Starter Emergency Fund: What Is a Starter Emergency Fund, and How Much Should You Put in It?

starter emergency fund

Your Starter Emergency Fund

In this article I am going to explain the meaning of a starter emergency fund. I will also share how much I recommend you save in your starter emergency fund, and I will give ideas for how you can fund your starter emergency fund.

By creating a starter emergency fund,  you will be helping your family to stand on wonderfully firm financial footing!

 

Tip: Save the image above to Pinterest so that you can easily refer to this article on building your starter emergency fund later!

 

What Is a Starter Emergency Fund?

A starter emergency fund, or a baby emergency fund, is savings that you put in a separate savings account and that you don’t use for anything else besides a true emergency.

Of course people define emergency differently, but I consider an emergency something that is essential for you to get by. So if your car breaks and you have to have your car to get to work, that is an emergency. However, if you have a car and it breaks but your spouse also has a car and you can get to work for a few months by riding your bike and in the meantime save up the money to fix the car, then that is not an emergency.

The difference between a starter emergency fund and a full emergency fund is that you build up a starter emergency fund very quickly, and you save less money in your starter emergency fund than in your full emergency fund. Read the next section to learn how much I recommend you save in your starter emergency fund.

Learn how to build a fully funded emergency fund here.

 

     

    How Much Should You Have in a Starter Emergency Fund?

    I recommend that you save somewhere between $1,000 and one month’s worth of expenses in your starter emergency fund. Note that I mention one month’s worth of expenses—not one month’s worth of income. If your expenses currently exceed your income, then work on reversing that trend. 🙂

    But the starter emergency fund should be based on your monthly expenses, not your monthly income, and it should cover up to one month’s worth of expenses.

    If you feel comfortable with a $1,000 starter emergency fund, then go with that amount because you can save that up more quickly and because $1,000 will cover most financial setbacks you will have.

    Find awesome ideas for how to fund your starter emergency fund in the next section!

    How Can You Build Your Starter Emergency Fund as Quickly as Possible?

    Treat funding your starter emergency fund like an emergency! 🙂 That way, when you have a financial setback or emergency, you’ll have accomplished this goal quickly so that you’ll be prepared.

    There are two main ways you can build your starter emergency fund, and I recommend that you use both of them. 🙂

    The first is to work to reduce your expenses. Consider canceling your cable or satellite service, cancel subscriptions and memberships, save money eating out and slash your grocery spending, and do a spending freeze (no spend challenge) for a period of time.

    Here are some additional things you can do to reduce your expenses to save up your starter emergency fund as quickly as possible:

    • Lower your ongoing expenses. Turn up (or off) the air conditioner (to 78 or higher, for the most savings), lower the furnace (to 62 or below, for the most savings), and lower your cell phone bill,
    • Replace expensive hobbies with free or cheap ones. Tell the kids you’re on a mission to save money and that you might not be doing some of your regular activities as often for a while. Find tons of ideas here for free and cheap ways to have fun with your family.
    • Sell stuff around the house. Do you have electronics, appliances, toys, furnishings, or other items you’re no longer using or don’t need? Sell them on Craigslist, Facebook Marketplace, or your local classifieds.
    • Cut other discretionary expenses. In addition to cutting your cable or satellite bill and eating out less, consider these options to save up your starter emergency fund (and then your full emergency fund) as quickly as possible: stay out of the movie theater, reduce or eliminate other paid-for entertainment for a time, cut back on your fun or spending money, cut your clothing budget, reduce your spending on your pet, reduce your Christmas spending and other gift giving, and cancel (or adapt) this year’s vacation plans.
    • Look into selling your car. If you really want to save money fast, look into selling your car (or cars) and replacing it with a less expensive car. This could fund not only your starter emergency fund but your full emergency fund, as well. And by selling a car with hefty payments, you could reduce your overall debt and to free up room in your monthly budget.
      Or if you don’t owe much (or anything) on your vehicle but can go from two cars down to one by selling one of them, then that’s another great option to help you save money fast. We’ve been a one-car family for most of our marriage, and it’s helped us to save a lot of money over the years in not only the purchase cost but in gas, maintenance, insurance, registration, and so on.
      Find more ideas for how to slash your transportation costs here. And learn how to never have a car payment again here.
    • Do what you can to reduce your housing expenses. Here are some ideas:
      • Find a cheaper place to rent. If you’re renting, shop around to see if you can find a less expensive place. You might check different neighborhoods or a nearby town.
      • Get a roommate. Find a roommate or housemate. Or two. Or more. 🙂
      • Rent out a room in your home to vacationers. Consider renting out a spare room or two in your home on Airbnb or Booking.com. Sign up here on Airbnb and get up to $55 to go toward your first stay!
      • And also find additional ways to save on your utility bills (<< more than 30 ideas in this article!).
      • For more than 30 ideas on how to cut your housing expenses, read this article.

    For more information on how to reduce your spending, see this article.

    The other way to quickly build your starter emergency fund is to make extra money.

    You could do overtime at work or get a second part-time job, or take on extra clients or work if you own your own business. You could start a side hustle such as starting a money-making blog. (Learn some of the best ways that bloggers can make incredible incomes, from $1,000 a month to $10,000+ a month!) You could rent out rooms in your home on Airbnb, as I mention above, or you could get a side gig driving for Lyft or Uber. You could sell stuff around your house that you don’t need.

    Here is a list of simple and fun ways to increase your income:

    • Start a money-making blog. Like I mention above, starting a blog can be a great way to earn extra money! And I admit that I put this idea first because blogging is my very favorite way to earn extra money! The potential to earn a significant income is definitely one of the reasons that I started this blog. If you love helping people and enjoy writing, being a blogger might be a great fit for you! In addition to great income potential (check out these amazing income reports of bloggers who make $10,000 to $100,000 or more per month!), there are many other benefits of being a blogger, such as being able to be your own boss and work on your own schedule.
      I have been blogging part time for a little over a year, and it took about 10 months before I was making a significant part-time income. Since that time, I have been making between $1,500 and $2,000 a month, and I expect that to grow as I continue to learn more about blogging and the different ways to make money blogging.
      One of the best things about blogging as a business is that it is such an inexpensive business to start. All you need is a computer, an internet connection, and a site and hosting service. You can literally start a blog for less than $5 a month! Learn how to start a money-making blog for cheap.
    • Do freelance work or coaching/consulting. If you work in a field that lends itself to doing freelance work, take advantage of that opportunity to earn extra income to pay toward your debt! I have been doing freelance writing and editing since before I graduated from college with my English degree and editing minor, and doing freelance work has not only helped me gain experience in other areas besides what I do for my full-time job but has also at times (when I wanted to give the time to it) brought in significant additional income.
      If you are a word nerd like me, consider making some extra money as a professional proofreader. My friend Caitlyn Pyle has an awesome course where she teaches people not only how to proofread but how to set up their proofreading business and get clients. Check out her course Proofread Anywhere here.
    • Get a (second) job. If one spouse is available to get a second job in the evenings or on Saturday, for example, then this is another great potential way to earn additional income. And if you are a one-income family, or if one of you works only part-time, you might want to consider reentering the workforce or going full-time temporarily in order to get out of debt more quickly. Though raises and promotions are awesome because you’re earning more money without necessarily having to spend any more time, you’ll generally make a lot more money by working at another job. (And of course, if you and your spouse both get a raise and a second job, then you take advantage of both methods of increasing your income. Yay!)
    • Start a side hustle. If you would rather earn money without working another regular job, there are a lot of things you can do to earn a little extra income. Some ideas include starting your own small business where you turn a hobby into a money-maker, being a virtual assistant, or driving for Uber or Lyft. Learn how to start a side hustle and find out about many side hustles that you can explore.
    • Ask for a raise or promotion. In all honesty, most people can make substantially make more money from the options above than from seeking a raise or promotion from their full-time or part-time job, but it is still a good way to increase you income.
      If it’s been a couple of years or more since you received a significant raise and you’ve been an exceptional employee at work, catalog your contributions and your accomplishments, and schedule a meeting with your boss to request a raise or a promotion. Focus on ways that you’ve earned the company money or saved them money. If you learn that a raise or promotion isn’t going to happen right away, ask what specific steps you can take in the next year or two to make it a reality. Read this article for more information on how to seek a raise or promotion.
    • Earn passive income. Some options for earning passive income are to create a product you have someone sell, write a book, create a money-making podcast or vlog, develop an online course, or participate in affiliate marketing. Read this article to learn more ideas for earning passive income.
    • Use money-saving apps like Ibotta and Rakuten (formerly Ebates). With rebate services such as Ibotta and Rakuten, you can earn money by shopping for things and at places where you would shop anyway.
      Ibotta is my favorite FREE grocery money-saving app. 
      I’ve been a member of Ibotta for years, and they are a fun and easy way to save money whenever you shop! With the free Ibotta app, you earn cash back on purchases you make every day from your favorite grocery and other stores such as Target, Walmart, Home Depot, Dollar Tree, Sam’s Club, Amazon, and many, many more! With the easy-to-use Ibotta app you can get cash back when you shop not only for groceries but also for clothing, home improvement supplies, travel services, and more!I can even use Ibotta at several of our smaller, local grocery stores, which I love!

      Signing up takes just a minute, and then you can start to save money whenever and wherever you shop, at physical stores and online! Sign up for your free Ibotta account here!

      With Rakuten, on the other hand, you generally buy items through their website to save up to 40 percent on purchases. It is primarily an online service. Because of this, you can actually sign up for and use both apps to save on purchases!
      Sign up for a free Rakuten account here, and sign up for a free Ibotta account here. You can literally sign up for both in just seconds and let the savings start stacking up.

    • Sell stuff on eBay or Amazon. If you have a good eye for a bargain, you can buy items at thrift stores or garage sales and sell them for a profit on eBay, Amazon, Craigslist, or your local online classifieds.
    • Sell your clothes to consignment shops. If you’re like most people, you probably have more clothes than you need. So use them to bring in some quick cash!
    • Have a yard sale or garage sale (or sales!). Declutter and make money, all at the same time!

    For more ideas, check out this article on increasing your income.

    Conclusion

    If you don’t have a starter emergency fund, treat getting one like an emergency! 🙂 Try to have your starter emergency fund funded in a month or less if you can by making extra money and reducing your spending.

    And then after you have your starter emergency fund and have paid off your nonmortgage debt, work to build your fully funded emergency fund of three to six months’ worth of expenses.

     

    How much do you feel is a good amount for your starter emergency fund? What ideas do you have for funding your starter emergency fund? Leave a comment below and let me know—I would love to hear your ideas!

     

    Invitation to Share

    Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

    Join Our Facebook Group!

    Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

    13 Amazing Ways to Spend Your Tax Refund!

    what to do with tax refund

    What to Do with a Tax Refund?

    In this article I am going to discuss my best suggestions for what to do with a tax refund! Learn 13 awesome tips for what to do with a tax refund to use it to your best advantage! With these 13 fun tips, you can get great ideas for what to do with a tax refund this year!

     

    Tip: Save the image above to Pinterest so that you can easily refer to this article on what to do with a tax refund later!

    Should You Use Your Tax Refund to Pay off Debt?

    Before we talk about what to do with a tax refund, I want to answer this question: Should you use your tax refund to get out of debt?

    The short answer to the question “Should I use my tax refund to pay off debt?” is Yes!

    The longer answer is also Yes! 🙂 But if you do use your tax refund to pay off debt, then also do the things that you need to and make the changes that you need to to not fall back into the trap of consumer debt!

    Being debt free is an amazing way to live your life, and it has so many benefits. Some of the more tangible benefits of being debt free include being able to free up money for other financial goals like saving (more) for retirement and being able to have more money available to pay off your mortage early so that you can save literally tens of thousands or even hundreds of thousands of dollars over the years that you can use for other things.

    And some of the less tangible blessings of paying off your debt include having peace of mind and the satisfaction that comes in knowing that your money is your own to use as you see fit; it’s not all controlled by someone else.

    Paying off your debt and becoming debt free puts you in a wonderful place of strength financially and is an important part of overall financial freedom!

    Check out this must-read article to learn how to get and stay out of debt!

     

    Can You Get a Loan against Your Tax Refund?

    The answer to the question “Can I get a loan against my tax refund?” is also yes. Unfortunately, there are many places, like quick cash and payday loan companies and even some tax accountants who will readily give you a loan against your tax refund.

    However, I am going to encourage you to not get a loan against your tax refund because that can put your family in a very precarious financial situation. It is almost definitely a sign that you are living beyond your means. Not to mention, you will almost certainly pay more than you would for a simple loan from a credit union or local bank.

    Instead, follow the advice above, and use your tax refund to pay off debt or use it for one of the other ideas that I share below!

    What Is the Best Thing to Do with a Tax Refund?

    Answering the question “What is the best thing to do with a tax refund?” can seem kind of tricky. As I note below in this article, there are many good and even great things you can do with your tax refund.

    But if you have high-interest debt like credit card debt, probably the very best thing to do with your tax refund is to pay off that debt. And then once you have used that money to pay off your debt, keep working your way out of debt! Becoming debt free is one of the very best things you can do for your own financial well-being and long-term success! It is very difficult to build wealth and reach financial independence without being debt free, so definitely make this a goal and work toward it as quick as possible!

    What Can You Not Do With Your Tax Refund?

    If you are wondering “What can I not do with a tax refund?” the answer is, not much. Pretty much anything you can do with your regular money you can do with a tax refund.

    However, there are some things that you should not do with a tax refund. These are things that will weaken your financial situation. For example, as I mentioned above, you really should not get a loan against your tax refund. And don’t go to Vegas and gamble it all away!

    You also shouldn’t just put the money in your checking account. Even with good intentions to use the money for something worthwhile, if the money is just left there, you are very likely to just blow it on some big, expensive thing you will regret later (such as a huge flat screen TV), or perhaps worse, you will use it up inadvertently, little by little splurges here and there.

    And perhaps worst of all, do not use your tax refund money to take out a loan for something you really cannot afford, such as a new car or new truck, expensive furniture or appliances, a home renovation, or something similar. Instead, put the money in a savings account as a great jumpstart to saving up for one or more of those things. 

    Learn about the 9 savings accounts that every family should have!

     

    13 Best Ideas for What to Do with a Tax Refund

    OK, now with some of those other related questions out of the way first, if you are looking for what to do with your tax refund, keep reading! Here are 13 of the best things you can do with your tax refund.

    But before we get to the suggestions for what to do with a tax refund, I do want to make this one other important recommendation: If you regularly get a tax refund of more than $600, then you should change your tax withholding so that you are not giving an interest-free loan to the government! 🙂

    I know that most people just see their tax refund as found money, but that is money that you have given to the government to use throughout the year, and you didn’t get any benefit from them using your money!

    According to Bankrate, the average tax return for 2018 was $2,899. That means that the average American family allowed the government to use $241.67 a month that they could have kept in their own pocket and used to fund their own awesome financial goals! So let’s not do that!

    Again, if you regularly get a large tax refund, don’t just see it as a windfall and blow that money! Adjust your W-2 tax withholding, and then use the money that it saved you each month to reach your own amazing financial goals! 🙂

    But for this year, here are 13 ideas for what to do with that wonderful tax refund.

    1. Build a starter emergency fund.

    One of the best things that you can do with a tax refund is to create an emergency fund. If you do not already have a starter emergency fund of at least $1,000 or up to one month’s worth of expenses, then start there. Put your tax refund money in a separate savings account (I like Capital One 360 because it is so easy to set up multiple savings accounts for your various savings goals, and they have been a great bank for us) earmarked for emergencies only, and then don’t touch it unless you have an emergency! Learn what an emergency fund should be used for here.

     

    2. Pay down credit card and other nonmortgage debt.

    Another great tip for what to do with a tax refund is to use it to pay off debt.

    If your nonmortgage debt is less than the amount of your tax refund, awesome! Pay it all off, and free yourself from that burden! If you do not have enough in your tax refund and other money available to pay off all of your nonmortgage debt at once, then pay off the debt with the highest interest rates first, or else begin and follow a debt snowball plan to wipe out all of your debt as quickly as possible!

     

    3. Finish off funding your emergency savings.

    If you have enough money with your tax refund money and maybe even other savings you have available to do so, then fully fund an emergency fund with at least three months’ worth of savings or, ideally if you can, six months’ worth of savings. Or save as much as you can toward that goal using your tax refund.

    And then save additional money each month (the money you were overpaying the government that gave you this awesome windfall in the first place? :)) to finish funding your emergency savings account until it is fully funded with, if possible, six months’ worth of expenses (but at the very least three months’ worth of expenses).

     

    4. Invest the money for (an amazing!) retirement.

    Another great option for what to do with a tax refund is to put the money toward your retirement savings.

    If you don’t have one set up already, you should open a Roth IRA and begin putting money in it each month to save toward your retirement. As of 2019, you can save up to $6,000 in your Roth IRA.

    So just for fun, let’s say you did that. If you are 32 years old, for example, and you got a big tax refund of $6,000 this year and put it all in your Roth IRA, And then let’s say that you worked till the (now recommended) age of 67.  And let’s also say that you invested the money in good, solid growth stock mutual funds and were able to earn the 30-year historical average of 12 percent on that investment. You would have $316,797! Pretty awesome, right? I would take $6,000 and turn it into $316,000 any day. 🙂

    If you don’t have a Roth IRA yet, sign up for the cheat sheet below to get simple instructions for how to open a Roth IRA in 10 minutes or less!

    5. Invest the money in an educational savings account for your children’s college educations.

    If you have children, one of the best things you can ever do for them is to help them have a debt-free college education. (It is possible, and even very doable—I promise! Learn how to save for your children’s college educations.) Don’t let them saddle themselves with thousands of dollars of student loan debt; just don’t! You likely had student loan debt yourself, and I bet you hated it! I bet you couldn’t wait to get rid of it! So save your children from having to go through that experience by helping to ensure that they pay for their college education with cash.

    They will thank you profusely for helping to set them up for financial success in life by not having to start out their adult life shackled by student loan debt—I promise.

    6. Use the money for a large purchase that you need to make (with cash!).

    If your washer and dryer need to be replaced, now might be a good time. If your car is on its last leg, buy a new (to you! not brand new!) car with cash. If you have been wanting to buy a nice piano for your children to put all of those many hours of practice to use on, by all means go for it.

    7. Use your tax return to pay for home improvements.

    If you are nonmortgage debt free or if you have home improvements that really need to be made before they become an emergency, then using your tax refund on home-improvement projects is a great idea!

    We don’t normally get much of a tax refund (because, again, we don’t like giving the government an interest-free loan for the year when we have so many financial goals of our own!), but we are getting a tax return this year, and because we are debt free (including the mortgage!) and already saving for our kids’ college educations, we are going to use the money for some much-needed home improvements.

    A speedy driver was kind enough to rearrange the fence on the east side of our home for us, and now we are going to get it replaced and finally pour the approach for the side driveway and do a few other things like that. I’m excited!

    8. Use the money to pay down your mortgage!

    If you have an adequate emergency fund (of three to six months’ worth of expenses), you are out of all nonmortgage debt, and you are saving the recommended 10 to 15 percent (ideally 15 percent) of your income each month toward retirement, then you are a financial rock star! Congratulations to you!

    In that case, a great way to spend your tax refund is to use the money toward paying off your mortgage. My firm belief is that one of the best things that you can do for your own family’s financial well-being, financial security, and ultimate financial freedom is to pay off your mortgage as soon as you can. Once you have paid off your mortgage, no one can take your home from you if you have a financial setback such as a death of a spouse, a major illness, or the loss of a job.

    And once you pay off your mortgage, you can invest the money in your own wealth instead of the bank’s! If you will pay off your mortgage as quickly as you can and then pay yourself a mortgage payment every month (as we have started doing since we paid off our mortgage a couple of years ago! #debtfreeforlife), you can then invest that money in good growth stock mutual funds in order to buy a more expensive house with cash in five or more years (which is our plan) or for your long-term financial security and wealth.

     9. Put your tax refund money toward a larger down payment to purchase your future home.

    Another great option for what to do with a tax refund is to put the money toward your down payment for the future house purchase you are saving money toward. By saving up a larger down payment, your monthly mortgage payment can be smaller. (I know it is extreme, but you might even consider the 100% down plan! That’s our plan for our next home purchase! #100percent down :))

    10. Start savings accounts for larger purchases and expenses (sinking funds).

    Another great idea for how to use your tax refund is to open individual savings accounts (these are all savings accounts that we have and regularly fund and use) for large purchases and expenses such as car maintenance and repairs, future (cash!) car purchases, home maintenance and repairs, annual life insurance premiums, family vacations, Christmas, birthdays and other gift giving, appliance and furniture purchases and repairs, and miscellaneous short-term savings.

    These types of funds are often referred to as sinking funds, and they are a fantastic part of your overall financial success plan so that you can avoid going into debt in these and other areas.

    Read this article for more information on saving up for large purchases and expenses and this article to learn more about sinking funds.

     

    11. Use the money to continue your education.

    If you are in a position where you would benefit from additional education to further your career (or just to further your own interests), then consider taking some college classes or completing a certification or other job training program.

    One of the best investments you will ever make is in your own education if it helps you to be able to increase your income. And even if you take classes just for fun, additional knowledge is always a worthwhile thing.

     

    12. Start a side hustle or small business.

    If you have been wanting to start a side hustle (learn how!) or small business on the side, this could be the perfect opportunity to do it!

    I would not recommend that you go into debt to start a side hustle or small business, but if you can do it for cash and have done the research to show it is a good fit and a viable (profitable) option for you, then go for it! Discover 19 awesome side hustles that you can do from home (or anywhere)!

    Perhaps you haven’t considered starting a side hustle and should! If your day job lends itself to freelance or consulting work, for example, then starting a business on the side could be a great way to further use your skills, expand your professional network, and earn extra income to reach your financial goals—like paying off debt or purchasing a home—more quickly.

     

    13. Go have some (debt-free, guilt-free) fun!

    Whether or not you follow any of the suggestions above for what to do with your tax refund, if you use some or all of the money from your tax refund for some debt-free fun, you will still be ahead of the game!

    You could use the money to buy a new TV, a new smartphone, or a nicer (paid-for, please!) car, or you could even go on an epic trip, like my coworker is (he and his wife are going to China!). You could purchase bikes for your whole family (can you say “tandem”? :)). You could pay for an awesome backpacking trip or go to Disney World or take a family cruise.

    If you love to save money when you travel like we do, read this article with 5 awesome ways that we save money by using Airbnb! And if you haven’t tried Airbnb yet, you need to! They are such a great way to save money while you travel! Sign up here to receive $55 off your first Airbnb rental!

     

    Conclusion

    There are many great options for what to do with a tax refund, but these 13 suggestions are some of the best ways to spend your tax refund to get the most bang for your buck!

    As I mentioned earlier, if you regularly receive a tax refund of more than $600, adjust your tax withholding on your W-2 so that you are instead bringing that money home each month! Then use the money to move you toward financial freedom!

    Use the money to fund your own amazing financial goals like building a six-month emergency fund, like saving more money for retirement, like paying off your mortgage early, like funding your children’s college educations, or even taking an epic, paid-for family trip or vacation!

     

    Check out these related articles!

    12 Best Tips to Save Money on Entertainment

    151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money!

    5 Awesome Ways We Save Money Traveling with Airbnb!

    5 Best Frugal Living Hacks to Save $500 a Month or More!

     

    What do you plan to do with your tax refund this year? Are you going to pay down debt, invest, build your emergency fund, save for a large purchase, or spend the money on something fun? Leave a comment below and let me know—I would love to hear your ideas!

     

    Invitation to Share

    Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

    Join Our Facebook Group!

    Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

    5 Simple Frugal Living Hacks to Save More Money: Save $500 or More per Month!

    Learn 5 simple frugal living ideas to save money each month! These 5 must-know frugal living tips will help you to save $500 or more per month!

    Top Frugal Living Ideas

    In this article I will share 5 simple frugal living ideas to help you save money fast. Learn 5 simple frugal living ideas that will help you save more money in order to reach your financial goals and live your dreams! With these 5 easy frugal living tips you can save $500 or more per month!

     

    Tip: Save the image above to Pinterest so that you can easily find this article about simple frugal living ideas to refer to it later!

     

    Tired of tiny interest rates on your savings?

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     Then you should check out CIT Bank. We love our CIT Bank savings account, which offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.75% on your savings account (which is really good in today’s market)!

    And right now you can get up to $300 when you open a Savings Builder account! Click here to learn more and open your savings account today!

     

    5 Simple Frugal Living Ideas to Save More Money

    If you are looking for simple frugal living ideas, then this article is for you! There are many, many things you can do to live more frugally and save money each month, but these are 5 of the best ways for a family or individual to live frugally in order to save more money each month. Follow these simple frugal living ideas to save $500 or more a month!

     

    1. Cut your food budget (in half!) to live more frugally.

    One of the very best frugal living ideas is to reduce the amount you spend each month on groceries and eating out.

    The average American family spends close to $800 a month on food. But you really can spend significantly less than that, especially if you nix eating out so much. So if you will cut $100 to $200 from your grocery budget for the month and $150 from your restaurant budget, you will have $200 to $300 (or more!) to go toward reaching your awesome financial goals!

    Here are my two best frugal living hacks to help you get the most bang for your grocery-spending buck:

    • First, make a plan. Get this free, helpful weekly meal planning worksheet (below) to get organized and plan your week’s worth of meals! The meal planner comes with helpful meal planning tips that will help you save a ton of money on your grocery shopping!
    • Second, shop with a grocery list and a price comparison cheat sheet! Make a list, check it twice, and then don’t deviate from it! 😊 Use this awesome, super handy shopping list and grocery price comparison cheat sheet to help you spot great deals and pass over grocery items that are overpriced.

    And here are even more frugal living hacks that will help you save a bunch of money on groceries:

    • Sign up for a grocery money-saving app like Ibotta. I’ve been a member of Ibotta for years, and they are a fun and easy way to save money whenever you shop! With the free Ibotta app, you earn cash back on purchases you make every day from your favorite grocery and other stores such as Target, Walmart, Home Depot, Dollar Tree, Sam’s Club, Amazon, and many, many more! With the easy-to-use Ibotta app you can get cash back when you shop not only for groceries but also for clothing, home improvement supplies, travel services, and more! I can even use Ibotta at several of our smaller, local grocery stores, which I love! Signing up takes just a minute, and then you can start to save money whenever and wherever you shop, at physical stores and online! Sign up for your free Ibotta account here!
    • Use what you already have. Clear out your fridge, cupboards, freezer, and pantry. There’s a good chance you have a week’s worth or more of food in your home, and using it up periodically is a good idea to make sure nothing goes bad. (But if you find things that have expired, don’t automatically toss them out. The dates are just guidelines, and you can eat most things months past the best by date.)
      You might even consider doing a no-spend challenge on groceries for a week, two weeks, or more periodically (or do a no-spend challenge on everything for a week, two weeks, or more to really turbocharge your savings).
    • Cut down on sweets, snacks, juice, beer, and so on. You can save a ton of money by just sticking to the main food groups. Leave the rest of the junk (food) on the grocery store shelf.
    • Plan to have a few meatless meals each week. Meat is one of the most expensive food items, so by omitting meat from your meals you can save a ton of money. Consider going meatless for a few dinner meals a week, or even plan a whole week or two week’s worth of meatless meals if you want to save even more money. Find awesome recipes for meatless meals here.
    • Buy only items that are in season. Blueberries may sound divine in January, but pass them up for fruits, vegetables, and other items that are in season.
    • Buy what’s on sale. Check the week’s grocery ads, and then plan what you buy for that week’s meals around that.
    • Be OK with inexpensive ane even unconventional dinner and other meals. If you really want to save more money on groceries, give yourself permission to plan super simple meals like cereal with milk, egg omelets, waffles, fried eggs with toast, grilled cheese sandwiches, peanut butter and jelly sandwiches, fried eggs with rice, chicken with rice, spaghetti, chicken alfredo, tacos, burritos, and so on.

     Want more ideas for how to save money on your grocery shopping? Read this article for more than 70 suggestions for how to slash your grocery bill without needing to use coupons!

    And dont forget to save money on eating out! The best way to save money on eating out is to eat out less! 🙂 My family spends on average less than $30 a month eating out, but we make it a priority to save for retirement, fund our children’s ESAs, and be consumer and mortgage debt free! 

    There are lots of other ways that you can save money eating out, as well. Find 19 ideas to save money when eating out here.

    Savings = $200-$300+

     

     2. Spend less money on entertainment.

    Saving money on entertainment is another great frugal living idea. The average family in the U.S. spends close to $300 a month on entertainment. So here, too, you can save a ton of money each month if you will reduce your entertainment spending.

    My favorite money-saving hack to spend less on entertainment (and the area where we save the most money) is to save on vacations and traveling! For that, I love to travel with Airbnb. If you have not tried them yet, you need to! We saved about half the price of a hotel just on our last vacation alone by using Airbnb for our accommodations. And we stayed in a three-bedroom home in a beautiful gated community with a pool and hot tub (which we had to ourselves most of the time), a playground, and more! You can sign up to become a member of Airbnb here and save $40 on your first stay!

    You also should look at reducing your monthly internet bill and your cell phone bill (and specifically, your data plan). For that, my best money-saving tip is to check out Xfinity internet and Xfinity Mobile.

    If you’re in an area with Xfinity high-speed internet and mobile, you’ve got to check them out! We’re paying an introductory price of $40 per month for our internet (same price as the much slower internet that we used to have from a different provider), and the cell phone plan is potentially virtually free.

    Since we’re such light data users (especially given the fact that Xfinity Mobile has free hotspots it seems almost everywhere—really!), we pay only $3.16 a month for taxes and fees for each line. (That’s the price if you use less than 100 MB of data per month, which we do; then it’s $12 per GB per month after that, or $45 per month for unlimited.) It’s such an awesome deal!

    And Xfinity Mobile has the same coverage as Verizon, which reportedly has the best cell phone coverage in the U.S. You do need to sign up for Xfinity internet in order to use Xfinity Mobile, at least initially. You can then drop the internet service if you want, but then you’ll pay an extra $10 per month per line for the mobile service. Interested in learning more or signing up? Use this referral code to save up to $100 when you sign up: 1RQ4SP

    To save even more money on entertainment, you might spend less money on the following things (or even give some of them up completely, if you really want to save money!):

    • Paying for cable or satellite. You could easily save $60 to $100 a month (or more!) by doing that alone
    • Going to the movies.
    • Going to music concerts.
    • Going to sports events.
    • Video gaming.
    • Purchasing gadgets (electronic devices).
    • Paying for subscriptions to magazines and paid TV services (Netflix, Sling, and so on—videos from the library are free!).
    • Paying for memberships to the gym, rec center, museums or zoos, and the like.
    • Participating in recreational activities like skiing, bowling, miniature golf, playing arcades, and so on.
    • Christmas shopping.
    • Your personal monthly spending money (some people call it fun money or blow money).

    Find more ideas for how to save money on entertainment.

    And just because you decide to spend less money on or even give up some paid activities completely, that doesn’t mean you have to give up fun! Check out this article with 90+ fun, free activities you can do without spending any money!

    Savings = $200+

     

    Check out these related articles:

    12 Best Tips to Save Money on Entertainment
    91 Fun, Free Activities to Do during a No-Spend Challenge!
    151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money!
    5 Super Simple Steps to Save $1,000 for a Debt-Free Christmas
    11 Ways to Save Big on Your Christmas Shopping
    4 Powerful Principles of Gratitude to Change Your Financial Life
    Contentment: 9 Powerful Principles That Will Help You Save More Money and Reach Financial Success

     

     

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     Then you should check out CIT Bank. We love our CIT Bank savings account, which offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.75% on your savings account (which is really good in today’s market)!

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    3. Trim your transportation costs to live more frugally.

    Another of my favorite frugal living ideas is to reduce your transportation expenses. Especially since you’ll be cutting back on (paid) entertainment and shopping, you can likely save money on transportation as well.

    My best frugal living hack to save money on transportation is to drive paid-for cars. If you have car loans (and statistically, you do ☹), consider selling the car and buying a less expensive car for cash.

    The average car payment in America is over $400 a month, so if you will get rid of your car payments, you will be well on your way to saving $500 per month just by doing that alone! You can literally become a millionaire simply by deciding to live your life without car payments! (So please give it a try—the financial benefits are amazing! 😊 Learn how to buy a car for cash.)

    Here are some more awesome ideas for ways to reduce your transportation costs (they really will save you tons of money if you will put them into practice, especially the first one!):

    • Enjoy staying home rather than spending money going places for entertainment. Pick up reading, playing family games, doing crafts, watching (free) movies, and doing other activities at home to save money on transportation costs.
    • If weather allows, ride a bike or walk to your destinations when possible.
    • Drive less. Combine errands and find other ways to drive less.
    • Carpool to work and school, or take the bus.
    • Telecommute!
    • Drive the speed limit. 😊
    • Use apps like GasBuddy to save money when purchasing fuel.
    • Look around for a cheaper mechanic.
    • Shop around to make sure you are getting the best deal on auto insurance.
    • Save money on auto parts by shopping at places like RockAuto (which truly has amazing prices!). If you possibly can, buy the car part yourself, even if you have a friend, family member, or trusted mechanic do the actual labor. You will save a ton of money that way! In my experience (and I have looked into this in virtually all of the auto mechanic shops in my area), the markup on car parts, even by reputable auto mechanic shops (unfortunately), is huge!

    Looking for more frugal living ideas to save money on transportation? Find more than 30 ideas for how to save on transportation costs.

    Savings = $50-$200+

     

    4. Spend less on housing and related expenses (like utilities).

    Another one of my most important frugal living ideas is to reduce your housing expenses.

    For most families, housing is their largest expense. Fortunately, there are a lot of things that you can do to save money on housing, even if you own your home and so your mortgage is fixed. 

    My favorite frugal living hack for saving money on housing is to rent out your spare bedrooms on sites like Airbnb and Booking.com. If you are able to do this, you could earn well over the cost of your monthly mortgage or rent payment. And you can meet some amazing people in the process.

    To save even more money on housing expenses, look at these options:

    • Consider refinancing your home if interest rates have dropped significantly. (But don’t lengthen the term of your loan! Keep it the same or, even better, shorten it! :))
    • Talk to your insurance agent and find ways to lower your homeowners or renters insurance.
    • Save money on your utilities; here are tips to save money specifically on your winter utilities bill and summer utilities bill.
    • Work to pay off your mortgage as quickly as possible so that you can invest the money in your own wealth instead of the bank’s.
    • Sell your home and purchase a smaller, less expensive home if your mortgage payments really pinch your budget or if you no longer need as much space as you once did.
    • Save a larger down payment before you purchase a home so that your mortgage payment is smaller. (Consider the 100% down plan!)
    • Rent a cheaper place.
    • Consider moving in with family or friends.
    • Simplify your landscaping (this saves money spent on watering it, too!).
    • Get a roommate (or roommates).

    For even more frugal living ideas for saving money on housing costs, read this article with 30+ simple ways to save money on housing and related expenses.

    Savings = $50-200+

     

    5. Spend less money on clothing to live more frugally.

    And one additional frugal living idea is to not spend so much on clothing and shoes. The average American family spends over $100 a month on clothes, so if you will spend say half of that, then you can add that amount to the money that you save each month!

    My favorite hack for saving money on clothing is to set up a clothing co-op of sorts. If you have children, see if you can swap children’s clothes with your nieces and nephews or with children from your neighborhood or church.

    My sisters and I share clothes for our kiddos, and it is an awesome way to save money (and help out the environment just a little)! Plus, I just love seeing my nieces and nephews in clothes that my kiddos wore! It brings back such fun memories!

    You can also save a bunch of money on clothes by shopping the sales and by shopping at discount clothing stores, thrift stores and second-hand stores, garage and yard sales, websites like eBay and Craigslist, and more!

    Want even more ideas? Check out this article with 13 must-know ideas to help you save money on your clothes buying.

    Savings = $50+

     

    For even more frugal living ideas, check out this article with 21 must-know tips to spend less money!

     

    Conclusion

    There are really tons of frugal living ideas that can help you save more money! The possibilities are endless. But these 5 simple frugal living ideas are a great place to start and can help you save $500 or more per month!

    And while you’re at it, in order to put yourself and your family on wonderfully solid financial ground, check out these cool things to save up money for to run your financial house smoothly.

     

    What are your favorite frugal living ideas? Or which of the ideas above do you think will help you save the most money this year? Leave a comment below and let me know—I would love to hear your ideas!

    Check out these related articles:

    How to Get (and Stay) out of Debt!
    Simple Must-Know Tips to Rock Your Budget
    13 Top Tips to Help You Stick to Your Budget
    16 Best Tips to Help You Stop Living Paycheck to Paycheck
    15 Top Tips to Help You Finally Stop Overspending
    31 Budget-Friendly Easy and Cheap Dinner Recipes for under $5
    42 Cheap and Easy Budget-Friendly Meals for under $5
    73 Easy Ways to Save Money on Groceries without Coupons!
    151 Easy Ways to Save Money: Your Ultimate Guide to Saving Money!

     

    Invitation to Share

    Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help a family member or friend or people in general? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being with others. Thank you!

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    Simple Must-Know Tips to Rock Your Budget

    how to create a budget

    How to Create a Budget That Works!

    In this article I am going to share simple steps for how to create a budget that works! These are simple steps that even those who hate budgeting or who have failed at budgeting before can do!

     

    Tip: Pin the image above so that you can easily refer to this article on how to create a budget later!

    Check out these related articles:

     

    How to Create a Budget: Simple Steps That Actually Work

    I know that if you are trying to figure out how to create your first budget, you might be a little nervous. You may have a strong emotional reaction already when you hear the B word. You might feel nervous at the thought of even trying to get a handle on your money.

    You might be afraid of what you’ll discover when you dig into the numbers. You might feel like you’re giving up your freedom by creating a budget. If it helps, use a different term—call it a spending plan. Call it your own personal P&L statement. Do what you need to to start breaking down any psychological barriers you might have to budgeting.

    That is important because one of the best things you can do to build lasting financial security and wealth for you and your family is to create and begin to live on a budget or spending plan.

    And when you do, you’ll likely feel like you got a raise. Because when you finally really start deciding what to do with your money each month, rather than just wondering what happened to it, you can start to do wonderful things with your money, such as really beginning to clean up your debt, saving, investing, and giving to causes you care about.

    This is because, as one financial expert notes, by getting control of your finances—and particularly your spending—you gain control of your best wealth-building tool—your income.

    If you managed the finances for a multimillion-dollar company, you wouldn’t dare do it without tracking all of the income and expenses—and if you tried to do your job without tracking the numbers, you would get fired pretty quick. That’s because you would not have the information you need to manage  that money well.

    And the reality is that over the course of your life, Your Family, Inc., is literally going to make you millions of dollars! Isn’t that exciting? I mean, really, when you think about it, isn’t that awesome news? So let’s get started making you wealthy! It will take a little time and effort, but you can do it! And I’m here to help you.

     

    Simple Steps for How to Create a Budget

    Here are the simple steps that you can follow to help you create your first budget (and be successful at it!) so that you can really begin to get control of your finances and work to reach your financial goals and dreams. These simple steps I discuss below will show you how to create your first budget and really begin winning with your money.

     

    1. Track what you spend as you work to create your first budget.

    Track what you spend for a couple of weeks or a month to really get a good feel for where your money has been going. This doesn’t have to be perfect; just do your best. Use a debit card to make purchases and pay bills as much as possible during this time so that you can go to your bank or credit union website to see what you have spent.

    2. Start with a simple, hard-copy budget.

    When you very first start budgeting, I recommend using a paper budget. This lets you gives you a simple way to create your first budget by helping you to get a rough idea of what you would like to spend where. You can sign up here for a simple budget that will help you get started.

    3. Then switch to a digital budgeting system, if you prefer.

    Once you get the hang of budgeting and have done it for a few months, go ahead and switch to a digital system.

    Or if you really can’t stand paper and you prefer to do everything electronically, you can build a budget in Excel or use a program such as You Need a Budget (YNAB.com). It’s a great, user-friendly budgeting tool with a lot of awesome features.

    Other good options for budgeting are Mint.com and Dave Ramsey’s EveryDollar.

    Or, especially if you have begun investing for retirement or intend to soon, you should sign up for my favorite money tracking app, Personal Capital. Personal Capital not only tracks your spending for you and lets you see all of your bank accounts and credit card accounts but it also tracks your investment accounts, as well.

    I love that it provides a complete picture of your overall financial situation and helps you monitor your progress  If you’re investing in a Roth 401(k) or IRA or have other investments, then sign up for a free Personal Capital account here.

     

    Check out these related articles:

    Budgeting Fail? Try This Simple Alternative to Budgeting
    13 Surefire Steps to Help You Stick to Your Budget
    9 Must-Know Tips to Help You Finally Start Saving!

     

    4. List all income sources as you work to create your first budget.

    If you have a job where you receive regular paychecks, this shouldn’t take too long. Simply add up all income (for you and your spouse), and write that number at the top of the page. Don’t forget to include freelance income and any money earned from second jobs, overtime, or side hustles.

     

    5. List all of your expenses.

    Then begin to list your expenses. Don’t forget to include tithing and charitable giving in this category.

    Do a zero-based budget so that every dollar you have goes to a designated place. If you don’t, it’s almost certain that the unallocated money will get blown in one area or another. Be intentional with all of your money so that your money really works for you.

    First list your regular, fixed expenses. Gather your regular bills, such as mortgage or rent payment, car payment, public transportation pass, utilities, health insurance premium (if not deducted automatically by your employer), cell phone bill, internet bill, car insurance bill, and so on.

    Then list your variable expenses. After you add up all of your fixed expenses, figure out your variable monthly expenses such as groceries, gasoline, household expenses, clothing, entertainment and eating out, pet food and supplies, and toiletries.

    6. Adjust your budget categories if you go over in an area.

    Because you’re going to go off of a zero-based budget, if you decide you have to spend more in one area than you planned for, then you need to pull the money from another spending category. So if something comes up where you need to spend more on your gifts category, for example, because you receive a wedding invitation, then the amount in your entertainment category or fun money or clothing category or somewhere else will need to be adjusted. Your budget needs to balance out.

    7. Don’t forget quarterly, semiannual, or yearly expenses as you work to create your first budget.

    Be sure to account for irregular or infrequent expenses such as semiannual or yearly expenses. These include expenses such as homeowners and auto insurance, vehicle registration, life insurance, property taxes, and so on.

    8. Decide how much money you want to go toward savings.

    It’s likely when you first start budgeting that you won’t have a lot of money left over to put toward savings. It’s OK to start small, but as quickly as you can, start increasing the amount that you save toward specific categories. And no matter how little your income, start saving something right from the beginning if you possibly can, to get yourself into the habit of saving.

    As long as you make a little more than your fixed expenses each month, then determine a realistic amount to save, and save that portion of your income before you do anything else—known as “paying yourself first.” If you plan to just “save what’s left over,” the chances that you’ll have anything left to save are slim.

    If you crunch the numbers and you really just don’t have anything left over to put toward saving (and then paying off debt once your starter emergency fund is funded—see the next section) after paying all of your bills, then you should look at ways to earn additional income.

    9. Fund your starter emergency fund (EF) first.

    The first thing you should start saving toward after you create your first budget is a starter emergency fund. This is a crucial next step because an emergency fund gets you out of the mode of relying on credit cards and it really does virtually stop emergencies from happening.

    It’s not that your car’s transmission never goes out or your roof never springs a leak, but those things are no longer emergencies—they are inconveniences because you have the money saved up to pay for them.

    You should put all extra money above bare-bones expenses (that means minimal spending on eating out, entertainment, and so on) into your emergency fund until it is fully funded.

    If you have consumer debt, start with a small emergency fund of $1,000 to one month’s worth of expenses (depending on how likely you are to need the money—for example, scale upward if you have an older car or home), and pay off your consumer debt before you build your full emergency fund of three to six months of expenses.

    Try to build up your $1,000 starter emergency fund in a month or less by slashing expenses such as your grocery bill and entertainment spending, by selling stuff, and by earning extra money through overtime or a side hustle or second job.

    Learn more about how to fund your emergency fund as quickly as possible.

    10. Start working to pay off your debts.

    After you start budgeting and have all of your expenses written down on paper, you will start to see areas where you can reduce your spending (see this article for more than 35 areas where you can cut your spending) in order to start paying off your debt.

    Once you have a good handle on doing your monthly budget, try to set up your budget so that you can pay extra payments on your debt in order to have all of your nonmortgage debt paid off within 18 to 24 months—or faster, if you can! (You may want to find ways to increase your income or find things to sell in order to help you reach this goal.)

    In order to pay off your debts, use either the snowball debt payment method or the avalanche debt payment method.

    Briefly, the snowball method is where you list all of your debts smallest to largest and you pay just minimum payments on all of your debts except for the smallest one and then throw all of the money that you can toward that smallest debt until it is paid off. Then once that first debt is paid off, you use the all of the money from your budget that you were spending on paying off that smallest debt to attack your next smallest debt. And then so on.

    With the avalanche method, you similarly pay minimum payments on all but one debt, but the debt that you attack first is the one with the highest interest rate. You will save on interest if you use the avalanche method, but I recommend that you follow the snowball method because of the motivation that comes from paying off the smaller debts first and getting the emotional boost from those relatively quick wins. The snowball method is the method we used to pay off more than $60,000 in nonmortgage debt.

    11. Then fully fund your emergency fund.

    After you have paid off all of your nonmortgage debt, then take all of the money that you were throwing toward paying off your debts and use it to fully fund your three- to six-month emergency fund. Try to do this as soon as possible—within six to nine months if possible.

    12. Next, start to save toward other financial goals.

    If you do not have any debt and you have already created your fully funded emergency fund, then start to save toward other financial priorities. In order to stay out of debt and build wealth, you’ve got to be able to cover your expenses without borrowing money.

    And that means you need to have the money saved to cover these costs with cash. For financial well-being, all families should have the following savings accounts in place and be regularly funding them.

    • Create a vehicle maintenance and replacement fund as soon as possible. Shorter term, funding your vehicle savings account prevents regular car maintenance and unexpected repair costs from becoming financial emergencies. And longer term, this fund helps you save thousands of dollars in interest by paying a car payment to yourself instead of to a bank or other lender.
    • Create a house maintenance or down payment fund. If you are a homeowner (or plan to be a homeowner in the future), then this is a must. Eventually virtually everything in your home will need to be repaired or replaced. And some of those items are really expensive. Yes, homeowners insurance will take care of many things, but whenever you can, you should be your own insurance plan—you should self-insure by having savings to cover those inevitable expenses that will crop up. This will help to keep your insurance premiums as low as possible—so raise those deductibles! And there are some things that homeowners insurance simply won’t pay for (generally), such as burst water pipes, collapsed sewer lines, and damage caue by earthquakes, mold, floods, and more.
    • Create other savings funds. Here are some examples of other savings funds that we have and that I recommend you set up as soon as possible:
      • Save for vacations, Christmas, gift giving, larger household items (such as appliances and furnishings), and more. Once you have the essential items covered in your budget (food, clothing, shelter, transportation, and utilities, for example), begin saving for things like vacations, Christmas, household furnishings and appliances, and so on. The easiest way that I’ve found to do this is by having separate savings accounts for each category. Shortly after I got my first job I signed up for an ING checking account. What I loved about ING is that I could add as many different savings accounts as I want, and see them all together (and the sum total of the money in our various accounts). ING has since been bought out by Capital One, and even though I don’t generally recommend really big banks, I have to say that I’ve never had a problem with my Capital One 360 account. In fact, the one time I did have a problem (which was completely my fault—user error), they fixed it in about a minute. Their customer service was great. I know it’s going to sound a little crazy, but we have over 10 savings accounts for different things—for me, I just like to know we won’t accidentally spend money we have designated for one thing on something else.
      • Create a dream fund. When you are out of debt and have begun to save for all of the above items, begin funding your dreams. Because learning to be financially savvy isn’t just so you can pay all your bills and retire with dignity and give to the causes you support—though all of those things are extremely important. It’s also so that you can really enjoy the many things money can buy, guilt free and without debt. This might mean saving for a motorcycle, a nice car, an RV, a boat, an exotic vacation—whatever you want. If you’re young or have a lot of debt it may be years before you can fully fund or maybe even start these savings funds, but if you keep it in the back of your mind, it will help you stay on track financially.

    13. Begin long-term investing for your retirement and kids’ college, or ramp up your efforts in those areas.

    There’s a saying in the personal finance industry that the best time to start investing was yesterday—and the next best time is now. So as soon as you can, start investing for retirement in a 401(k) or Roth IRA (or both!), and start saving for your children’s college expenses in an educational savings account (ESA) or college 529.

    Even if you start with just $100 a month, the savings begins to grow quickly, and by seeing the progress you make, you’ll be motivated to save even more. We have investment accounts with both Schwab and Vanguard. Both are inexpensive, excellent options to help you start investing for retirement and saving for college today.

    14. Automate your finances.

    To avoid getting overwhelmed, automate as much of your finances as possible. I don’t have any bills that I regularly pay with a check—we use bill pay for all of our expenses, including tithing and charitable donations. Automating our financial transactions saves time and makes life much simpler (and helps me avoid forgetting to pay my bills!).

    If you want to learn more about how to automate your bill paying, saving, and investing to simplify your life and start to build wealth, I recommend The Automatic Millionaire by David Bach. It’s one of my favorite personal finance books because it gives simple, actionable steps you can follow. And check out this article for more information on automating your finances.

     

    15. Use cash for areas you learn you tend to overspend on.

    Some areas that you’ll probably want to use cash for in your budget include food, entertainment, clothing, and personal fun money. You can use envelopes to keep your cash for the week or month or a wallet with different compartments.

    16. Continue tracking your spending each month, and adjust your budget as needed over time.

    It will probably take about three months to work out the major kinks in your budget, but then it will really start to work.

    You should create a specific budget for every month because no two months are exactly the same, but once you’ve been budgeting for a while, your budget will be mostly set and you’ll only have to make minor tweaks from month to month.

    However, when major events happen in life that cause big changes in your finances, be sure to adapt your budget accordingly.

    17. Cut yourself some slack.

    I mentioned this briefly above, but it’s worth repeating. You’re probably going to mess up when you first start budgeting. You’re likely going to overspend sometimes. Some months life may get so hectic that you forget to budget at all. But just keep working at it and giving it your best, and you’ll make huge strides and ultimately reach your financial goals and dreams.

     

    Conclusion

    As I said at the beginning of this article, by learning how to create a budget and learning to control your spending, you’ll have the means to be able to do some amazing things with your money.

    You’ll be able to save for emergencies, give to causes you truly care about, retire in comfort, help your children pay for college, and buy a lot of fun toys and fund a lot of amazing experiences along the way.

    But you’ve got to get to that point first—and the way to do that is with a budget or spending plan. So get started with it today! 🙂

     

    What are your biggest struggles when it comes to how to create a budget? What has worked for you in the past when you have made a budget? Leave a comment below and let me know! I would love to hear your thoughts and ideas!

     

    Invitation to Share

    Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

    Join Our Facebook Group!

    Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

    5 Financial New Year’s Resolutions to Save More Money!

    financial New Year's resolutions

    Financial New Year’s Resolutions

    In this article I am going to talk about financial New Year’s resolutions that you can make to set yourself up to win with money this year (and throughout your life)!

    By following these financial habits, you will be able to begin to save more money, and over time you be able to build financial stability and find financial peace. And as you continue to follow these habits, you will build wealth over time so that you can attain ultimate financial freedom, where you are able to choose to a large extent the kind of life you want to lead and if, when, and how you want to work.

    Tip: Save the image above to Pinterest so that you easily refer to this article on financial New Year’s resolutions later! 

    Why Have Financial New Year’s Resolutions?

    The new year is a great time to begin again and have a fresh start. It is a great time to reflect on where we are and where we want to be.

    New Year’s resolutions can be a powerful way to decide what is really important to you and to make a plan to get there. And since money and personal finance touch virtually every aspect of our lives, making one or more New Year’s resolutions related to money (and then keeping them!) is a great way to improve and make progress in vitally important ways.

     

    How to Keep Financial New Year’s Resolutions

    Making financial New Year’s resolutions is a great start. But the power of financial New Year’s resolutions comes only as you make progress on them. Sadly, I have heard that most people give up on their New Year’s resolutions by Valentine’s Day.

    These things can help you stick to your financial New Year’s resolutions:

    Make sure you set realistic goals so that you aren’t just setting yourself up for failure! If you make $20,000 a year, it probably isnt realistic to have a goal to pay off $15,000—unless you get an awesome side hustle or increase your income in other ways.

    In order for you to keep your resolve and keep working toward your financial goals, write them down! That is a huge first step.

    Then make sure you put them in a place where you will see them often. Put a reminder in your phone to help you continue to think about and work toward them.

    Set up simple rewards you give yourself to keep yourself motivated to keep working toward your goals. For example, if you have a goal to pay off a lot of debt, then set up milestones along the way to help you get there, and give yourself a simple and inexpensive (or more expensive, if you can afford to and you crush a huge debt) reward when you reach each milestone. For example, you could go out for ice cream, go out to dinner, buy a new movie or video game, go out to the movies, buy a handbag or purse, and so on.

    Get the help and support of others. Especially if you are married, work on your financial New Year’s resolutions together. If you are not married, get a family member or friend to help you and keep you accountable and motivated to stick to your goals!

     

    5 Financial New Year’s Resolutions to Help You Save More Money!

    If you will commit to making (and keeping :)) financial New Year’s resolutions in these five areas of your money, you will be able to reach your financial goals and move steadily toward financial stability and obtaining financial freedom and building wealth for you and your family.

    The five financial New Year’s resolutions are these:

    1. Determine your why and set financial goals.

    This first financial New Year’s resolution is so important. Your why helps you know what is really important to you and your family and gives you the motivation to stick to the financial goals that you set.

    Without a powerful why, there’s a good chance you’ll quit before you reach your financial goals. So what are your core values? What is most important to you in your family and in your life? If you align your financial efforts with your core values, you will rock your financial goals.

    Perhaps you want to get out of credit card or student loan debt. Maybe you really want to be able to purchase your own home. Maybe being able to retire with dignity and comfort is super important to you. Perhaps taking control of your money and your income is your current driving motivator.

    Or maybe it is the fear of what will happen if you are not able to pay your bills or if you continue to be unable to pay all of your bills that will give you the motivation to finally really make change.

    Having fear be your motivating factor is not the best why, but sometimes it is an effective one. Before we started learning about personal finance my husband and I had made some financial decisions that weren’t the best, and we had over $60,000 in debt (this was before we bought our first home).

    And when I finally kind of realized the magnitude of that financial burden, there were definitely nights when I was so worried and scared that it was difficult to sleep. There were days when the knot in my stomach never seemed to completely go away.

    That was because at the time I didn’t know if it really was possible to get unburied from so much debt. So admittedly, part of my why—and one of my now core values—is a super strong drive for financial security.

    Two more why’s that drive how I spend money (or rather, don’t spend it) are more positive ones than the power of fear—they stem from a desire to have a comfortable retirement and a strong drive toward independence and self-sufficiency. I have a strong need to be responsible and to be able to care for myself.

    Take the time to figure out your own why. Why is it worth it to you to save money? Why is it worth it to invest? Why is it worth it to have an emergency fund? Why is it worth it to get out of debt? Why is it worth it to spend less than you earn? Why is it worth it to save for retirement? Why is it worth it to save to help pay for your kids’ college?

    And also figure out your own financial values. Then set goals and plans that align with your why and those financial values. And then you will start to win with your money!

     

    2. Make (and then follow :)) a budget.

    Another super important factor in being able to succeed at your financial New Year’s resolutions is to create a budget. A budget, or spending plan, is basically a list of monthly goals for your money. It is where you decide what you want to spend for each area of your finances. If you are living paycheck to paycheck, you might want to estimate a little high for the different budget categories right at the beginning, just to give yourself a little wiggle room. And we’ll start working on ways to find more money in your budget during the next step.

    As you create your first (or new) budget and then work to tweak it, don’t shoot for perfection and don’t be too hard on yourself.

    It will take a few months for you to get most of the kinks worked out and for you to start really budgeting effectively. But when you do, chances are that you will feel like you got a raise, even before you start adjusting your budget in order to spend less and save more. And that will feel amazing! Find steps for creating an effective budget here.

    One tool that I love to use to track our finances is Personal Capital. With Personal Capital you can see the activity from all of your banks and credit cards and so on in one place, which is awesome. And you can also link your company 401(k) or retirement plan and your IRAs and other brokerage accounts, as well. It’s a great way to get an easy, complete picture of your finances. And it’s free! You can sign up for Personal Capital here.

     

    3. Decide to spend less so that you can save more.

    Another crucial financial New Year’s resolution for most people is to spend less money. According to a 2017 study, almost 80 percent of Americans, for example, are living paycheck to paycheck. And that is not an ideal place to be.

    In order to have more money to reach your financial goals, decide where you can reduce your spending. To keep things simple to start with, look at these three areas first where you are likely to be able to most easily cut your spending quickly: 

    • Food 
    • Transportation 
    • Entertainment 

    Food. One of the easiest ways that you can find room in your monthly budget is to choose to spend less on food. First, if you are spending much money eating out, decide how much you will save in this area. The average American family spends about $300 a month eating out. In contrast, our family spends less than $30 a month eating out. Could you (will you) bring your work lunches? Could you find other means of (free) family entertainment? Could you have a movie and popcorn night at home? Could you have more potluck dinners and game nights instead of going out to eat for family gatherings? Read this article to find ideas for how to save money eating out. 

    And now let’s look at your grocery budget. The average family of five spends about $700 a month on groceries. And our family of five spends on average less than half that. There are many, many things that you can do to cut your grocery bill. You can buy less meat and buy less expensive meat. You can limit the amount of junk food, soda, and alcoholic beverages you buy. You can buy more inexpensive staples like brown and white rice, pasta, potatoes, beans, other grains, and eggs.

    You can buy only fruits and vegetables in season. You can shop less often, shop with a meal plan (sign up below to receive free, awesome meal planning worksheets to help you start to meal plan like a pro!), use a grocery price comparison chart (sign up for the free worksheet below!), and buy less food. Read this article to learn more about these and other ideas; it discusses more than 60 ways that you can save money on groceries. 

     

    Transportation. Look at your driving habits. Could you drive less? Could you carpool more? Could you bike or walk more? Could you sell one vehicle to become a one-vehicle family? We have had only one vehicle for most of our marriage, which has saved us several thousand dollars over the years.

    If you have loans on one or both vehicles, could you sell one or both of them and buy less expensive vehicles for cash (or with a small loan you could pay off quickly)? Could you stay closer to home when you travel for vacations? Read this article to find more than 30 ways to save money on transportation.  

    Entertainment. Where does most of your entertainment budget go? What could you spend less on or cut out completely? Will you cut your cable or satellite and find cheaper options? Will you find free and cheap options for entertainment to replace eating out if that is a big pastime for your family? Will you look at ways to lower your smartphone bill? Will you cut your gym and other memberships and find less expensive alternatives for exercising? Will you cut magazine and gaming subscriptions? Will you buy fewer video games and get your DVDs and books from the library? Will you go on less expensive vacations? We save a lot of money by using Airbnb. I love Airbnb! Sign up here to save $40 on your first stay!

    For ideas on how to save money on entertainment, read this article. 

     

    Check out these related articles: 
    73 Totally Fun Free and Cheap Activities for Kids
    13 Best Tips for How to Raise Kids without Breaking the Bank 

     

    Once you have found ways to slash your budget in those three areas, work on reducing the money allocated to your other budget categories, as well. Find more than 20 ideas for how to spend less money in virtually every budget category. 

     

    4. Build an adequate emergency fund. 

    A fourth important financial New Year’s resolution is to create an emergency fund (and then fund it! :)). As you are working to improve your financial situation, begin to build a small emergency fund. I recommend building a starter emergency fund of at least $1,000 as quickly as possible by taking on extra work, selling stuff around the house, reducing your spending on things like food and entertainment, or (ideally) all of the above.

    At first you may feel like you can put only $50 or $100 a month toward your emergency fund, but increase this amount as quickly as you can. Try to have $1,000 (or $500 if you make a household income of less than $20,000 a year) saved within a couple of months.

    If you feel more comfortable with a little more of a safety net, then you can increase that to up to one month’s worth of expenses. And then save a fully funded emergency fund once you are out of consumer debt. Learn here how to build a three- to six-month emergency fund.

    Do you want to turbocharge your saving so that you can get that emergency fund built up faster? Do a no-spend challenge.

     

    5. Work to get out of nonmortgage debt as quickly as possible. 

    And finally, as a last financial New Year’s resolution that will really help you to win with money in your life, work to get out of debt.

    Once you have extra money in your budget from reducing your expenses and increasing your income, start really working on paying off your debt.

    In order to accelerate your debt payoff plan, you can use either the debt avalanche method (pay off debts with the highest interest first) or the debt snowball method (pay off the smallest debts first).  You will save some money on interest over the debt snowball method if you use the avalanche method, but for most people, I would recommend the snowball method.

    Or you could also try a combination of the two methods, where you begin with the snowball method and then switch to the avalanche method once your commitment level to getting out of debt is rock solid.

    The snowball method is the one we used, and I feel that it works best in most cases because it keeps your motivation high because you have more frequent debt payoff wins, especially at the beginning.

    Find out more about the debt snowball and debt avalanche method of paying off debt here. And read this article to learn more about how to get (and stay) out of debt.

    Conclusion: Go After Your Financial New Year’s Resolutions!

    By making (and sticking to!) to these five New Year’s resolutions, you will be able to get control of your finances and really will be able to win with your money this year and throughout your life.

    By determining your financial why and outlining your financial goals, making and then sticking to a budget, reducing your spending in order to save more money, creating an emergency fund, and eliminating your nonmortgage debt, you will have a firm foundation to succeed with your money and be on your way to ultimate financial freedom!

     

    Which step are you on in this financial journey outlined above? What is your most important financial priority this year? What could you use the most help with? Leave a comment below and let me know! I would love to hear your thoughts!

    Invitation to Share

    Was there something in this article that inspired you to change something about your money? Are there ideas or tips that you feel could help others? Would you please take a minute to share this article via email or social media? I would love your help to share these principles of financial well-being. Thank you!

    Join Our Facebook Group!

    Join our closed Families for Financial Freedom Facebook group to get support and share ideas for how we can all improve our financial well-being by earning more, spending less, saving more, and investing more and reach our financial goals. You can do this! And we are here to help.

    7 Simple (and Crucial!) Steps to Automate Your Finances to Save More Money

    how to automate finances

    How to Automate Your Finances

    In this article I am going to share my best tips for how to automate your finances.

    I am also going to share why it is so important that you automate your finances to help you build wealth! If you have the goal to become a millionaire, then automating your finances is a crucial step to help you get there!

     

    Tip: Save this image to Pinterest so that you can easily refer to this article on how to automate your finances later!

     

     

     

    Why Is It So Important to Automate Your Finances?

    If you want to reach your debt-payoff goals, your savings goals, and your retirement goals, one of the most important things you can do to help ensure your success is to automate your finances, particularly your saving and investing.

    The reason that automating your finances is so powerful is that it takes willpower out of the equation. And even the most disciplined of us only have so much willpower. That’s why it’s better to put systems in place in your life where you can set it and (mostly) forget it. It makes the likelihood of success much higher!

    Read on to learn simple things that you can do to automate your finances so that you can get your debt paid off and start to save and invest your money to reach your financial goals!

     

    7 Simple Steps for How to Automate Your Finances to Build Wealth

    In this article you will find 7 steps to help you automate your finances to save money, get out of debt, pay your bills, and invest for future wealth.

     

    1. Set up direct deposit.

    The very first step as you begin to automate your finances, if you don’t have this done already, is to set up direct deposit with your employer so that your paycheck is deposited automatically into your checking account. This will prevent you from being tempted to spend any of the cash you receive right away, before you have time to allocate your money to the places where it needs to go according to your monthly budget. (More on that below.)

     

    2. Transfer money directly into savings.

    The next step as you work to automate your finances is to transfer a certain amount of money each paycheck into savings. So let’s say you just barely created your new budget, and after reducing spending on your groceries, eating out, clothing, and entertainment, you now have $300 a month to start with that you know you can put toward building your initial, starter emergency fund.

    So with the money from your first paycheck (if you get paid twice a month, for example), set up automatic transfers with your bank to transfer $150 directly into your savings account designated as your emergency fund.

    If your bank or credit union doesn’t offer very good interest rates on savings accounts, look into CIT Bank or another online bank with high interest rates.

    One of the things that I love about my CIT Bank Savings Builder account is that you can have multiple savings accounts for your various savings goals. And one of those is our emergency fund. They also have one of the best interest rates around, with up to 1.75% interest rate on your savings. And right now, you can get up to $300 when you open a Savings Builder account.

    Learn more or open your CIT Bank Savings Builder account today!

     

    If you have the option to set up your direct deposit from your employer so that you can deposit money into more than one account, then you should transfer a certain amount of money directly from your employer into a savings account each paycheck unless you are working on paying off nonmortgage debt.

    In addition to saving for you emergency fund, as soon as you can work it into your budget by continuing to reduce your spending, you should also start saving for larger, irregular purchases and expenses, such as saving up for appliance and furniture repair and replacement, car repairs and replacement, home maintenance and enhancements, Christmas and gift giving, vacations, and a down payment for a home purchase.

    Tip: Check out these 9 savings accounts every family should have!

    And again, the best way to do this is automate your finances in order to take out the need for discipline as much as possible. When you’re just starting to budget and are used to living paycheck to paycheck, you may not have much money for these different categories. But as you get your debts paid off and as your income increases over time, you will be able to find more money in your budget to save up for these things so that you can fund them yourself rather than relying on credit card and other debt.

     

    Tired of tiny interest rates?

    Are you tired of tiny interest rates? Do you want a solid bank with a long history (one that has been around for over 100 years) who is focused on their customers and not just their bottom line?

     Then you should check out CIT Bank. We love our CIT Bank savings account, which offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.75% on your savings account (which is really good in today’s market)!

    And right now you can get up to $300 when you open a Savings Builder account! Click here to learn more and open your savings account today!

    3. Transfer money automatically from your checking account to pay off debt.

    Once you have at least $1,000 in your emergency fund (or up to one month’s worth of expenses, if you’re in a situation where you want a little more of a buffer), then you should automate your finances in such a way that you can start working diligently to pay off your nonmortgage debt.

    You can take the money that you were paying to fund your mini emergency fund and use that to start paying extra on your debts. So if you had gotten to the point where you were able to put $500 toward your emergency fund each month, for instance, then you would use that same amount to pay toward your debts. So you would set up an automatic transfer from your checking account to start paying off your debts as fast as possible.

    There are two methods you can use to pay off your debts more quickly: one is the snowball method, where you pay minimum payments on all of your debts except for the smallest one, and you then throw all available money at that smallest debt to pay it off as quickly as possible. Then when it’s paid off, you move on to the next smallest debt, and so on.

    The avalanche method, on the other hand, is where you pay minimums on all of your debts but throw all money that you can at the debt with the highest interest rate, and pay it off as quickly as possible. Once you pay off that debt, then you work to pay off the debt with the next highest interest rate, and so on.

    Tip: Learn more about the debt snowball and the debt avalanche, and decide with debt payoff method is best for you!

    For most people, I recommend using the snowball method because it has the benefit of helping to keep you motivated as you are able to more quickly pay off smaller debts. However, if what will really keep you motivated is to work on pounding down the debts with higher interest rates, then use that method. Just do whatever will help you stay motivated to reach your financial goals and win with your money!

    The benefit of building at least a small emergency fund and then paying off all of your debt before you work on other bigger and more long-term financial goals is that you build a strong financial foundation that will allow you to gain financial stability and better reach those financial goals.

    By building a strong foundation, the beautiful financial tower of wealth that you are going to build over your lifetime will not crumble like a house of cards. And unfortunately, I bet you know people who have had exactly that happen to them because of poor financial planning, when they didn’t have an emergency fund to fall back on.

     

     

    4. Transfer money directly into your 401(k).

    Once you have paid off your nonmortgage debt and built a fully funded emergency fund of three to six months’ worth of expenses, then the next thing you should focus on as you automate your finances should be to start saving 10 to 15 percent of your income for retirement. (Work up to 15 percent as soon as you can.)

     

    If you receive a company match for your retirement investing, then you should start with your company 401(k) or Roth 401(k) (or similar) plan, and have the amount matched by your company automatically taken out of your paycheck and invested in your company retirement plan.

    Learn more about how to start to invest for retirement here!

     

     

    5. Transfer money automatically into Roth IRA or other retirement investment accounts.

    Once you have invested up to your company match in the company retirement plan, then you may want to automate your finances so that any additional money above the company match (up to 10 or 15 percent of your income) is automatically transferred to a Roth IRA.

    The reason that investing in a Roth IRA instead of putting all of the money you invest for retirement in a company 401(K) is that you will generally have more options for what mutual funds to invest in with a Roth IRA than with a 401(K).

    And with more options for mutual funds, you will likely find mutual funds that could outearn those offered by your company retirement plan. You also have more options for what you can do with the money invested in your Roth IRA (such as being able to use the money for some things besides retirement, if you follow the required guidelines).

    To invest in your Roth IRA, use direct deposit into a Roth IRA, if your company offers direct deposit into bank and investment accounts, so that your money will be invested automatically before you ever even see it or get tempted to use it for other things.

    If you do not receive a company match, then you may want to have all money designated for retirement saving automatically transferred from your paycheck to invest in a Roth IRA instead of your 401(K), if you can do that. If you can’t have money from your paycheck automatically deposited into your Roth IRA account, then you can use automatic withdrawals by your brokerage firm to accomplish the same thing.

    If you earn enough money that you cannot invest the full 15 percent of your income into your Roth IRA and the Roth IRA of your spouse, then look into putting the rest of the money designated for retirement into non-tax-advantaged accounts. (But invest as much as possible into tax-advantaged accounts as you can first.)

    I have been investing with Schwab for my Roth IRA for years, and that is where we have our nonretirement investment accounts, as well. They’re a great brokerage firm because of their amazingly broad range of low-cost mutual funds available to invest in and their great customer service.

    We also have nonretirement investments with Vanguard. They are a good company as well, but personally I prefer Schwab. They just seem to make investing easier, perhaps largely because I feel that their website offers a better, more intuitive user experience.

    Learn more about how to invest for success here!

    Once you begin investing for retirement, I recommend that you check out a great free app called Personal Capital in order to track your progress toward reaching your retirement and other financial goals. With Personal Capital, you can see not only all of your bank checking and savings accounts and even your credit cards and other finance accounts, but you can also link your retirement and regular nonretirement brokerage accounts.

    This allows you to have a complete, overall picture of your current financial situation. And you can also view your account history to see how your accounts and overall portfolio have done over time. I love this very helpful tool and use it regularly! Sign up for your free Personal Capital account here.

     

     

    6. Automate your finances by transferring money automatically into additional savings accounts to save up for larger purchases and expenses.

    As mentioned above, particularly once you have your emergency fund in place and you are out of nonmortgage debt, you should automate your finances to start saving for larger expenses and purchases, such as replacing your car with one you buy for cash, replacing appliances and furniture, doing home maintenance, paying for vacations and Christmas and other gift giving with cash, and so forth. Learn how to save for large expenses and purchases and why you need to (because you do need to!).

    Learn the 9 savings accounts that every family should have for financial success!

     

    7. Transfer money automatically into nonretirement investment accounts for additional wealth building.

    Once you have saved at least 15 percent of your income in retirement accounts and (in most cases) after you have paid off your home, you might want to automate your finances to invest in additional nonretirement investment accounts to build additional future wealth.

    Or if you have not yet purchased a home and you have a time frame of at least five years before you intend to buy a home, then you might consider using investment accounts for your future home purchase.

    Especially if you’re intending to follow the 100 percent down plan (in other words, you decide to buy your house with cash to avoid a mortgage :D), then your time frame may be longer and investing your money in good stock mutual funds in the meantime can be a good way to go.

    This is what we are doing as we save up to purchase our next home with cash in about five to eight years—we’re investing what used to be our mortgage in stock mutual funds with good long-term rates of return until we have the money needed to buy a little bit larger, nicer, newer home with cash. #debtfreeforlife

    Begin your path to automatic wealth building today: See an example of how to automate your saving, debt payoff, and investing.

    One of the best things you can do to help ensure that you consistently work toward and reach your financial goals is to automate your finances in such a way that it helps you succeed. One of my all-time favorite financial books is The Automatic Millionaire, by David Bach. If you want to win at money, you need to take willpower out of the equation as much as possible and replace it with a system that won’t allow you to fail.

    So, let’s say, for example, that for now you have four main savings goals that you want to work on: you want to pay off your credit card debt, build up a three-month emergency fund, start saving for retirement, and start saving to purchase a five-year-old car in a couple of years. So this is how you could go about doing that.

    Set up direct deposit.

    First, automate your finances by setting up direct deposit with your employer if you possibly can and if you don’t already have it set up (for convenience, but more important, so that you won’t spend money right from your paycheck that would have been better off going to something else more important).

    Then, set up an automatic transfer to start saving.

    Next, set up an automatic transfer from your main checking account into a separate savings account that will be used for your emergency fund. Transfer as much money as you can each paycheck into this EF savings account until you have at least $1,000 but up to one month’s worth of expenses in this account.

    A great way to do this, if your current bank doesn’t offer the option of having multiple savings accounts linked to your checking account, is to open a savings account (and then more savings accounts, as you are ready to use them) with CIT Bank.

    Pro tip: CIT Bank offers the highest savings rate that we know of. With the CIT Bank Savings Builder, you can earn up to 1.75% on your savings account (which is really good in today’s market)! It is a great place to put your emegency fund and other savings.

    And right now you can get up to $300 when you open a Savings Builder account! Click here to learn more and open your savings account today!

    We currently have over 10 different savings accounts for our various savings goals, and I love knowing that I won’t accidentally spend the savings for one item or category on something else.

    In order to build up your initial emergency fund as quickly as possible, see if you can sell anything around the house or in the garage that you don’t need. And look into ways to earn extra income.

    Next, automate your finances to pay off debt.

    Then after you have a small starter emergency fund in place, further automate your finances as you work toward paying off all of your credit card and other nonmortgage debt, and get that paid off as quickly as you can, as well. If you haven’t gotten a second job or side hustle (such as blogging! There is awesome earning potential, from $1,000 to $10,000+ per month working part time! :)) before this time, consider getting one now so you can get out of debt sooner. To begin paying off your debt, automatically transfer the money that was going into your emergency fund toward paying off your debts.

    There are a couple of ways you can do this: attack your highest-interest debts first or your smallest debts first. You can do whichever will help you to best stay motivated, but my recommendation would be to attack your debts smallest to largest because of the quick wins that you get and the extra motivation that gives to stay focused and keep working on getting out of debt. As you work to pay off all of your debts, reexamine your spending, and see if there are places where you can cut your spending in order to get out of debt sooner. Here are some ideas of how to reduce your spending.

    Then automate your savings to build a fully funded emergency fund.

    Then once you have paid off all of your debts, continue to automate your finances by transferring more money into your emergency fund, until it has at least three to six months’ worth of expenses in it. In order to save more money toward your emergency fund, take all of the money that you were using to pay off your debt and now use it to fully fund your emergency fund. Try to fully fund your EF as quickly as you can—in three to six months if you can. And then you can begin investing for retirement, saving toward your children’s college, and saving (to pay cash!) for large purchases such as a newer vehicle, awesome family vacation, new furniture, and more.

    Automate your investing for retirement.

    Once you have a fully funded emergency fund, start saving money in your 401(k) at work (or Roth IRA or other retirement account available to you), or increase your contributions, to at least 10 percent (and, if possible, 15 percent) of your income. Here, again, automate your finances by setting up automatic electronic transfers so that the money will leave your paycheck before it has the chance to get spent.

    Then, once you have invested enough to receive the full match from your employer in your Roth or traditional 401(k), invest the rest of the money allotted for retirement savings, until you reach 10 or 15 percent of your income, in a Roth IRA. The reason to invest in a Roth IRA once you have invested enough in your 401(k) to reach the match is that you will likely have a lot more options available to you through a brokerage firm that offers Roth IRAs than you do through your company retirement plan. And that means you should be able to earn higher returns. For more information on investing for retirement, read this article.

    Automate your finances to save for large purchases and expenses.

    Finally, at the same time as you are working to increase your retirement account contributions (or sooner, if you can fit it into your budget), start saving for larger purchases and expenses. For example, begin automatically transferring money each month into a savings account for that used car that you want to buy in a few years to replace the one that you are currently driving, that I mentioned above. If you can save $200 a month toward the car that you want to purchase in two years, then you would have about $5,000 to go toward that newer car, plus the amount that you can sell your current car for at that time—let’s say that that was also $5,000. So that would give you $10,000 to buy the five-year-old car. So you would transfer automatically each month that $200 into a savings account, and allow the money to grow for the next couple of years.

    And that is how you automate your finances in order to save, pay off debt, and invest in order to gain financial stability and build wealth!

    Conclusion

    Automating your finances is one of the best things that you can do to save, pay off debt, and invest for the future. When you automate your finances, you set up systems that help you to reach your financial goals effortlessly, and you take the temptation to spend the money on other, short-term pleasures out of the equation.

     

    What do you think about these tips for how to automate your finances? Are you doing these things already? What would you do differently? Leave a comment and let me know! I would love to hear your thoughts!

     

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