Disclaimer: As I sit down to write this post, I do not know of 8 ways to build an emergency fund.
I did a little research, and I saw some well-worn ideas on the web, none of which inspired me. So I decided to exercise some independent creative thinking and see if I could come up with a list of 8 strategies. All of this is follow-up to my last post where I decided my goal for 2012 is going to be setting aside the equivalent of $10 per day in savings.
So here goes. Let’s see if I can come up with 8 ways to build my emergency fund, all on my own.
1. Keep a change jar.
I’ve always kept a change jar, because I don’t like carrying change around in my purse. But in recent years, the change jar doesn’t collect as much because I hardly ever use cash any more. Even if I buy something relatively small, like a latte, I tend to use a debit card. But here’s an idea.
I once had a college roommate who rounded up her check amounts when she entered them in her checkbook. If she spent $15.17 at the grocery store, she would enter $16 in her checkbook. When she balanced at the end of the month, she always had extra money.
I’ll have to adapt the strategy, since I use checks even less than I use cash – but I could round up my debit card purchases, take the difference in cash back, and put that in my change jar. And I don’t necessarily have to round up to just the next dollar. I could round up by a couple of dollars each time.
2. When contemplating buying something that is not a necessity, put that money in savings instead.
No matter how broke I am, I’d bet I can always find myself paying for something that is not, strictly speaking, a necessity. On an emotional level, I don’t think it works very well to tell myself I can’t spend anything except what is absolutely necessary. That’s kind of like telling yourself you can never, ever have cheesecake again.
What’s the first thing you think of when you tell yourself that? Yup. Where can I find the biggest, most extravagantly caloric cheesecake on the planet? Let me at it! It’s the fear of deprivation that makes a person obsess over what they can’t have, and strategize endlessly to get it. So instead of choosing deprivation, maybe I just need to shift the priorities.
I can have a kindle book after I have a month of savings toward my emergency fund goal already set aside. I might be able to make that one work.
3. Pay myself first.
This is one of those old warhorses that I’ve always assumed would never work. How can I pay myself first if I don’t know whether I’ll have enough for the monthly bills? My skepticism has kept me from trying it at all. But I think it may be the right time to dust it off and give it a go.
Although I don’t get regular paychecks. I do have three regular checks that come in predictably every month. If my goal is to save $300 per month, maybe I should just take $100 from each of those checks and dump it straight into savings, and then live off whatever is left.
According to my budget, I can afford to do this. According to my daily life, I can’t. I wonder which one will turn out to be true?
4. Cut out the recurring entertainment service charges.
The other day I realized I’m subscribed to Netflix and Hulu Plus and Amazon Prime. And I never have time to watch movies. I’ll keep Amazon Prime because I tend to buy my gifts all year there, and the free shipping is an awesome benefit that more than covers the cost of the membership. But I can cut Netflix and Hulu Plus and save close to $30 right there.
5. Drive less.
This one is both easy and hard. The easy part is that I don’t have much mandatory driving to do. I don’t go to an office every day, so there’s no commuting in my life. The hard part is that sometimes I just need to get out of the house, because I work from home and also home-school O Psychic One.
Really, about the only thing I have to do daily is drive Sir Empath across town to school. The rest of my driving is pretty much voluntary, or at least can be done whenever I want to do it. Yet I often find myself driving across town multiple times, or driving to the next biggest town a couple of times a week.
Planning ahead would eliminate that entirely, and with gas still hovering at about $3.90 a gallon here, I could save quite a bit of cash that way. Then I just need to decide to get out of the house some other way than driving, or get out of the house at the same time I’m driving Sir Empath to school.
6. Plan more.
Speaking of planning ahead, that’s a good way to save some cash in and of itself. By nature I’m not a planner. I’ve learned that recently (again, for the 1000th time) while taking a class in basic html and css. That’s an extreme case where it doesn’t work to sit down at the computer and just start coding on a whim.
I tried it, so I know. The validator returned 186 errors.
It worked much better when I made myself a to-do list of all the code snippets I needed to write to get the end result. I think that applies pretty well to all of life. Sure, you can wing it, but your own personal validators are going to return a higher number of errors when you wing it than they will if you plan.
Some ideas for planning that I think could save me cash would be: planning meals at least a week ahead and shopping from a list with full knowledge of what is already on hand (I discovered three bottles of cinnamon in the cupboard yesterday, just for example).
7. Give the kids an allowance.
My boys are forever asking me for little things – a song on iTunes, a couple of dollars to walk to the local market, a new cell phone (just kidding about that last one – not that they don’t ask, but they are familiar with the time-honored parental remark that money does not grow on trees).
I don’t keep track of these small requests and have no idea how much I spend on them. But I have a feeling it adds up. I’ve been meaning to give them an allowance, but I do have some hesitation about giving them cash. They’re at an age where having extra cash could lead to no good.
So I think, instead, that I will give them a virtual allowance of some dollar figure per week or month, and then have them record their spending against it. Maybe I’ll even come up with a way that they can earn more allowance, like by doing extra math homework, or improving grades.
8. Last, but not least, and most dreaded: Track daily spending.
I loathe this one, and that’s why it’s last. I know it works. Counting anything works – calories, steps, drinks, anything. Count it, and you find out what’s real, and that becomes your objective baseline. Then judge each day’s actual performance by counting again and comparing with the baseline.
Did I do better than the baseline, or worse?
Since I know it works, I don’t know why I loathe it. Maybe there’s something miserly about it, at least in my mind. Something penny-pinching and retentive. Maybe I want to see myself as generous, not penny-pinching. Maybe I want to be the kind of person who doesn’t have to track daily spending, because there’s always enough in the bank to cover it.
Maybe I didn’t realize until just this moment that this is the attitude that defeats me with money: If you have to think about it, then there isn’t enough of it. Therefore, don’t think about it, and there will be enough.
Isn’t that about the screwiest money belief you’ve ever heard? I didn’t even know I had it until I just wrote it down.