8 Steps to Take When You Have No Savings

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

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Having no savings can be stressful, and you may not know what to do. 

When you have no savings, you’re forced to swipe your credit card every time an unexpected expense comes up, and this causes you to sink further and further into debt.

You might be wondering what you can do when you have no savings. 

In this article, we’ll go over key steps to take when you have no savings so that you can mitigate sinking into debt and turn your situation around so that you can get some cash into the bank for safekeeping.

Let’s jump right in.

1. Review Your Spending

The first thing to do when you have no savings is to review your spending. 

Identify if you’re bills are higher than expected, if you’re spending too much money on things you don’t truly need, or if you have things such as unused subscriptions charging you that you’re unaware of.

If you frequently spend money on things you don’t need, such as if you’re an online shopper, go out to eat a lot, hit the bars, buy designer clothes, and so on, then one step to take is to cut the spending.

According to a report by Ladder, the average American spends over $18,000 per year on unnecessary things.

There’s nothing wrong with spending some money on yourself, but if you have no savings, then you have to ask yourself where you can cut back.

Can you eat out half as often? When you shop, ask yourself if you’ll still want something in three months from now. 

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Employ the 7-day rule where you don’t buy something for seven days after you get the initial impulse.

Use this guide if you think you have issues with impulse shopping to help you do so less.

2. Open an Emergency Fund if You Don’t Have One

An emergency fund is where you store cash to use when an unexpected expense arises.

This could be anything like missing a few days from work due to illness, a car or appliance breaking down, or bringing your cat to the vet.

Your emergency fund could even be used when you get your tax bill and you see that you owe more than you budgeted.

It’s best to place your emergency fund in a separate bank account and possibly a separate bank than where your checking account is.

This reduces the temptation to take money from it when you want some fun money and your checking account doesn’t cover it.

When starting an emergency fund, consider just saving up $1,000 to start. Approximately only 4 in 10 Americans can cover a $1,000 sudden expense, so you’re already ahead of the game with $1,000.

Once you’ve saved $1,000, gradually work up to saving more. Some financial experts agree that you want three to six months’ worth of living expenses saved in an emergency fund. 

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Other experts say that after the COVID-19 pandemic, it’s wise to consider having 12 months saved up.

Two effective strategies to save for your emergency fund are to cut back on expenses or to increase your income.

Increase your income by working extra hours, taking on a temporary part-time job, or starting a side hustle.

3. Cut Back on Things You Don’t Need

Making saving money a priority is key when you have no savings to begin with. 

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 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. 

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The more you can cut, the more money you’ll save, and the quicker you can do things such as pay off your debt and get some buffer money in your bank for when unexpected expenses come up.

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 pay a portion of how much they save you. 

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4. Look for Ways to Increase Your Income

Aside from cutting expenses, you can also increase your income. 

People often look at this and shy away from it because they think it’s about getting a second or third job. 

While working another job will undoubtedly raise your income, there are other ways to make money that can pay more or that will create passive income.

Some ways to create multiple income streams include:

  • Opt for freelance work
  • Start an online business

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Choose something you’d like to pursue and focus on it until it gives you back a steady income. Then you can add another source and repeat the process.

It’s a good idea to experiment with things with a low entry cost 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 seek opportunities to get promoted at work or find a higher-paying job at another 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.

5. 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 your monthly obligations and see if there’s an option to downgrade without losing any primary 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.

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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. On the contrary, having fun while limiting your spending is wise so that you can reach savings goals each week or month.

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.

6. Get Out of the Habit of Spending Money Frivolously

One way to avoid spending money frivolously is to categorize your expenses into “needs” and “wants.”

Your needs are expenses you can’t live without, such as your rent or mortgage, food, utilities, transportation, healthcare, and clothing. 

Your wants are expenses you want but aren’t required to get by, such as video games, alcohol, eating out, subscription services, premium TV, and so on. 

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.

7. Learn To Save Money Daily

Much like how money compounds thanks to compound 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.

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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 your savings account.

8. Aggressively Pay Down Credit Card Debt

Credit card debt is one of the biggest reasons you can’t save as much as you want. 

When you use your card to pay for something and then don’t pay off the entire balance at the end of the month, you’re charged interest.

As interest adds up, you spend more and more money until you get your balance paid off.

Then when you miss a payment or don’t pay, you can be charged additional fees and higher interest rates. 

Your credit score will also suffer, which can make future loans have higher interest rates, making monthly payments higher.

Consider aggressively paying down credit card debt first. 

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

Another habit you’d want to build is only using your credit cards when you have the money to pay. 

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Wrapping It Up

Generating savings is all about adjusting your lifestyle to 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 times. 

A method like that can help you increase your savings from each paycheck. 

Continue to implement each method until you’re regularly saving money and soon you’ll no longer be in a situation where you’re no longer living paycheck to paycheck.

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