Imagine waking up one morning, slapped in the face because you no longer have a job. Living paycheck-to-paycheck used to haunt you, now it’s a dream come true compared to the life that lies ahead.
Over the last few years, this stark reality has crashed head first into a shocking number of Americans, just like you and me. When it happened to my family, we were slapped on the back of the head, caught off guard – cold water poured over the top of our reality.
One day we were struggling to pay our bills, the next, we were struggling to live.
”Struggling to pay our bills,” meant struggling to pay our bills and live life without a share of fun. With kids, you can’t exactly lock yourself away from the world without spending a dime on entertainment. Not unless you want mutiny. So we always made sure to save a little extra money each month for family outings and miscellaneous fun.
Save and spend, save and spend, save and spend. That was our pattern, and where we went wrong.
Don’t make the same mistake we made.
Saving for That Rainy Day
I know what “saving for a rainy day” actually means. For years, I thought it meant saving for when you wanted to go out and have fun.
Nope. Not unless you really want to hurt when it’s pouring.
“Rainy day” clearly means the hard times that might lie ahead. But I was naive. Saving for a rainy day means easing the burdens that rain from the unexpected; losing your job, an unexpected health crisis, or any other significant threat to your livelihood.
Forcing yourself to save for a rainy day will make sure you’ll always be dryer when the sky opens up and starts pouring. While there’s no definitive answer to how much you should have in reserves, it’s safe to start with half of a year’s salary.
When and How To Start Saving
Start today. Waiting too late can carry terrible consequences.
When you start saving, make a separate account, like a high yield savings account, specifically for that money. Never combine it with regular savings accounts that you rarely contribute to. Name this account in a way that distinguishes it from everything else. A name is a constant reminder that this account is essential to your family’s financial health.
Once you set up and name your account, then start getting it to grow.
How much you pad your account to hit six months worth of salary is up to you. The more you put away, the faster your safety net will spread.
If you must ration your money like most of us, try putting away as much as you can, shooting for a fourth of your total earnings. Don’t worry – this is a temporary saving plan until you can get your account cushioned – you won’t have to live off peanut butter and crackers for long.
Don’t Give Up
Living on three fourths of your salary will be hard, but think of what you’re gaining in the meantime – six months worth of sanity. Six months worth of minimized stress.
The sacrifices that you make now can really help you adjust to making more difficult sacrifices later. Think of it as training for disaster.
Figure out what you can live without, then cut it from your budget. If you think you can’t live without TV, try it anyway. You’ll find yourself spending more time with your family and friends, and doing things like reading more. You can even utilize that HDMI port on your laptop – you know, the reason you justified buying it in the first place – to watch online programs on your TV. There are so many ways to cut your cable TV bill, and it’s easy to take them for granted.
Look at your snack cabinet. What can you cut? Our family discovered that we spent about $100 a month on snacks and nibbles that we didn’t even need. A hundred dollars a month doesn’t sound like a lot, but when you’re living on nothing, it seems like everything.
Make a game of saving before it has to be real.
This sort of exercise will be great for your disaster fund, and amazing for your family, too. It will train them to function on the bare necessities so if this ever happens, they’ll be ready and your household will be less stressed.
You may even find that once you’ve built your fund, you may not want to return to the life of excess you were living before. And that you enjoy knowing you have the money to cover the essentials your family will need in case something goes horribly wrong.
If you prepare today, you can make the hard times a whole lot easier. What other tips do you have?