Clever Ideas for Saving Money

“A penny saved is a penny earned”
- Ben Franklin in Poor Richard’s Almanac

According to the The 2009 MetLife Study of the American Dream, “A disturbing 50% of Americans say they are only one month — or only two paychecks — or less away from not being able to meet their financial obligations if they were to lose their job, and more than half of these, a startling 28% of the total respondents, couldn’t survive financially for more than two weeks.” [MetLife] And yet, with the current recession, “Three quarters of Americans have already been touched by unemployment in some way as a result of the financial crisis, with nearly two in ten reporting that they have recently lost a job and an additional 55% having a friend, relative or neighbor who lost their job.”

When I was laid off last year, it took me six months to find a new job close in pay to my old job. We still had to pay bills, especially the COBRA insurance payments, buy food, etc, using only a modest severance payoff, a pittance from unemployment insurance and our cash savings.

Everyone needs an emergency savings account. Otherwise you can be forced into some very bad choices. For example, if you stop paying for health insurance, you create a “gap”. When you do get employed and resume insurance, the new insurer may refuse to cover any “prior conditions”, that is ANYTHING you’ve seen a doctor for in the past.

Liz Weston at MoneyCentral wrote that, “A reader asked me for help after racking up more than 2,000 in bounced-check fees. Another owed thousands to a payday lender. A third despaired of ever paying down his credit card debt. Every time he started to make some progress, his car would break down or he'd encounter another unexpected expense that wound up charged to the cards.”

Fortunately MSN has an excellent article called An emergency fund out of thin air. The author, Donna Freedman, asked readers for ways to save money and they responded.

• Save part of every paycheck, no matter how small. Just $10/month will add up over time.
• Ideally you should save 10% of your earnings instead of $10. This may not be possible – so set a value that works for you, set it aside, and don’t touch it.
• If possible have your bank automatically direct-deposit your fixed monthly savings from your paycheck to a separate account.
• Save spare change, found coins, and dollar bills and deposit these in your emergency fund
• Sell items on eBay or Craigslist
• Rent out your parking spot or condo for weekends
• Use coupons
• Get a second job (even if it's just temporary or seasonal)
• Shop for better insurance rates online
• Collect cans or metal for recycling cash
• Trim your budget, spend less
• Sacrifice a little, drop cable TV and get films from the library for free or watch them online
• Make your own food. Eat out less and buy fewer prepared meals.

Bottom Line

The secret is to be consistent and most importantly to spend less than you earn. At my last job, 11% was deducted from my paycheck to go into a 401-K. Unfortunately I don’t have that option at my new job so I have to come up with my own plan for setting money aside on a regular basis.