Summary
- Keep a spending diary.
- Ask about benefits.
- Work on debt.
Money in the bank is more than just dollars and cents. It can be a path to independence and greater peace of mind. When you have some money set aside, you will worry less about how to pay for emergencies. You will be able to buy more things for yourself. You won’t have to depend so much on your monthly checks.
But how do you get there? You’re getting very little money now. It may seem that you only get enough to survive. So it may seem that you could not possibly save anything.
Chances are, though, that you really haven’t looked closely at your spending. Most people haven’t. So the first step is to know where your money's going.
Keep a spending diary
There are several ways to learn about your spending. If you spend mainly with checks, credit cards or debit cards, you should look at your past few monthly statements. But even then, you probably pay for some things in cash. For these, you should start keeping a diary. Every time you shop, write down what you buy and how much you pay. Always make sure you get receipts. These make the job of tracking your spending much easier.
When you have done this for a couple of months, add up what you spend on food, shelter, clothing and other items. (Shelter includes rent and utilities such as phone, electricity, etc.) Then break down those categories some more. In food, for instance, look at what you spend on staples—such as milk, bread, fruits and vegetables—and what you may spend on “fun” items such as ice cream and sodas.
I spent that much on shoes?
Add up the categories. Next, estimate how much you spend, for each, in a year. If you have three months in your diary or your checking or debit card statements, multiply the totals by four. The results may surprise you. You may find that you’re spending more than you take in. In any event, it’s time to set priorities. Ask yourself: What is absolutely necessary for me to survive and stay healthy? What can I give up?
For the real necessities, ask yourself: How can I meet these needs for less money? Here’s an example: You need shoes. You can pay $200 or $50 for a pair that meets your needs in pretty much the same way. It depends where you shop and how careful you are when you are there. With food, you may be paying far more than needed because you choose brand-name canned goods over plain-label products. Think for a bit, and you’ll come up with many other examples.
Ask about benefits
Before you take the next step of making a budget, you need to make sure you are getting all the benefits you can. People on public assistance programs are eligible for other aid and don’t know it. Your electric or gas company may have a special lifeline rate, for instance. You may qualify for drug discounts. Don’t be afraid, or too proud, to ask about these things.
Set priorities and make a budget
Now, with your spending data in hand, you need to set priorities and look for ways to save. Cutting out junk food is an easy one. Quitting bad habits such as smoking is another. In the big categories like shelter, you may want to ask yourself if you could live more cheaply somewhere else and still feel safe. In clothing, you may find that you have enough to wear for now and don’t need to do much shopping for the time being. And ask yourself if you can get by without cable or streamed TV (you can always borrow movies from the library).
Now, starting with your basic needs, add up what you must spend each month—and no more. It should be well below your monthly income. If not, go back and trim some more. Once you’ve done that, you may be able to add back some spending for fun, gifts and other things you don’t absolutely need.
If you can keep your spending total 10% below your income, you’re doing great. At that rate, you would have a full month of your income in the bank in less than a year. But don’t be discouraged if you can’t save that much. Saving anything—and doing so every month—is still worthwhile. It gets you in the habit of saving, and over time you will get used to paying yourself first in this way.
What about debt?
Saving is that much harder if you have run up a big balance on your credit card (or cards). You need to pay a minimum each month, and you need to pay more if you really want to get out of debt. If you’re being charged high interest on the balance (and you probably are), the smart thing is to focus on paying it off.
You’ll still do everything else we talked about here—getting control of your spending, budgeting, etc. That is, you’re still learning how to save. When your debt is paid off, you’ll find that you now have money to set aside. In the meantime, leave your credit cards at home. You many need them for emergencies, but you can shop without them.
Summary
- Keep a spending diary.
- Ask about benefits.
- Work on debt.
Money in the bank is more than just dollars and cents. It can be a path to independence and greater peace of mind. When you have some money set aside, you will worry less about how to pay for emergencies. You will be able to buy more things for yourself. You won’t have to depend so much on your monthly checks.
But how do you get there? You’re getting very little money now. It may seem that you only get enough to survive. So it may seem that you could not possibly save anything.
Chances are, though, that you really haven’t looked closely at your spending. Most people haven’t. So the first step is to know where your money's going.
Keep a spending diary
There are several ways to learn about your spending. If you spend mainly with checks, credit cards or debit cards, you should look at your past few monthly statements. But even then, you probably pay for some things in cash. For these, you should start keeping a diary. Every time you shop, write down what you buy and how much you pay. Always make sure you get receipts. These make the job of tracking your spending much easier.
When you have done this for a couple of months, add up what you spend on food, shelter, clothing and other items. (Shelter includes rent and utilities such as phone, electricity, etc.) Then break down those categories some more. In food, for instance, look at what you spend on staples—such as milk, bread, fruits and vegetables—and what you may spend on “fun” items such as ice cream and sodas.
I spent that much on shoes?
Add up the categories. Next, estimate how much you spend, for each, in a year. If you have three months in your diary or your checking or debit card statements, multiply the totals by four. The results may surprise you. You may find that you’re spending more than you take in. In any event, it’s time to set priorities. Ask yourself: What is absolutely necessary for me to survive and stay healthy? What can I give up?
For the real necessities, ask yourself: How can I meet these needs for less money? Here’s an example: You need shoes. You can pay $200 or $50 for a pair that meets your needs in pretty much the same way. It depends where you shop and how careful you are when you are there. With food, you may be paying far more than needed because you choose brand-name canned goods over plain-label products. Think for a bit, and you’ll come up with many other examples.
Ask about benefits
Before you take the next step of making a budget, you need to make sure you are getting all the benefits you can. People on public assistance programs are eligible for other aid and don’t know it. Your electric or gas company may have a special lifeline rate, for instance. You may qualify for drug discounts. Don’t be afraid, or too proud, to ask about these things.
Set priorities and make a budget
Now, with your spending data in hand, you need to set priorities and look for ways to save. Cutting out junk food is an easy one. Quitting bad habits such as smoking is another. In the big categories like shelter, you may want to ask yourself if you could live more cheaply somewhere else and still feel safe. In clothing, you may find that you have enough to wear for now and don’t need to do much shopping for the time being. And ask yourself if you can get by without cable or streamed TV (you can always borrow movies from the library).
Now, starting with your basic needs, add up what you must spend each month—and no more. It should be well below your monthly income. If not, go back and trim some more. Once you’ve done that, you may be able to add back some spending for fun, gifts and other things you don’t absolutely need.
If you can keep your spending total 10% below your income, you’re doing great. At that rate, you would have a full month of your income in the bank in less than a year. But don’t be discouraged if you can’t save that much. Saving anything—and doing so every month—is still worthwhile. It gets you in the habit of saving, and over time you will get used to paying yourself first in this way.
What about debt?
Saving is that much harder if you have run up a big balance on your credit card (or cards). You need to pay a minimum each month, and you need to pay more if you really want to get out of debt. If you’re being charged high interest on the balance (and you probably are), the smart thing is to focus on paying it off.
You’ll still do everything else we talked about here—getting control of your spending, budgeting, etc. That is, you’re still learning how to save. When your debt is paid off, you’ll find that you now have money to set aside. In the meantime, leave your credit cards at home. You many need them for emergencies, but you can shop without them.
Summary
- Keep a spending diary.
- Ask about benefits.
- Work on debt.
Money in the bank is more than just dollars and cents. It can be a path to independence and greater peace of mind. When you have some money set aside, you will worry less about how to pay for emergencies. You will be able to buy more things for yourself. You won’t have to depend so much on your monthly checks.
But how do you get there? You’re getting very little money now. It may seem that you only get enough to survive. So it may seem that you could not possibly save anything.
Chances are, though, that you really haven’t looked closely at your spending. Most people haven’t. So the first step is to know where your money's going.
Keep a spending diary
There are several ways to learn about your spending. If you spend mainly with checks, credit cards or debit cards, you should look at your past few monthly statements. But even then, you probably pay for some things in cash. For these, you should start keeping a diary. Every time you shop, write down what you buy and how much you pay. Always make sure you get receipts. These make the job of tracking your spending much easier.
When you have done this for a couple of months, add up what you spend on food, shelter, clothing and other items. (Shelter includes rent and utilities such as phone, electricity, etc.) Then break down those categories some more. In food, for instance, look at what you spend on staples—such as milk, bread, fruits and vegetables—and what you may spend on “fun” items such as ice cream and sodas.
I spent that much on shoes?
Add up the categories. Next, estimate how much you spend, for each, in a year. If you have three months in your diary or your checking or debit card statements, multiply the totals by four. The results may surprise you. You may find that you’re spending more than you take in. In any event, it’s time to set priorities. Ask yourself: What is absolutely necessary for me to survive and stay healthy? What can I give up?
For the real necessities, ask yourself: How can I meet these needs for less money? Here’s an example: You need shoes. You can pay $200 or $50 for a pair that meets your needs in pretty much the same way. It depends where you shop and how careful you are when you are there. With food, you may be paying far more than needed because you choose brand-name canned goods over plain-label products. Think for a bit, and you’ll come up with many other examples.
Ask about benefits
Before you take the next step of making a budget, you need to make sure you are getting all the benefits you can. People on public assistance programs are eligible for other aid and don’t know it. Your electric or gas company may have a special lifeline rate, for instance. You may qualify for drug discounts. Don’t be afraid, or too proud, to ask about these things.
Set priorities and make a budget
Now, with your spending data in hand, you need to set priorities and look for ways to save. Cutting out junk food is an easy one. Quitting bad habits such as smoking is another. In the big categories like shelter, you may want to ask yourself if you could live more cheaply somewhere else and still feel safe. In clothing, you may find that you have enough to wear for now and don’t need to do much shopping for the time being. And ask yourself if you can get by without cable or streamed TV (you can always borrow movies from the library).
Now, starting with your basic needs, add up what you must spend each month—and no more. It should be well below your monthly income. If not, go back and trim some more. Once you’ve done that, you may be able to add back some spending for fun, gifts and other things you don’t absolutely need.
If you can keep your spending total 10% below your income, you’re doing great. At that rate, you would have a full month of your income in the bank in less than a year. But don’t be discouraged if you can’t save that much. Saving anything—and doing so every month—is still worthwhile. It gets you in the habit of saving, and over time you will get used to paying yourself first in this way.
What about debt?
Saving is that much harder if you have run up a big balance on your credit card (or cards). You need to pay a minimum each month, and you need to pay more if you really want to get out of debt. If you’re being charged high interest on the balance (and you probably are), the smart thing is to focus on paying it off.
You’ll still do everything else we talked about here—getting control of your spending, budgeting, etc. That is, you’re still learning how to save. When your debt is paid off, you’ll find that you now have money to set aside. In the meantime, leave your credit cards at home. You many need them for emergencies, but you can shop without them.