The Secrets to Freedom and Debt Free Living! Part 1, Step 1

The Secrets to Saving

There are a number of “tried and true” steps to freedom and living debt free.  They aren’t really big secrets, but since most American’s are in debt, you would think they must be well-kept secrets.  The secrets are actually simple steps, but simple does not mean “easy to stick to”.  It will require more or less discipline depending on your situation, but the rewards will be enormous.

Step 1.  Your task:  Set up a beginner emergency fund. 

Set aside $500-1000 in savings as fast as you can. 

That’s right.  You need to change your behavior right away and start thinking about saving and not spending.   You’re saying you don’t have money to save?   Pretty much everyone I’ve ever met can set aside even a small amount on a regular basis to come up with some savings over time.

This is important.  You will begin the “habit” of paying yourself first.  Set a small amount at first that you believe is realistic to reach your goal.    Most people find ways to save this money as fast as they can because it’s so rewarding to see the savings grow. Try it and you’ll see.  Depending on your financial institution, it is best to set up your savings in a separate account from your usual checking accont.  Ideally save in a money market account, so you can get a little bit of interest, but that is not critical at this point.  If you already have some money in savings, but are not setting aside a specific amount every month in your budget, your goal will be to add $500-$1000 to your savings.   Keep your focus that the goal right now is savings and not investing or paying off your bills. That will come.

And by the way, don’t go out and make any significant purchases while you are working to shore up your finances, especially if that means adding debt!  I know that sounds obvious, but I can bet you the temptation will arise….

So where do you find this money to save?

There are countless awesome, creative, and legal ways to do this.  But first off, it is not by adding debt.  You can’t take out a loan to do this.  You have to change your behavior–I will be saying that quite a bit.  Borrowing money is pretty much not the answer–it’s actually the problem.

It is best at this point to be creative and find some additional money.  And I’m guessing that unless you have already built a strict and sustainable budget with no extras at all, there will be additional money to be found.

Here are some ideas to get you thinking of possibilities that may work for you.  Obviously you can do any one or mix of ideas to get to your goal quickly.

1.  Sell something you have.  

We all have stuff hanging around that we may not use that has value to someone else.  What good is it doing if you are just hanging on to it, or even worse paying to rent a storage unit to keep it?  Items you may consider selling can range from clothing, houshold items, a piece of furniture,  a boat or vehicle, or anything of value to someone.  You may want to have a yard sale or advertise your items.

2.  Look for ways to cut costs.

Think about the little things.  They add up. 

Do you realize…

…a $5.00 cup of coffee every work day (20 days/month) adds up to $100 each month?

…just one $5.00 pack of cigarettes every day adds up to $150 each month?

…a bi-weekly mani/pedi can easily set you back $150.00 a month?

…a glass of wine at the local pub may be $5-10.  Even just two glasses a week is $10-$20 or $520-$1050/year.

And don’t forget to cancel the storage building rental— you can save on that, too, once you re-home or get rid of the things you don’t need–an average of about $30/month for a small unit or $360/year.

Consider reducing or deleting phone or cable TV service.  Paying to have a land line home phone is a popular cost cutter.  Many households these days use their cell phones almost exclusively but have hung on to the landline which can cost upwards of $60/month or $720/year. Do you really need to subscribe to X-Box AND Hulu AND Netflix?  The same goes for a comprehensive cable TV package which has a gajillion channels that you don’t watch.  Be wary of the plans that entice  you with low short term rates that then increase after the promotional period.   Are you renting extra cable boxes that you don’t use?   Just take a minute to return these and save yourself hundreds of dollars over the year.  If you are really ready to get serious, be mindful that the average cable bill of $150/month adds up to $1800/year.  Is it worth that to you?

Shop for your insurance and don’t just accept renewal rates.  Yes, you absolutely should have insurance and you should be properly insured, BUT did you know by shopping around it is likely that you will actually find same or better coverage with a reputable company for a significant savings over your current rates?  A few hours of your time shopping may save you hundreds if not thousands of dollars over the year.

Depending on your situation you may need to really begin to tighten up with your finances.  Like I said, at first it may not be easy, but you will find new energy and peace of mind as you make progress toward your goals and take control of your money instead of it controlling you.  And once you get in this mindset, you will be mindful of your priorities and find additional opportunities for savings.  As you feel good about your progress you will be changing your behavior for the good.

3.  Get a job or part-time job, volunteer for overtime.

If you are not working and could enter or re-enter the workforce, now may be the time for you to make the leap.  If you are already working, how about an additional part-time job or overtime? If you have an option for additional overtime think about what the extra dollars could do toward your savings and financial freedom goals.  In most cases, earning an additional 8 hours of your regular pay at overtime rates is like being paid for 12 hours but only working 8!  If you are able, even a 5-hour-a-week part-time $10.00/hour job can gross you an additional $2500 a year.  Would the short term efforts be worth the long term gains?  If you feel you are under-employed, maybe it is time to start looking elsewhere or consider a different path to get you where you want to be.  There is no time like right now to get started.

4.  The possibilities are endless.  These are just ideas to get you thinking.  Become mindful of ways to reduce expenses and increase your  savings.

Please share your ideas and especially ones that are working for you!

What next?

Depending on the value of the items you sell, cost-cutting measures,  or additonal money you earn, you are likely to  quicky exceed your $500-$1000 savings goal.  Are you wondering what is the best thing to do with that money? Won’t that be a great problem to have?  If you do exceed your initial goal, no worries, that “excess” money is a good thing and will be used toward reducing your debt and eventually to build your wealth, but we will get to that in future blogs.  When you earn extra money, just be careful not to add to your expenses or increase your debt thinking you’ve got all this money now and problem solved!  Remember this is about changing your behavior, controlling your finances,  and being debt free so you can live the life of your dreams–not so you can work all the time and be a slave to money.

Also, ideally you will not take away from paying for obligations at this point.  If you are able to keep paying your debt as you have been and still set aside some money, that’s good.  You at least are going to pay mimimum payments on your debt for now.  If you are already behind on your bills, just know that you are not alone.  If you are behind, there’s some extra work cut out for you and we will need to deal with that separately–but you still need to figure out a plan to find some money to pay yourself.  No excuses.  You have to start somewhere and change that behavior that got you where you are today.   Dare to be different.

Take a look at my infographic to see how much you can pay yourself by eliminating “extras”!

Are you financially well?  Take the  Financial Wellness Checkup!

Want more info?  Contact me

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