How to Stop Living Paycheck to Paycheck and Start an Emergency Savings Fund

Living paycheck to paycheck is a dangerous way to go. It means that you have no emergency savings fund, you may be over-extended on credit, and you have nothing left over at the end of each month. Heaven forbid, if your car died, you had unexpected medical expenses, your refrigerator stopped working, or worst of all if you were laid off, what would happen to you? Being late on one credit card bill can cost you $35 or more. Bouncing one check can cost you hundreds, after the chain reaction of more checks bouncing. You need an emergency savings fund to cover you against any of life's unexpected emergencies. So, how can you get one started if you feel trapped without enough income to save?

Instructions

1. Set achievable goals. Don't get overwhelmed with thinking about saving six months of living expenses. Start with the goal of saving just $100. With just $100, you've saved enough to pay for an unexpected medicine you may need for you or your family. Make your goals in increments of $100. When you've put together $200, you have enough to cover a broken microwave oven. With $300, enough to pay for a minor car repair. $400 is enough to replace a dead washing machine, and so on.

2. Open a separate account that is designated just for your emergency fund. Do not mingle the emergency fund savings with your regular checking account, so you won't spend it. Put in $10 or $20 to start it up.
   When your savings fund gains momentum, when you have a few hundred dollars, research the highest money market rates, and open one of the best money market accounts. You can get your money easily from a money market account, and it will be earning interest.

3. Cut back. Take a look at all of your expenses. Cut things that will cause the least pain. Things to consider cutting include: buying coffee out, magazine subscriptions, restaurant meals, cable TV, buying books. Instead of buying books, music, and movies, use your public library instead. The library will loan all of those things for free! Make your own coffee at home. Take it with you in a thermos or coffee travel mug. Find a discount grocery store that carries overstocks and out-of-date foods and take advantage of major savings there.

4. Bring in more money each month. Do something that doesn't put your family relationships in jeopardy by taking too much time and energy. Can you babysit? Do seasonal work? Mow lawns? Write on the internet? Can you clean someone's house once or twice a month? Look in your basement. Find things to sell on Craigslist or eBay. Consider getting a roommate. If that idea does not appeal to you for the long term, find someone who needs a room for a short period of time.

5. Pay off credit. Always make more than the minimum payment on your credit card bills. If you don't, you will be paying forever, and the balance you owe will hardly budge. When you cut back expenses and bring in more each month, make sure to use some of that money to pay down what you owe. Do not charge any more! Pay cash.

Tips & Warnings

• Perhaps you can find a bank that gives you money just for opening a new account.

• Give yourself props for making your incremental goals. You are awesome!

• After you have some decent funds put aside, you will have more freedom to go back to school or switch jobs, etc.

• Make sure to put your emergency savings fund in a separate account. Do not mingle them with other money, as it will be too easy to spend them.

• Make sure you research the highest paying money market rates when you're ready to open a money market fund. Interest varies a lot among money market accounts.