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Love Don’t Pay My Bills: Saving

We’ve been making such exciting progress through our journey in Financial Land, and it’s not time to stop now! No, today, we’re going to tackle one of the most difficult aspects of personal finance, and you know what that is. Not picking out a killer new wallet. Saving.

And as usual, DailyWorth (which I still maintain you need to check out) has some solid advice for saving, and it comes in three steps.

#1: Make 90% of your savings passive. Everything from your 401K to your emergency fund should be an automatic process. Praise the Technology Gods! Every financial institution in the world wants to make this easy for you. Your employer, if they pay into a 401K for you, will directly deposit this stuff at the same time as your paycheck. Your bank account can probably automatically deposit into a savings account if you set it up monthly. Set as much of this up as possible. As a good friend of mine (who is one of the few natural savers I know) says, “I just assume a portion of [my paycheck] isn’t even there.” Saving is, frankly, a bit unnatural to most of us: money is one of the few forms of energy it’s good to pile up toward a goal. By making it passive, you don’t have to rely on your active impetus to be faithful to those goals.

#2: Save $500 first. This is known as your emergency fund. And once you hit $500, keep going. Don’t touch this account for anything but a true emergency. What is a true emergency? Job loss, an unforeseen medical event, or a death (God forbid). That’s it. Keep building on this fund until you have enough money in there to float you for a period of unemployment – at least one month’s full living and bill payments, but preferably three (which is considered a pretty standard amount of time to spend looking for a job these days).

#3: Save your savings. You know that friend you have who’s like, “I went shopping and got this deal and saved $20 on the cost of my new whatever”? Let me tell you from experience: she didn’t save anything unless she put that $20 aside, in a savings account. Plan to pay full price for things, and set whatever savings you encounter aside.

So, that’s a great starting point, and some smart rules to live by, but what exactly are you saving for? Here are a few things you’ll want to put savings toward:

Emergency Fund: Everyone needs this. Everyone either loses a job or has a medical emergency or has to pitch in for someone else’s, and you need money to take care of these things. You’ll be amazed by the peace of mind you feel, even if your job is stable and you’re in incredible health, just socking a bit away toward this fund every paycheck.

Semi-Emergency Fund: You can probably anticipate a few of the emergencies that will come up in your life. Know you’re planning to have a kid? Start putting money in here; babies are expensive. Know that you want to continue using a computer for more than four years? Put replacement or repair funds in this account. Own a car? HELLO. They break. Save some money for repairs. These are predictable emergencies; you don’t know when they’ll happen, but you can safely estimate that they will happen. Give yourself a break and save in advance for them.

Retirement: Everyone wants this, and will probably need it. And women, you’re special: you live longer than men, so chances are you’ll be retired longer than the men in your life. If your job doesn’t contribute to a 401K for you, ask them why not. And then set one up for yourself. They’re fairly easy to set up, and you don’t have to put a ton of money into it every paycheck; just $20 over the long haul, with interest, will give you a nice chunk of change when you’re too bent over to run photocopies for 30-year-old sales assholes anymore. If your work does contribute, that doesn’t excuse you from contributing. More is good. Think of it as taking care of your grandma.

Funsies: This is my favorite savings account. Funsies are everything from the annual Christmas present budget, to that vacation you want to take, to the wardrobe changes you envision for yourself in the next year of your life, to gadgets, books, special dinners, treats, or whatever. You could also call this your Rainy Day Fund, because this is the money you have on hand to treat yourself. Finally, this is also the fund you use to save up toward specific, personal goals.

And what about those of us (many of us) who don’t have any elbow room in our paychecks? Why, darlin’, that’s when you get creative. There are savings everywhere. You can save on groceries, household items, and other regular purchases not only by coupon clipping and watching for sales, but also by targeting items you know you use regularly and using a program (like Amazon’s Subscribe and Save) to get regular savings on those items (I use it for cleaning supplies and toiletries; I know another writer here uses it for regular bulk cooking ingredients, like high-quality flour). Around your home, some small fixes can make your home more energy efficient (plug leaky windows and doors, hang curtains over single-pane windows, call the landlord and demand he fix the effing leaky faucets now, etc.). If you have regular prescriptions, ask your doctor if there are generic forms of the medications you take, to decrease your monthly output there. Even debt payments can sometimes be negotiated down to give you a little wiggle room.

But once you find these savings, don’t go splurge off the savings high. That elbow room sometimes feels so good, you don’t know what to do with yourself. So let me tell you what to do: put the money in the damn savings account! I promise it feels better than (in my case) a new pair of shoes and a funky wall hanging. I figure fun spending is just like getting a tattoo: if you still want it in a few months, when you’ve had time to save the money for it without burdening yourself or taking a significant chunk out of your lifestyle, then go for that purchase. But in the mean time – save, save, save!

What are your savings tricks and tips? What are you saving for right now?

By Meghan Young Krogh

Meghan had a number of quality writing mentors over the course of her education, which just goes to show that you can't blame the teacher for the way the student turns out. Team Oxford Comma represent.

12 replies on “Love Don’t Pay My Bills: Saving”

I’ve got the savings skill down. one thing that made a huge difference was when I moved my savings into an online-only account. it takes about 3 days to move money in or out of it. so money only comes out when it’s really serious stuff.
when you have all of these different goals for the money, how o you keep them separate? do you have a separate bank account for car repair, and one for emergencies? the logistics is something I’ve been trying to refine for years.

As I mentioned to Honeybadger below, http://bucks.blogs.nytimes.com/2010/07/01/multiple-savings-accounts-multiple-goals/ lists a number of places that allow multiple savings accounts; you can also just compile the amount in one account but track your deposits in separate ledgers, so you have a record of the amounts you have for each fund. I find the separate accounts helps me mentally separate the funds, but it’s not totally necessary.

(Delurking). Ok, I’ve got a challenge for you. I receive a limited income on disability living in Vancouver BC. 60 percent of my monthly income goes to rent. Because of my disability I often don’t have the energy to cook, although I’m working on making simple meals that are low-spoons. So I often end up eating out, and I must say Vancouver has a tempting array of food options. I do go to school and get grants and loans; if I was working at my old student assistantship again I’d be putting the maximum 18 percent in an RRSP and 32 percent in a high interest savings account, but sadly it seems this year somebody else got hired. My mother sends me clothes from Bangladesh, and because I inherited an insurance policy from my late father I only owe about a thousand dollars in student loans and credit card debt so far. So I’m not in material want so much, I just don’t have much money to save from my monthly income when I’m not in school. Because of my disability I haven’t been able to develop a lot of skills that would be useful in earning money, apart from my work as a singer-songwriter, which is too underground in a city with few performance opportunities.

Delurkify is my favorite spell at Hogwarts.

First, congratulations on finding a way to make ends meet! Being a student, and having a disability, can make just meeting the basics more challenging, so I think you’re doing great so far!

I would do a couple of things in your circumstances:

1. Look into some easy to prepare, inexpensive meals you can make at home without much energy. Many boxed meals have microwave instructions, for instance, and a lot of grocery stores are now selling pre-chopped vegetables (to put into soup, or stir fry, or whatever you want) that can save you some of the effort of cooking but will still cut down on your food budget. Look, too, for whole foods which can be eaten without preparation (fruit, breads, cheese, etc. can be more nutritious than a lot of takeout, which contains everything from preservatives to tons of hidden fat/calories, excess sodium, and other bulk-food shortcuts). Groceries are almost universally less expensive than takeout. Many grocery stores also have deli sections with pre-made salads, pasta dishes, soups, and roast chicken. So there are a lot of low-cost prepared food options out there that are a little better price-wise than restaurant food. Even on a student budget, it’s doable.

2. It really sucks that you lost your assistantship, but is there a career center or student resource center on campus where you can call, explain what happened, and look for other part-time work through them that fits with your disability and class schedule? Many campuses have resources like this (in the U.S., it’s called Work Study) and they should be able to help. If you aren’t sure where to start, call your Financial Aid office and ask them first. They ought to be able to point you in the right direction.

3. As a singer-songwriter, I am guessing you also know how to read music, possibly play an instrument, and sing well. Why not offer private lessons in any/all of these? You can make a decent chunk of change in a short amount of time, and fit it around your personal needs. As much as there might be a dearth of performance-for-pay opportunities around you, I bet that, like anywhere in the developing world, teenagers and young adults in mass numbers are interested in becoming rock stars. Help a few out, and research the kinds of rates that are fair to charge for these lessons. Even if you only get one client per week for an hour at, let’s say, $50/hour, you’ve got an extra $200 you can pop into savings and let it sit there.

It’s definitely very difficult to save as a student, and even more difficult when your working options are limited. But it sounds like you’re already tackling your finances with a lot of responsibility (good for you for keeping your debt down, too!) The big thing at this point is to find solutions that work within your personal structure, and try to build a set of good habits now that will continue into your life beyond higher education. Also, try to avoid running up more credit card debt; I know it can be a tempting solution in an emergency, but look for other options first. Make your payments regularly so your credit score doesn’t take a ding, and look at that student debt (as long as you keep it low) as a good form of debt: one that represents your commitment to your future, and one that represents you as a good investment.

If you have more questions or want to get more in depth, please email me at persephone at parliament-books dot com

Do you know if there are cultural centers near you where you could hang a flier advertising your services? Because you might want to target your skills to a young audience, which would enable you to work at a level with which you’re comfortable with your skill level, as well as tap into the pocketbooks of parents rather than people your own age. :)

Also, if you are bilingual or multilingual, have you considered freelance translation services?

Ahem. I am nowhere near that skilled – my training is primarily in Hindustani classical music , although I did take a basic musicianship program a few years ago where I got poor grades. So good enough to make rock music and understand what other musicians are saying, but not good enough to teach.

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