The most important thing you can do to make your personal economy strong is to have an umbrella—an emergency fund with at least enough money to pay all of your bills for three to six months without a paycheck. Call it $10,000.
Save 10% of your paycheck
It may sound like a lot, so if you can’t do 10, start with 5% or even 1% percent and build up. Deposit the money automatically into your Contingency Fund; you won’t miss what you don’t see in the first place. Okay, you’ll miss it for the first few weeks, but soon you really will not miss it.
Get rid of non-essentials
Look seriously at all of ways money is leaking out of your life—things that are not essential to your life such as cable TV, eating out, gym membership, and entertainment.
Cut variable expenses
You can’t cut off your utilities, stop eating, or give up driving. But you can reduce the cost of the food, energy, and fuel you buy. Opt for the cheapest supermarket and gas station. Turn out the lights; turn down the heat. Eat in, go meatless a few meals a week.
This suggestion requires no explanation. Although it does beg the question, who can even afford to smoke these days? At about $5.50 for a pack of smokes (U.S. average) that’s a $2,007 per year for a pack a day. And in New York City it’s double that. Yeah, $12.85 a pack average.
Stop paying bank fees
If you’re paying a $7.95 (or higher) per month fee for the privilege of maintaining an account, stop! Open an account at an online bank (they pay better interest rates anyway), like Ally Bank, that doesn’t charge a monthly maintenance fee for checking or savings accounts. Or check with a local credit union for free personal checking accounts. Some banks even offer free business accounts.
Stop sending more money than required each month to your credit card companies, mortgage lender or any other creditor until your emergency fund is funded. It’s admirable that you’re being diligent in repaying the debts, but if you continue to do this while living without money in the bank, you’re setting yourself up to fall even deeper in debt.
Take a look through your cupboards and closets. Identify everything you haven’t used in the past six months. Turn what you don’t need into cash on a website like eBay or Craigslist. Or hold a yard sale.
Use the Federal Withholding Tax Calculator to make sure you aren’t having too much or too little income tax withheld from your pay.
Increase your income
Get a second job. Or third. Work more hours at your current one. Get creative by making money doing things you already love to do, like dog walking or selling handmade items.
Give up the landline
Take your lunch to work
Have you figured out what you’re spending per year on eating lunch out? At $10 a day, you’re spending $2,500 after-tax dollars on lunch. Just think of all the dinner leftovers you throw out that could easily be tomorrow’s lunch.
Stop at the match
If you are contributing to a retirement account like a 401(k) or 403(b), don’t stop now, but limit your contribution to the amount your employer matches. Ask your employer how to adjust your contribution. Once you have save to your goal, you can always change your contribution again.