If saving were easy, we would all be millionaires.
But the reality is that for many households, the monthly paycheck is barely enough to cover the bills. Nearly 60 percent of consumers surveyed this month by Bankrate.com said they didn’t have enough cash to cover unexpected costs, such as a $500 auto repair bill.
Needless to say, saving for something as far off as retirement or accomplishing other financial goals can feel out of reach. Still, if you’re living paycheck-to-paycheck, there are small steps you can take to stabilize
your finances and reach a point where you can save for the long term.
Here are a few moves that might help:
Change the due dates for your bills. Sometimes you have enough money coming in to pay all of your monthly expenses, but your paychecks don’t match up with the due dates for your bills, said Rachel Schneider, co-author of the “Financial Diaries,” a book
to be published in March about the detailed money habits of 235 households . Try asking your creditors to see if they’ll change your due date so that it will fall closer to your payday, Schneider said. Say you get paid twice a month, but your biggest bills, such as your rent and car payment, are both due at the beginning of the month. Some credit card companies, utility providers or other creditors may be willing to let you change your due date or billing cycle to give your wallet some breathing room.
Negotiate for a better deal. Chances are that your wireless provider or your cable company are not going to call you up when they have lower rates available, said Sue Rogan, director of financial education for the Maryland CASH Campaign, a group that works to help people become financially stable. “You need to reach out to them,” she said. Call your cable, Internet or cellphone provider roughly once a year to make sure you’re getting the best rate possible, especially if you notice that your monthly bill increased. Do some research on what competitors are charging and ask if they will match those rates for you. If they decline, you would at least know that there are other companies offering better deals.
Treat yourself. (You read that right.) Budgeting can be a lot like dieting — if you deprive yourself too much, you may be tempted to binge and undo a lot of your progress, financial experts say. It may be easier to stick to your saving goals if you work in treats and splurges that are important to you, says Jonathan Morduch, co-author of the “Financial Diaries.” That might be a monthly dinner with friends, a trip to the movie theater with the kids or the occasional happy hour. If you budget for splurges, the sacrifices you make everyday — such as having a sad desk salad for lunch — can feel a lot less painful.
Set a modest savings goal. If the traditional financial advice of saving enough to cover three to six months worth of expenses feels impossible, you should set a more modest goal. “One month of savings, just one month, can be really really powerful,” Morduch said. Having enough savings to cover roughly one month of expenses can still help families avoid costs such as overdraft fees and payday loans when emergencies arise, Morduch said.
And even if that goal seems too out of reach, start by saving what you think you can afford, Schneider said. For some people, that may mean saving only $1 a day. “Don’t get overly fixated on the benchmark, just do it,” she said. Some people may want to look into apps such as Digit or Acorns that can help automate the saving process. It can also help to set aside cash when a large windfall comes in, such as your tax refund to help with your savings goals, Morduch said.
Track your spending. The word “budget” can make a lot of people cringe, said Carlos Moreno, a financial specialist at EMPath, a group in Boston that helps people find a way out of poverty. But it becomes easier to manage your money once you know where your cash is going, he said. Many consumers think they know how much they’re spending on regular expenses such as groceries, but they are often surprised after they track their costs more closely, Rogan said.
Some third-party websites such as Mint.com, You Need a Budget and others can help you track your cash flow. Some people might prefer to sit down once a week and do the math themselves by reviewing their online statements. No matter the method, the point is to scan your spending to make sure it lines up with your expectations. Also, look for any areas you may be able to cut back, Rogan said.