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[The following is a partial transcript of this episode of The Scott Alan Turner Show. Listen to the full episode to hear this story, listener questions, money hacks, and inspiring stories of people that are changing their financial lives. Subscribe to the free podcast on iTunes or Google Play]
If you’re like me at one time you had no idea what an emergency fund was. Then when you did find out you thought to yourself, hmmm, this could really save my bacon.
A rainy day fund which can go by many other names such as:
- an emergency fund or
- I forgot about that expense fund
is money you set aside to cover the unexpected, allowing you to weather a financial storm. How much money you should have saved is something personal finance experts will argue about, but $10,000 will cover many expenses when everything seems to go wrong.
Some people, they wonder, how the heck am I going to come up with that much money? I have $0 in my savings account and I’m supposed to save how much? $10,000!
I remember learning about this just after buying my house. I was scared so I sold my car so I wouldn’t have a car payment to get this thing going. That decision gave me a lot more peace. Now I teach people this is what you need to do BEFORE you buy a house. Most people have never heard this before, I know I didn’t.
How would you feel if you had $10,000 in cash?
- Enough to handle paying cash for a new car if the engine falls out on the highway
- Enough to pay the mortgage and all your bills for months until a disability policy kicks in
- Enough to let you or a loved one quit that job with the bad boss and find something new
- Enough to pack up your bags and move for a fresh start
- Enough to take extended time off to take care of an aging relative
I know what you’re thinking – $10,000!
$10,000 may seem like a lot, but you can build up $10,000 in savings in just one year. Many of you already know tips like this. If you’re like me having refreshers and reminders is helpful to continuously improve your finances. You’ll always have something new to share with others.
Switch to Lower Cost Alternatives $1,700
You don’t have to give up things you use and love to save money, just switch to lower cost alternatives. With the rate technology has been developing over the last decade, tons of new options and ways to interact with technology have popped up. Gone are the days you needed cable to watch sports or have a massive data plan on your cell phone when wifi is nearly everywhere.
Cable can cost over $100 a month, but a digital antenna or services like Sling TV, Netflix, and Hulu can cost significantly less, somewhere between $8 – $25 a month. Cutting cable for alternative solutions could save you around $100 per month.
Cell phone plans can be expensive, particularly for smartphones, typically costing a minimum of $60 a month. However, unless you are a teenager constantly on the phone, then you can probably afford to switch to lower cost providers like Ting or Republic Wireless. The average bill for a Ting customer is just $23, and Republic Wireless offers the best value plan at $30 a month and plans as low as $15 a month. Switching to an alternative cell phone provider could save you over $500 a year.
Do a Savings Challenge $1,378
There are lots of different savings challenges you could participate in; it is just a matter of which one you like best. Two common savings challenges are the 52 Week Challenge and the $5 bill challenge.
The 52 Week Challenge starts with you saving $1 in week one, $2 in week 2, and so on until week 52 where you save $52. By the end of the year, you will have saved $1,378. If manually setting aside that money seems tiresome to you, then you can use an app like Qapital to automate the savings challenge for you.
The $5 bill savings challenge is great for those that use an all-cash budget. Each time you end up with a $5 bill you set it aside in savings. However, if you don’t tend to pay for things with cash, then you might be better off with another savings challenge, such as a rounding up purchases to the nearest two dollars or putting aside the difference when you come in under budget.
Evaluate Your Insurance Needs & Shop Around $1,500
If you’ve been with the same insurance providers for a long time, it’s possible you are no longer getting the lowest rate. The best deals are usually reserved for new customers, to entice them to leave their current insurance provider. Call and ask what kind of rate other providers can offer you, if it’s less then you can take it back to your current provider and see if they will match that lower offer. Leveraging different companies against each other can result in a much lower rate, saving you hundreds if not thousands each year.
If you love your insurance provider and don’t want to switch then take the time to evaluate what you are paying for, are you paying for more than you need? If you can afford a higher deductible that could lower the cost of insurance or you maybe don’t need as much coverage as you are currently carrying. All these things can impact how much you pay for insurance. Make sure you are only paying for what you need, overpaying could be costing you a bundle.
Meal Plan with Low-Cost Options $3,279.60
Would you be open minded to doing some meal planning on Sundays?
According to the USDA which puts out monthly reports, a family of two spending liberally on food spends over $700 a month on food. Simply by meal planning and being cost conscious you could save hundreds each month. The same couple making adjustments could find themselves spending in the low-cost category (according to the report), with just $492 a month on food. This amounts to savings of $273.30 a month and over $3,000 in savings over the course of a year.
Bring your lunch + snacks challenge $1,500
If you spend $15 on workdays between coffee, lunch out, or sacks, doing a no-spend day 2–3 times a week can add up to $1,500-$2,250 in savings.
Go Used $2,150
Whether you buy or trade for used items, you could save a fortune. Between Craigslist and Facebook Yard Sale or Trade groups you don’t have to look far to find a good deal and still get the things you need.
According to the Bureau of Labor Statistics, the average consumer spends over $1,800 on apparel and services. By buying used clothes at thrift stores you can save upwards of 90%, even just saving 50% could net you an extra $900 each year.
Exercise equipment, such as a treadmill or bike can also usually be found used for a fraction of the price. ABC’s Good Morning America managed to find a $1,000 exercise bike for just $100 on Craigslist. The same can be said for electronics, even just buying refurbished laptops instead of a new one could save hundreds. Over the course of the year, you could easily save $1,200.
Another easy area to save by buying used is furniture and other household items. Hit up garage sales or estate sales in your area to find a good bargain. You may even be able to buy things like cleaning supplies or paper products for extra cheap since estate sales are usually trying to clear out the house. Buying used or trading for furniture could easily save you $550 a year.
This one is my favorite. Selling stuff you already own is the quickest way to start an emergency fund. Most everyone has something they can sell and get cash for.
Look around your place with fresh eyes and question everything you own. Think of everything this way: What has more value, the item or the money.
What would happen if you tried some or all of those things this week. Or next week when you have a couple days off. Just imagine that beefier emergency fund, or a starter fund if you don’t have one yet. A little more security, a little better sleep. A lot more security, a lot better sleep.
Water Cooler Conversation
Ask someone what cell phone provider they use and what it costs and how the service is. Just tell them you’re doing some research to see if you could get a new plan that’s cheaper.
Saving $10,000 for a rainy day fund in one year may seem like a lot, but with these tips, you can do it. Ultimately you are looking to save less than $1,000 each month, and it will help when the financial storm hits.