The most important thing you can do to make your personal economy strong is have an umbrella — a contingency fund, with at least enough money to pay all of your bills without a paycheck, for three to six months.
Call it $10,000. Weekly, try to save 10 percent of your paycheck. It may sound like a lot, so if you can’t do 10, start with 5 percent 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. OK, you’ll miss it for the first few months, but soon you really will not miss it.
Until you have a fully funded contingency fund, approach this with scorched-earth determination. No spending on anything that is not necessary or legally obligating until you reach your goal.
Get rid of nonessentials. Give up such extras as cable TV, eating out and gym memberships.
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 and only run full appliances.
Quit smoking. This suggestion requires no explanation. Although it does beg the question, who can even afford to smoke these days? At about $7.50 for a pack of smokes (U.S. average), that’s a $2,737-a-year habit. And in New York City it’s double that. Yeah, $14.50 a pack ($5,292 annually).
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), such as 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, such as U.S. Bank, even offer free business accounts.
Pull back. Stop sending more money than required each month to your credit card companies, mortgage lender or any other creditor. 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 for major emergencies, you’ll be setting yourself up to fall even deeper in debt.
Clean out. 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 such as eBay or Craigslist, or hold a yard sale.
Adjust withholdings. Use the 2015 Federal Withholding Tax Calculator, available through the IRS website, 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, such as dog walking or selling handmade items.
Give up your landline. More than 40 percent of American adults have given up their land-based telephone service. Are you in that group? If not, why not? Basic service costs at least $25 per month in most markets.
Take 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 such as a 401(k) or 403(b), don’t stop now, but limit your contribution to the amount your employer matches. Once you have your contingency fund in place, return to your more aggressive contributions.