what Dave Ramsey would call an “Old Beater”.
If you can drive a car that you paid $1,000 for a couple years and put a $100/month toward your next car, at the end of 2 years you’d have $2,400 plus the trade-in or sale of your “Old Beater”, now you upgrade to a better car and do it all over again.
The best this about this plan is you will never have a car payment!
- Have your kids go to a State School instead of a private University
Lastly, I’ll leave you with an idea that should give you long-lasting peace of mind. Instead of worrying about saving up for a private university for your kids, just focus on saving enough for them to go to a State School. If you’ve accomplished this, you can consider your job done.
Then if your child really wants to go to a private school let them worry about the difference (or you can help if you’re financially sound at that point.)
State schools are really good, and for the money they’re a real bargain.
I’ve jotted down over twenty ways to save money and start building an emergency fund. I can’t explain how incredible it feels not to worry about money, what an incredibly freeing feeling it leads to.
You can live life the way you want to rather than the way you have to.
So in the long term it’s worth sucking it up and cutting costs, taking on extra work and furiously saving until you reach your goal, because having the freedom to take chances, have fun, and not having to worry about money all the time is really the way life is supposed to be lived.