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What To Do When You Have No Savings

person saving money in a piggy bank after having no money saved

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It can be hard to make important financial decisions when you have no savings to back you up. Relying only on your job and paycheck means that you have nothing when an emergency occurs. Even worse, if you lose your primary source of income, you could end up in a stressful situation. The good news is that there is always a way to turn your situation around.

Improving your financial and savings situation is not an overnight occurrence. However, the steps you take can help you move in a better direction. Here are some of the things you can do to free yourself from the burden of having no savings.

Review Your Spending

If you’re always bringing your account balance to zero, you may have a spending problem. You may think that you’re using your paycheck wisely, but we don’t often notice that we are spending money on things that we don’t need. 

For example, if you love going out every weekend, consider doing it every other weekend instead. If you’re spending $100 per weekend on fun activities or entertainment, and you cut that expense in half by going out every other weekend, you would save $2,600 per year.

Another way to approach this is to create a budget. List your expenses, including your monthly obligations like debt and bills. From there, you’ll be able to see where most of your money is going. By understanding where it goes, you can make adjustments to limit spending in certain areas.

It also means living within your lifestyle. Try to find more affordable brands and services if possible. A small sacrifice is necessary to ensure you have financial security. Budgeting is a great start as it will allow you to track your spending and find ways to cut back so that you can save.

Open an Emergency Fund if You Don’t Have One

An emergency fund is cash reserved for when an unexpected event occurs. The best way to create one is to have a different account reserved for emergencies apart from your main one. Having separation ensures that you don’t start spending the money when it adds up. Some people even set automatic transfers, so they forget that they contribute to their emergency fund.

Since you’ll keep the money for long periods, it’s best to have it work for you. For example, placing it in a high-yield savings account will mean that the money grows a little bit each year. It’s also possible to put your emergency fund in a conservative investment portfolio, but it’s important that if you do this, you keep the investments liquid so that you don’t run into a situation where your money isn’t available when you need it.

Building an emergency fund can take time, so set small goals. Start by earning $1,000 first before moving to higher amounts. If you suddenly lose your job or your car breaks down, you’ll have money to compensate. This will help prevent you from having to swipe your credit card.

It’s recommended by many financial experts to build up an emergency fund with up to six months’ of living expenses.

Cut Back on Things You Don’t Need

Making saving money a priority helps lead to a healthier financial future. That means cutting down on expenses you don’t need. To start with, you may want to look at your expenses again and cut things that you can live without. These include:

  • Subscriptions you’re no longer using
  • Going out to eat too frequently
  • Making a habit of online shopping

It’s okay to spend money on yourself now and then, however, you’ll want to keep your expenses under control to where you’ll have enough money to save when you’re paid. The more cuts you’ll do, the faster you’ll accelerate your savings.

The app Trim will help you save money as they’ll negotiate your cable, internet, and phone bills, as well as bank and credit card fees. Trim also helps you identify subscriptions to cancel and can help you cancel them. Lastly, Trim is mostly free, in that you only paid a portion of how much they save you. You can check out Trim here.

If you’re wondering how much you’ll need to start, it’s ideal to have at least three to six months' worth of expenses saved for emergencies. With how the pandemic has affected everyone, some experts even believe a year’s worth of income can be a solid safety net.

Look for Ways to Increase Your Income

On the opposite end of cutting expenses is increasing income. People often look at this and shy away from it because they think it’s about getting a second or third job. While that will increase your income, not all forms of earning are directly tied to hours worked. In today’s digital world, there are many opportunities to get money.

Look for ways that help multiply your income streams while maintaining a similar schedule. That way, you won’t get burned out from overworking yourself. Here are some examples of how you can do this:

  • Opt for freelance work
  • Start an online business
  • Buy and sell items online for a profit
  • Rent a car, room, or house
  • Start an affiliate marketing site
  • Start a blog and earn money from ad revenue
  • Take jobs that don’t have a strict time requirement
  • Learn how to invest and invest money for passive income

Choose something you’d like to pursue and focus on it until it gives you back a steady income. Then you can add to your two sources and create a third. 

It’s a good idea to experiment with things that have a low cost of entry, so that if you find out that it’s not your thing, you aren’t out much money. It’s also important to do plenty of research to make sure you can earn money with what you decide.

With so many ways to earn money online, the examples above only scratch the surface of what is possible. Imagine a scenario of two income streams. Your main job pays for most things, including your lifestyle, while the second source goes directly to your savings. Having one income stream going directly to savings can help you build ample savings so much faster.

Another option is to pursue higher positions or pay within the same or different company. Keep your options open as it’s often easier to make more money by changing jobs every 3-5 years versus staying at the same job for most of your career.

Get in the Habit of Saving Money

Saving money has to be a part of your lifestyle, and you should always look for opportunities to get more for your money. For example, when you sign up for a free Swagbucks account, you can get cash back when you shop online at thousands of retail and grocery stores. Swagbucks also offers coupons and deals on pharmacy items.

Alternatively, assess some of the monthly obligations you have and see if there’s an option to downgrade without losing any crucial benefits. For example, you might be able to downgrade your internet because you don’t truly need the amount of speed you signed up for.

Assess each spending category in your life and see if you have a way to save more money. Even a little bit can add up. Of course, that doesn’t mean you should deprive yourself of fun. You should still feel fulfilled as much as possible while keeping things to a limit, so you still have savings at the end of each day.

One of the best ways to automate this is to build a habit. Get into the habit of setting aside money each pay cycle or only using half of what’s in your wallet when you go out. Try to make it a challenge. Eventually, you’ll get used to saving and it will become part of your lifestyle. You can even make a game out of saving money and reward yourself as you go.

Get Out of the Habit of Spending Money Frivolously

The best way to avoid spending money frivolously is to categorize your expenses. You have needs and wants. Your needs are items you can’t live without, and the wants are things you want but aren’t required to get by. Doing this will let you know when you’re spending or overspending on wants.

It’s a small step that can make you aware of where your money goes and if any purchases are worth it. Before you go on another shopping spree or take that impulse buy because of a sale, take a step back. Ask yourself if it’s something you want or something you need.

This article discusses the difference between needs and wants.

Learn To Save Money Daily

Much like how money compounds thanks to interest, the amount you can save also multiplies with each action you take towards saving. Instead of ordering lunch every day, try bringing it from home. This action alone can save you over $5-$10 a day. Go for a walk or take a bus or train instead of hailing a cab. Small decisions like these can help train your mindset to save.

One way to save money daily is to consider any time that you would have spent money on something but then talked yourself out of it, take the amount you would have spent and use that money towards an extra credit card payment or towards your savings account.

Aggressively Pay Down Credit Card Debt

Credit card debt is one of the biggest reasons you cannot save as much as you want. It accounts for the largest share of personal debt across all US citizens. When you use your card to pay for something when you don’t have the money for it, you’re spending more. For the convenience of getting the money you need, you pay interest rates and sometimes fees to the financial institution owning the card.

Then when you miss a payment or don’t pay, the debt only adds up. Like how savings can compound, debt can also act similarly due to interest rates.

Consider aggressively paying down credit card debt first. The more you can pay it, the lower amount of interest you'll pay each month.

If you have multiple credit card debts, you can prioritize the highest interest rate or the lowest balance. Doing either can help lower payments as you eliminate debts one by one.

Another habit you’d want to build is to use your credit cards when you have the money to pay. Think of it as a debit card. You’ll still get the benefits of points and rewards while you keep yourself from getting into unnecessary debt.

Wrapping It Up

Generating savings is all about making adjustments to your lifestyle that can pay you back in a big way. Try to do them one by one. For example, start with budgeting first until you’ve become accustomed to it. As you save money, you can then look to other methods.

From there, you want to have an automatic setup where your savings get deducted from what you earn at set periods. A method like that can help you increase savings each payday without worry. For example, if you have a side hustle, you can use part of the money you earn there for the savings account. It all depends on how aggressively you want to build those funds.