How to Save 6 Months of Living Expenses
By: Sarah Emerson | Date: February 14 2019
- The Basics – What’s an emergency fund
- Three steps to save six months of living expenses
- Step one: set a budget and stick to it
- Step two: Reduce your monthly expenses
- Step Three: Earning extra money
The Basics – What’s an emergency fund
How much should you have saved and how to create an emergency fund?
Most experts believe that you must have sufficient amounts of money in your emergency fund to cover at least 3-6 months of living expenses.
Analyze your mandatory cost
First, you should start estimating your spending on things that have priority such as housing, food, health care, transportation, personal expenses, and depts. It is not necessary to include expenses which are discretionary in case of job losses or serious disasters like entertainment, dining out, unnecessary shopping, and vacations.
Decide whether or not you want to start saving
Second, make up your mind whether you need to save more money. If you decide so, you will probably think about expanding your emergency savings and it benefits you in various situations. Either during a recession or If you’re in a high-risk industry where layoffs are common or your income is unstable or If you’re retired.
It is important to start saving something now
At the end of the day, something is better than nothing. You can create it by reserving smaller amounts regularly, such as every week or every salary. If you keep it that way, you will eventually reach your goal.
For example, suppose that you spend $ 25 a week on an emergency fund. After two years, you would have managed to save 2,600 dollars. Increase this amount to $ 50 a week and your savings could increase to $ 5,200. Earn $ 75 a week and you’ll notice that you saved a huge amount: $ 7,800.
Three steps to save six months of living expenses
In economically difficult times, it is often difficult to provide savings until needed. Many of us find themselves living between salary and salary, and we struggle to pay for the increased living expenses. Since emergencies such as health problems and job losses can happen to anyone, many advise that the minimum savings be within three to six months of living expenses. What is really worrying is the sharp drop in the saving rate from under 10% in several countries. Saving money may seem impossible at the present time, but luckily there are many ways in which you can create your own savings account.
Step one: set a budget and stick to it
Setting and committing to a budget is the first step towards achieving financial independence.Your budget is your plan to spend money for the next week, month, or year, and it is based on calculating the money you earn each month and to know how much you spend. Among the ways to control the budget is to set a clear goal that you seek to achieve by the end of the set period.
Indeed, a budget can also be a fun opportunity to test yourself, by considering it a challenge with oneself. Although this issue may seem stressful, it may be the opposite if done correctly, as it will enable you to live according to your capabilities, to have a surplus in income and to put it in a savings fund.
Step two: Reduce your monthly expenses
In the adversary of life, which has been developing rapidly, and during this development, inventions increase daily, and what was previously a luxury is now considered necessary. There is no longer what is called a luxury. In this momentum, daily and monthly expenses are increasing day after a day. For example, a house that had one landline in which three or four mobile phones need a monthly balance and a daily electric charge, all of these expenses have increased. There is a way to relieve such burdens, of course there are many methods, but many people do not take them seriously. Here are our tips on how to save on daily and monthly expenses.Here are some useful tips and ideas for decreasing the expenses:
Cancellation of cable or satellite service
cancel anything that you don’t use enough to pay for. In the era of high-speed internet, it is easy for most people to get rid of the subscription of TV channels. Subscriptions to video games, cosmetic boxes, and magazines are other expenses that may seem small but accumulate over time.
If you use these services regularly, lower costs may remain an option. Do you pay for a movie rental service that includes both live and CD but you don’t use it? Switch to a cheaper plan without CDs. This is one of the most difficult things to do because we love watching live sport events and our favorite shows or programs. But still you can watch them in a more inventive way. For example, watching sport events at a friend’s house or at sports bars as well as for regular programs instead of your home.
Eat at home
Although food is necessary, it is also a problem with over spending. Although cheap food is often considered unhealthy, there are many ways to pay less without sacrificing the nutritional value. Many people overeat most of the time, especially when it comes to lunches at work. If you decide to prepare most of your meals at home, you will be able to save a lot of money every month, use the money you would have used for dinner, and add it to your savings account.
Eating out and ordering pizza is very comfortable and satisfying, but they waste money as well.
Shop during sales. Instead of sticking to a specific brand or creating a traditional shopping list, buy your requirements while offering them for sale at the best deals. Although buying things during discounts in large quantities may be tempting, buy only what you can store safely or consume quickly.
Always choose things at the lowest cost per unit. Although many people assume that the best version of anything will be the most valuable, it is not often the case. I believe that grocery stores are the easiest places to reduce expenses. And no, that doesn’t mean you have to serve spaghetti and Ramen at every meal. You may also use coupons wisely; use them in stores with double or triple coupons as well as for items on sale. If you do not want to do the calculations yourself, many groceries will list the cost per unit next to the element.
Purchase by cash only
It is easier to use a credit card to pay for a purchase than to pay for a large number of bills, but this convenience is one of the reasons why so many people spend so much. The downside of credit cards is the speed which you can increase spending; when we deliver our card, we often don’t realize how much everything will be added at the end of the month.
By paying in cash, you see by yourself how much money you have, and the amount of your money decreases with every purchase. By paying in cash only, you force yourself to spend only what you have. So, give your credit cards a respite and try to stick to a cash-based system to see if it will reduce your spending habits. Depending on your budget, you can get some cash at the beginning of the week and put it in an envelope, which will act as an ATM for this week. Withdraw some bills here and there to cover your purchases, and if you find that you are running out of cash, you’ll have to figure out a way to make your money stay longer.
This way will teach you how to stop relying on credit and know how to stop spending money that you do not have. The cash envelope system will also encourage you to become more creative and resourceful. If you’re over spending and you don’t have enough to go out to dinner with your friends, you’ll have to figure out different ways to save money.
Stop all the unnecessary spending
Although this method may not be the most credit for saving money, it is very important and easy. Is it necessary to pass over the cafe in the morning? Is it important to buy soda and snacks? What do you think about preparing coffee in your home? A cup of coffee at home costs just less than two pounds! You can also save on soda if you bought it in bulk from the store. Is it really necessary for all movies to enter the cinema, and what is the price of movie tickets associated with popcorn or transportation every month? Did you check your library for movies, or did you charge for Netflix online? These steps are quick and most of them become an essential part of your life with getting used to. You will feel psychological pain at first, but when you see the money you’ve saved, you’ll notice a big difference right away.This requires you to be aware of every penny you spend and deciding whether this is a necessity or a luxury.
Check your insurance costs
The quickest way to save money for some people is to reduce their monthly expenses in health, cars, and insurance. Insurance companies are competitive, so you can view the deals that these companies offer. When you do that, be aware that the lowest primary offers aren’t always the best!
Save on car insurance money: lose your discount and avoid gasping for a higher discount. Analyze the entire plan based on your needs and expectations, and analyze the risks first. If you are not an experienced driver and do not have savings, it is not a good idea to look for a higher discount. If your car is funded, you may have to look for the lowest insurance costs.
For health insurance: you can check alternatives. Find plans that match your lifestyle and think about your needs for what you have. A healthy, mid-30s man can think of a plan that includes higher health fees and lower premiums, while couples wanting to start a family should choose plans that include higher premiums with wider coverage.
Step Three: Earning extra money
Have a yard sale
This is a fast, feasible, and simple way to earn extra money.Sell things that you no longer want or need. Search old things and consider selling what you no longer want or use. Sell larger items like furniture instead of disposing of it when replacing it.
Sell small items that are easily shipped through online stores or auction sites. Try to sell large, bulky, or inexpensive items. Remember that your time is valuable, and it may not be worth making an effort to publish and sell a list of merchandise that doesn’t cost dime.If you can pretend there is no extra income. Instead of adding it to your monthly budget, put all of your extra income into savings.
Take extra work hours
Use your free time to start simple overtime, such as babysitting and dog walking. If you enjoy making marketable products, try selling your business on a popular craftsman site. Common items that are usually sold include clothing, stuffed animals, beauty products, art prints, and jewelry.Until your savings reach a comfortable level, avoid starting a business with significant startup costs. Adhere to projects that use inexpensive or already available materials.
Your expenses may also start to decrease. If Friday nights become childcare, you will save money by not going to movies or expensive places.
Sell on eBay
If you want to earn some extra money or maybe start a new business or profession, selling on eBay may be the answer you are looking for. There is a great opportunity to earn money by being part of the site seller community. Invest some time reading ways to start selling, and you may find that the knowledge you gain that will bring you a lot of tremendous profits. When you finally finish selling on eBay, transfer the money from your Paypal account to your bank account and then you can transfer it to your savings account.
Rent additional rooms or spaces
In many areas where the cost of living is high, it is getting more common to rent the second or third bedrooms in the house or apartment. This could add some money to your savings.
Check the lease and local laws before renting. In general, the property owner must be aware of the sub property, or you may risk being expelled.Be careful about who to rent to, especially if you will live with it. Remember that yours, yours, and even your credit rating may be at risk if you are not careful. It is best to find tenants through mutual friends and co-workers. Do a simple checkup for everyone who wants to rent.
Are you going on a business trip or a long vacation? Try the short-term renters while you’re traveling. Also, if you live in a city like big with annual events that attract huge crowds, you can stay with a friend and rent your house for the duration of this event with very high numbers.The best part is, earning extra money doesn’t have to be dreadful or boring, and you’ll be setting yourself up for financial success in the meantime.
Get rid of your concerns about the lack of a savings account and do everything in your power to build this account. Keep in mind that this is only temporary: once you have your emergency savings in place, you can return to your old way of spending. Or maybe you figure that it is not a bad thing to be frugal!