Of all the financial nightmares we can imagine, the one most people fear the most is being without an income for an extended period of time. I am sure that over half of all American families would experience financial stress if they lost their income for at least a month. And there are virtually no stop-gap measures to protect you from such a short window of deprived income.
If you are laid off and eligible for unemployment benefits, you may find that the monthly cap on benefits leaves you in the red. And while you are required to look for a job while receiving unemployment benefits there are no guarantees that you’ll find a job which replaces your lost income.
If you are injured and your company paid for disability insurance they may cover the eligibility period, which is usually two weeks, with their standard time off package. But if it was up to you to buy that disability insurance and you didn’t want to “nickel and dime yourself to death”, you have nothing after your paid time off expires.
If you are just fired, or quit your job, then you have neither unemployment nor disability to look forward to. And so it all comes down to your savings. How much do you have and how quickly can you get to it?
Most financial experts advise families to set aside six months’ income. If you can only save one month’s income out of the year, it will take you six years to reach that point. But most families cannot save 1/12 of their takehome pay even once, let alone six years in a row. You may have to wait 10-12 years before you have that six month reserve. It’s just not a realistic option unless you and your partner plan very carefully how to manage a second income before you become dependent on it for day-to-day expenses.
Foresight is Your First Option in Saving Money
Your dire financial need is not a matter of “if” but “when”. If you are young enough to have never faced a sudden loss of income then now is the time to start saving money. Every raise you get should go into savings until your barren, frugal lifestyle no longer provides you with even a smidgen of joy. And then, only then, are you permitted to spend a little extra on yourself.
But what if you are further down the road and you have already weathered a financial storm or two? Now you have no savings, but you at least have an income. Truth be told, the advice you need is the same you would need at 21: start saving money now and live a barren, frugal life until you have an emergency reserve that can pay your bills, put food on the table, and even pay for moderate unexpected expenses.
Waiting for the next financial disaster to start saving money (again) is the worst possible strategy.
Being Cruel to Yourself is the Second Option in Saving Money
Maybe you don’t eat out or have a gym membership, but the chances are very good you spoil yourself in some way, unless your income is so low you are really living near or below the poverty line. But don’t give up hope just yet. We can plot a course through these dry, rocky waters of low income.
First, you need to change your lifestyle. Think about the time you spend on yourself, just relaxing, and estimate how much money you spend during those periods. Maybe you buy a lottery ticket once a week. Maybe you buy a six-pack of beer. These little indulgences that cost very little money are lost opportunities for saving. But you don’t just want to give up whatever you’re doing for relaxation. You want to replace it.
Gambling is not a good investment. Only one in 140million people ever win the lottery in a given year. That’s about two big lottery winners per year. Winning anything less than the big jackpot can ease your financial burdens but it won’t put you in a position to retire early. Unless you win at least ten million dollars, your chances of living on the proceeds of gambling for the rest of your life are almost non-existent (barring your immediate demise after winning).
Cutting back means you have to find some other way to relax. That may mean taking more walks at the park, or spending more time washing your car. You know, truth be told, most people either spend way too much money on their vehicles or not enough. You can keep it clean without spending a lot of money. It will help you take pride in something you own, and you will feel better for doing it.
The whole point of this exercise is to make a positive change in your spending habits. Positive = saving money, negative = spending more money than you should.
You have all the power when you make even a small positive change.
Ideas for Saving Money on A Starvation Budget
Remember the old “stone soup” story, where some lost soldiers gradually entice an entire village into sharing their meager collection of vegetables and seasonings in the middle of winter? Well, the point is that you don’t need to provide a full meal for yourself every day if you can work out ways to share the costs of meals with friends and family. Pooling your resources is a great way of cutting costs.
Start saving money by working out a dietary plan that doesn’t push you into obesity. The less expensive foods tend to be the least healthy, but there are ways to buy foods in bulk and divvy them up among several people.
Your clothing is another area where you can save money. I’m not saying you should start browsing the thrift shops but most people spend a few extra dollars every now and then on a “nice” shirt or jeans. No piece of denim should cost you $50-100. You really do not need that kind of “designer clothing”.
Instead, buy a $20 pair of jeans and some needles and thread. Then stitch your own elegant design into the pockets. Most people will be proud of you for upgrading plainwear at such a low price.
If by this point you’re dreading the inevitable carpooling tip (or, worse, take public transportation), fear not: I have a better idea. Swap errand time with your friends and relatives. If they need an errand taken care of at the same time and place you do (or close by), then one of you should do both errands. This helps people save on time and gas. It also takes up some of the slack in your own schedule and you are less likely to feel bored and give in to the temptation to spend money on frivolous things.
Better yet, when you are running errands for yourself and friends you can enjoy the luxury of driving your own vehicle, so you retain that power of individual transportation. But be sure you and your circle swap time fairly. Otherwise you end up doing all the work and burning all the gas. If everyone else is willing to pay you something to run those errands, that might work out. Don’t lose yourself in the task without gaining the benefit.
Never Give Up Hope
That’s a hard lesson to learn. I know too many people who settle for what they have because they see no way to a better life. In my opinion, that is the number 1 reason why people fail to improve their finances. You may not always have a working plan but you have to keep hope alive. It is hope that leads you to the next plan. Hope is your most valuable asset. If you allow no one to take it away from you then hope is only yours to lose. But don’t just walk away from it.
Every five thousand mile journey begins with the first step. Making little changes in your life is the first step on that long journey. When you have become accustomed to those changes you’re ready to take the next step: learning to recognize opportunities when they come along.
But that’s a thought-piece for another day.
For More Information about Saving with No Money
There is a new Website in town. It’s called Low Income Aid. This private blog shares many tips for free for people with low income and minimal savings. You don’t have to register or pay for anything. Visit LowIncomeAid.Com.
