Savings - Set up a Rainy Day Fund

If you think things are bad now, they could get worse.  That is why it's important to have some money tucked away for a rainy day.  The obvious question:  how is someone who is flat broke going to stash some cash?

Photo By Jericho [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

How To Free Up Credit

It's a fair question.  The answer is too start small. If you have credit card debt, set aside some of your credit cards for emergency use only.  It's important to have a card that will only be used if the car breaks down or for a medical emergency or for unforeseen vet bills.  Just set the card aside in a drawer and refuse to use it.  As you pay down your balance, you're emergency credit will build up.

How to Save Your Change

Of course, available credit isn't the same as cash.  It's better to have some cash stashed.  You can start by tossing all your coin change into a change pot or piggy bank.  Pretty soon, you'll have $20 or $30 saved up for little emergencies.  You can also put a few dollars in an envelope every pay period. Pretty soon, you'll have a little stash.

How to Save Money

But, you really need money in a savings account.  Open a savings account with your local credit union.  Take your cash envelope down and deposit it from time to time.   Get in the habit of transferring some money to savings each pay period.

Don't think you can save any money?  Look at the stupid things you spend money on.  For example, you could stop smoking and stash the money you save. Here is a calculator on how much you would save by giving up cigarettes:  Smokefree.gov.  You can also give up some small luxuries like Starbucks.  If you want to save, you have to make some sacrifices.  There are tons of ideas for saving money at FeedthePig.org.

McDonalds vs. Starbucks

Starbucks addiction is one thing that helps keep people broke.  When a cup of coffee can reach $5, your money can be frittered away in a hurry.  It's called the latte factor by financial planners.  Starbucks convenience food items can also add up.  Fortunately, there are ways to break away from Starbucks before it breaks your budget. 

When it comes to coffee, size matters.  Here is a McDonalds Small and a Starbucks Grande

If you like Starbucks. you owe it to yourself to try McDonalds.  The iced hazelnut coffee at McDonalds is awesome.  Their Mocha and Iced Mocha are very good.  But, their Mocha Frappe is out of this world.  Plus, with all day breakfast available it's easy to get something tasty with your coffee.   Plus, McDonalds prices are affordable.  You can get McDonalds for half the price of Starbucks.  That keeps money in your pocket.  Plus, you don't have to keep track of tall, grande, venti, and trente.  McDonalds speaks English with Small, Medium, and Large.

Of course, if you want to save even more money, you can simply make your coffee at home for pennies on the dollar!

The Importance of Having A Piggy Bank

Almost every child is given a piggy bank for saving change and allowance money.  It helps kids get into the habit of saving money.  However, having a piggy bank is not a bad idea for adults either.  If you throw all of your coin change into a change pot, piggy bank, or coin jar automatically at the end of a day, you will soon accumulate enough money to come in handy.

I find that in just a couple of month, I will accumulate $20 to $40 in change.  That change can come in handy if there is an unforeseen emergency or if you fall a little short in a pay period due to an unexpected expense.  Sometimes a piggy bank can provide enough money to pick up a few groceries and make it to the end of a pay period.   On a more positive note, it can also provide a little extra money for something nice:  a gift or a meal at a restaurant.

Many grocery stores offer change counting machines like CoinStar.  These machines make it convenient to turn your change into dollars.  However, there is a 9 or 10 percent transaction fee.