Building an Emergency Fund When You Can’t Afford Anything

a man holding his pockets inside to show they are empty

I was clicking through the headlines on MSN the other day, and I came across an article entitled “20 ways to save $1,000 a month.”  That sounds good – let’s check it out.  However, I only got through the first three suggestions before I gave up.  (1) Track your spending and see where your money is going.  Well, duh.  (2) Pack a lunch each day instead of going out to eat.  Not really helpful – I’ve done this for years.  (3)  Stop going out for dinner several times a week.  Seriously?  Several times a week?  Who does that?  And who writes these articles anyway?  I didn’t even bother reading the rest of the “tips” – they probably wanted me to trade in my Hummer for a more fuel-efficient car.

That reminded me of another article I read with the following scenario – “Let’s look at the case of a 56-year-old man named Leo.  He’s single and takes home $10,000 per month…”  and that was enough for me.  Honestly, how many people do you know who are single and take home $10,000 a month? 

I don’t know whose reality these articles are grounded in, but it sure isn’t mine.  That’s why I hate the financial sections of newspapers – those writers live in a different reality.  Their articles are written for people who are making six figures or more per year.  They are not geared towards people like me, who earn less than $45,000 a year (gross, not net) and have already cut their budget to the bone.  I would be happy enough to save an extra $50 a month to put away each month for emergencies.  And I think a lot of others feel the same way.  So in this article, I’m going to help you find some extra money to put into an emergency fund for unexpected expenses. (I call this my curveball account because sometimes life throws you a curveball – like when your fridge stops working and it needs to be fixed).

There are different ways to save money, but I will focus on some of your fixed expenses.  For example, do you still have cable?  Do you really need it?  Do you actually know what you’re paying for?  Are you paying for unlimited internet usage, when you are only using a fraction of what you’re paying for?  Are you paying for channels you don’t even watch?  You can probably save about $10 or $20 a month by carefully reviewing your bill and cutting out a few unnecessary things.

What about your land line?  I’m sure you have a cell phone.  Do you really need a land line as well?  Cutting off your land line should save you about $20 a month.

How about your utilities?  How can you reduce these costs?  There is one simple method that you can use to “reduce” your monthly costs – set up an equalized payment plan for your heat, water, and power bills.  Your provider will determine your yearly usage and then spread the cost equally over 12 months.  So if your annual heating bill is around $1,200, you will pay $100 per month for 11 months, and then on the 12th month, you will pay a “settle up amount”.  This means that if you went over $1,200 and used $1,300 worth of power, then you will pay $100 plus the extra $100.  The benefit of this arrangement is that now you know how much your bill will be each month.  This will allow you to set aside an extra $10 or $15 a month to put towards your curveball account.  If you do this for all three of your utility bills (heat, power, and water), you should be able to save a minimum of $30 per month.  A word of warning, however, – keep an eye on your monthly bills and make sure that you’re not getting too far in the hole each month.  You don’t want to end up with an $800 bill for heat in your settle up month!  If you notice that you’re running a deficit, pay an extra $20 or so when you have a bit of extra cash so you can stay on top of the bill.

So there you have it.  If you can cut four of your monthly bills by an average of $13.25 per month, you can save $50.00 per month to put into your curveball account for those unexpected expenses. 

Author: Sharon Skwarchuk

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