According to Forbes, 63% of Americans do not have enough money in their savings to cover a $500 emergency. This means that when an emergency arises, families are forced to budget in other ways to make sure they have enough money to cover it. My question is: what would happen if we budgeted before the emergency in the same way we budget when the emergency approaches? My guess is that we wouldn’t only be able to pay off the $500 emergency but that we would actually still have a surplus in our bank account after it is paid off. There are many ways to change your daily budget. However, there will be some major lifestyle changes that come with it.
Decrease the price of common household bills
One of the most challenging, yet most rewarding ways to save is by finding ways to decrease the use of common utilities in your household. For example, you can check out different energy providers to find cheaper deals and information on how to cut down your monthly costs. You can also decide to do simple things to cut down on household bills too. For instance, you can limit the amount of lights you use daily. You can take shorter showers every day and you can unplug everything from the electric sockets when they are not being used.
On top of this, you can consider getting a cheaper phone, internet and cable plan. A lot of the time, we pay for more than we use. To figure out if you are paying more than you need to, keep track of the amount that you use for a month. After this month, choose a new plan that reflects the amount of data, internet and cable that you actually use.
Understand why you want to save money
There are many reasons to save money, but everyone has a unique reason as to why. Maybe you’re a single mother or father that needs to provide for your kids. Maybe you’re a college student trying to afford living alone while paying off loans. Maybe you work as hard as you can to make ends meet but sometimes it just isn’t enough. Or maybe you’re just someone that wants to save for a nice vacation or an expensive item. Whatever the reason is, it is always possible to save as long as you are okay with the growing pains that it comes with. If you do not take time to consider why you want to save, odds are you probably won’t stick to your plan.
The importance of setting realistic goals
The next step after you understand your reasoning for saving money is setting a realistic goal for yourself. It is easy to say that you want $20,000 saved by the end of the year but it is not always possible depending on your income. If you set an unrealistic goal, you set yourself up for failure. If you’re unsure how much you should save you can always go by the 10: 10: 80 rule. In this rule you use ten percent being generous; ten percent in savings and you live off of the remaining eighty percent. If you find it hard to save ten percent, then take it down to five percent. Then, after a few months of saving, see if you can save ten percent instead of five. You can also alternate months so that you save ten percent one month and five percent the next month. It is okay to be crafty with the numbers as long as you are maximizing the amount of savings according to your own income.
Remember that it may take you a few years to get to your goal so DON’T GIVE UP! The good part about this savings plan is that if you happen to use less than eighty percent, you can put the rest of that money into your savings and reach your goal faster.
How to motivate yourself to stick to your budget
In conclusion, there should always be a reward for sticking to your budget. It is okay to splurge and have fun to celebrate the victory of sticking to your budget. A great idea is to set a goal and reward yourself for sticking to it for a certain amount of months. When you reach the three month, six month and/or the one year mark, reward yourself by enjoying a nice dinner or going to see a movie that you’re interested in. You can do many things as long as you do not go over a specified amount. It is okay to splurge a little but if you spend too much, you may jeopardize the amount of money you’ve been saving. If you take these tips seriously, you can break the cycle of living paycheck to paycheck. Eventually, you will be able to afford that vacation you have always wanted and you will exit the 63% statistic that claims that Americans do not have enough money saved for a small $500 emergency.