Create Your Own Money Saving Plan

When a person can have good financial control and a good plan of action? Should emergency funds be needed, a person can then sleep better at night?
There is no real magic formula for coming up with on-the-spot emergency cash. There is a good deal of thinking through and the putting of a good plan into action. If you can do that, you have it made. That is truly all that any one of us can do to secure out tomorrows.

How to Cope with a Cash Crisis?

Here is how to assess your situation and get back on your feet.All of a sudden and without warning, your roof begins to leak! Your hot water heater shuts down and your computer goes up in smoke, the clutch needs to be replaced in your car and your son decides to have his wedding on the Isle of Oahu - all of this within the same week!

As you sit, stunned and you ponder an exit strategy you receive a friendly letter from the IRS explaining that you miscalculated your taxes in 1996, and they now own your house.

This article is part of "How To Generate Quick Cash In An Emergency" by John Fines.

The above scenario looks like a money emergency of biblical proportions. You are afraid to open your front door for fear of finding a swarm of locusts!

This Kind of Money Emergency Requires your Immediate Attention!
What do you do?

Thank goodness, there are things you can still do to restore your financial life and equilibrium-and perhaps even fend off future misfortune-without having to sell your very soul.

Wherever there are money woes, you can be sure to find crippling emotional setback. You try avoid it all, you might just as well begin to prepare for the devastating fiscal and the emotional fallout that is sure to come. You will need to cope very well with both if you hope to make a solid financial comeback.

Whenever a money emergency hits, it will be your ability to deal with the individual pitfalls that will hold you in good stead. It is when a series of financial hits come your way that the stress will tend to accumulate and make your life much more difficult to cope.

You will not be so overwhelmed when you can calmly and rationally look at each individual problem as it arises. If you sit back wringing your hands with worry and allow all of your emergencies to pile into one; you will find yourself down for the count.

Calm must take center stage. You must NEVER allow yourself the luxury of panic. There is no one there for you to just take over. You are all you have.

The more you panic, the less effective you will be. You need to keep a very clear head to be able to sit down and come up with an appropriate plan. Be aware of your own tendency to sabotage your plans further. It is only when you are at your most calm that you will be prepared to get to where you need to be and then overcome.

Being Calm is the First Key to Managing a Money Emergency

At even the first hint of a money emergency, it's important not to act right away. If you do you will inevitably make a mistake! First, before you can manage your finances again, you have to first manage your emotions. You absolutely must regain your balance before you can even begin to make a plan.

If your money emergency demands that you act quickly, think first about seeking the advice of a debt counselor, money coach or financial planner. Whenever possible think about seeking out the aid of a financially perceptive friend or family member who can help you to come to a clearer perspective.

Remember the old adage that "two heads are always better than just one!" You won't need to make a major cash investment if you're strapped. Look for a planner who will give you a one-hour consultation for $150. Often times this will be all you will need to securely turn the corner.

The first step toward establishing financial stability is to step back, take a deep breath and assess the damage. Possibly one of the bigger mistakes people make when they're in a financial crisis is not being prepared to make a clear assessment of where they're at.

You can easily become overwhelmed. However, totaling up the damage serves two important purposes. First, you need to know exactly how much you owe, how much money you have in hand and what it will take to cover the distance between the two. Second, you will want to avoid any other mishaps, such as penalties, further repairs, missed deadlines, etc.

If you are not properly prepared, you must become prepared on the spot. Any type of money crisis will catch you unaware and you will feel cornered. Wouldn't it be ideal to be ready and waiting for the crisis? How likely is this to happen to you, though?

Most people will be at least somewhat prepared. If the crisis is not too dire, they will be able to handle it ok. Some will be sunk from the get go. The idea is to not be overwhelmed and to have a good plan of action, no matter how little or how a lot. You need to be entirely prepared to deal with any sized setback.

Ideally, those unexpected expenses could be covered by the funds in the Irregular Expenses account in any good budget. Unfortunately, though, there is always a common problem. You might well have an emergency stash-but it's most often depleted. This same problem affects the majority of us so take heart.

At about this time many people make the mistake of turning to plastic for relief. Resist this one. You will only be transferring your problems from one pocket to the other.

The Idea is to Make a Smart Decision and not a Rash one

If you are sure you can handle using credit cards to deal with a cash emergency, you had better be sure you could pay them off when the time comes. Otherwise, why add yet another debt and another problem. Eventually, it will all catch up with you.

If you're truly running while on your last leg, consider taking out a home equity line of credit. This will work for some. The interest is tax deductible, but those aren't fixed rates. Be smart about this remedy, though. Unless you plan to pay back the amount you borrowed promptly, it can end up costing you more than you thought-especially if you've already depleted your own equity.

Think well before borrowing from your 401(k) or IRA. There are loopholes that allow you to do so, but there are also hidden costs-never mind potential taxes, penalties and other consequences. Keep in mind that if you were to lose your job, you'd have to repay the loan immediately, or be taxed as though it was a withdrawal. This remedy could be very costly in the long run.

1Take on a hobby that you can translate into dollars. Can you walk a neighborhood dog? Teach basket weaving? Host a dining room? Baby-sit for your sister's kids?Do Computer graphics?Consider which of your talents might be worth a few extra bucks and then go out there and do it.



2Take on a part-time job.The holidays are soon coming up, and many people supplement their salaries with part-time retail jobs. Just don't spend it all on holiday gifts and be sure to bank it into your savings.



3Spend more wisely. We all have our own ways of wasting money. Now see how you can eliminate the ones that you wouldn't miss. Just saving the dollar you would normally spend on that cup of coffee each day adds up.



4
Borrow from a trusted friend or relative. The interest rate is low to nil, the cash is quick-but guilt is even higher. Be sure you have a plan for how you're going to pay back the loan even before you approach them.

You can spend your precious time crying in your milk wondering why you have been singled out in this way or you can get busy and look at how this could have happened to you in the first place. You will need to face some touch answers if you want to avoid future financial crises.

Suffering a serious financial crisis is an excellent time to self-assess. Ask yourself where you went wrong, where you're not paying attention-and how you might be setting yourself up for future financial setbacks. Understanding the answers to these important questions will help you out next time around should the same befall you.

Be prepared before the crisis starts. You won't be able to anticipate every time a financial burden lands in your lap, but, if you want to be cushioned against it, you have to anticipate the unanticipated.

Be very careful. An emergency fund is set up for . . . emergencies. It's not supposed to be depleted on a whim and every month. Take a closer look at your expenses these last few months, and if you have had to lean heavily on your emergency account to pad your budget, it's time to rethink your money management issues and in a hurry.

Pay special attention. Take a page out of this lady's book she noticed that her towels were slightly singed when she took them out of the dryer one day. Instead of calling the repair guy, she shrugged it off-until the next load caused her entire house to go up in flames. We all have these same moments where we glimpse a potential crisis hovering on the horizon and do nothing until it is all too late. Pay attention to the smaller details and avoid the larger calamities.

Plan further ahead. Your clutch is likely going to give out every 80,000 miles or so. The roof can give out every 15 to 20 years. A vacuum cleaner might give up the dust in as much as five. Avoid the obvious and pay excessively later. It is your call.

Your five-year-old desktop is getting creaky. You could wait until it dies. However, according to Murphy's Law of Money, it will expire at the worst possible moment. Either way, paying for a new computer might not be part of the budget so planning ahead gives you some control over when you take the hit. Start to plan today for what you know will be coming-come hell or high water. Plan smartly for the inevitable.

Establish emergency savings in both good times and in bad. The chance is very good that you will be called upon to put out a sum of money on the spot and when you least expect it.

It is a very good rule of thumb to sock away three to six months' living expenses. You can also use this same money when you're faced with major, unplanned expenses such as a car that breaks down or much needed college funds.

The purpose of this type of savings plan is to put the money away consistently, and then tap into it for true emergencies. The success of this type of long-range savings plan will depend less on the rate of return than on, day-by-day, putting the money away and then leaving it there for a true emergency.

Lock it away and then hide the key.

People who are living on a fixed-income will have the toughest time setting aside money for emergencies. If you can manage to just squeeze out another $10 or $20 each month and sock it away into a money market account, it's worth doing.

If you decide you need $2,000 in an emergency fund, look at what you can afford to sacrifice each month from your current budget and then look at that sum of money as a bill to pay yourself. Decide on a monthly amount and then put that same amount aside every month and then watch it grow.

Once you have reached your goal of $2,000 you'll now be in the habit of putting away that extra set amount each month. Keep on doing it.

Financial planners echo the idea of treating your emergency fund as a bill. Put the money away each month, but don't be tempted by the latest sale. You are not to touch the amount, except for in an emergency.

Putting money aside on your own is hard. Retirement plans are successful because the money comes out of your paycheck before you can get your hands on it and because there are taxes and penalties for early withdrawals.

Stashing money away in an easy access money market account takes discipline. Limit your access to the emergency fund. You can have immediate access to some of the money, but not all of it. The bulk of the fund is to be used, strictly, for emergencies and nothing else.

Once you have saved up about two months of living expenses, move one month of expenses to a one-month CD. When the CD matures, roll the principal and interest into another one-month CD. Your savings will grow well this way.

As you continue making regular payments to the emergency fund money market account, you will soon have another month of living expenses that can be used to invest in a two-or three-month CD. If you are wishing to set aside six months of expenses, continue the process until you can comfortably purchase a six-month CD. Your savings will accumulate quickly this way.

Credit cards are perhaps one of the most expensive forms of money. A very good rule of thumb is, unless you pay off your credit card bills each month, don't use the cards for anything you can either eat or wear.

Another good rule of thumb is to consolidate your debt. If you have several credit cards, each at different rates of interest, why not fold them into a home equity loan and then write off the interest payments? This is a good way to begin an emergency savings fund.

Saving money on your own brings many rewards, and like most other things, it becomes easier over time. In the end, your entire family will have peace of mind that comes from knowing you have financial resources set up and ready for when times are the toughest. The sacrifices you make now will be realized when you need the most comfort as a family.

If your plan for money for your next emergency is to scoop up the change that falls between the cushions, you might want to come up with a plan to add to that stash.

It is always a good idea to have a little extra green for the lean times. Rainy days could be just around the corner. Rainy day funds become necessary!

Below You will find some very clever and virtually painless ways to put aside some money now!

Put aside a large envelope, cookie tin, coffee jar or something similar. At the end of every week, throw a couple of dollars aside. By the end of your first month you should have some extra cash put aside to have a nice start on an emergency fund.

The idea to doing this is don't count it or spend it. Place it somewhere that is hidden away. Put it somewhere that you won't be tempted to dip into it. This kind of money really adds up!

The next time you treat yourself or your family to a meal out, tip yourself! Just as you go to tip the waitress 15 to 20 percent, put the same amount aside for yourself. When you get home, stash it away in your cookie jar. Every time you go through a fast food window, put a dollar away for that cookie jar, too!

Take advantage of that cash back option! Next time you make a purchase using your debit card, ask for a small amount of cash back. Instead of spending it, stash it away in your cookie jar! Chances are you won't even miss that extra $1, $2 or $5 bill and come emergency time, you will notice how the amount has piled up.

Consider joining a Christmas club. You will save a lot of money. Each year you put aside a bit of money and place it into a hamper program. Then, as Christmas rolls around you don't need to scramble looking for Christmas cheer to share with your family. Your hamper arrives filled to the brim with all kinds of seasonal goodies that you paid for over the previous year. You can easily put aside $50 each year towards your emergency fund this way and you and your family will enjoy a hassle free Christmas.

Sign up for a grocery shopping membership card. At the bottom of your store receipt, you will see a print out that states how much you save each week. It really adds up. You can easily save an average of $15 on each weekly grocery trip. Add that amount, each week, to your savings cookie jar.

Did you enjoy your tax refund this year? Sure you did, we all did. Decide to deposit that extra money right away into your savings account or cash it and then stash it. Sure you can come up with plenty of ways you can use that money now, but put it away for later. You might need it even more later.

If you are a responsible spender, take out a credit card that rewards your loyalty. When you pay off the bill every month, use a card that promises a cash reward and bank the money. Use your reward credit card smartly and you could end up with a very nice windfall for your rainy day fund.

Put aside a large mouthed jar in the kitchen. It is very likely that your parents and grandparents had one. At the end of each workday simply empty your pockets or clean out your change purse. All the change goes into the jar. Who wants to carry around all that dead weight, anyway? Your spare change adds up a lot faster than you think. While you are at it, add at least one bill to your change jar at the end of each week. Aim for a $20!

If you yearn to loose some weight, try rewarding yourself the cost of the item that you do without each day. Put that money into your change jar. You will look great and you will be saving for a rainy day!

Place a large jar by the telephone. Everyone must drop in a coin to make a call. All proceeds go to the emergency fund. This one works!

You are ready but you feel at a loss as to how you will come up with that extra money. You are already barely eking out a living. You can manage if you train yourself to think differently. That is the first part of any good plan. You have to think right. If you don't think right towards your money, you won't be able to manage it.

Your First Step: Rethink how you think about money

Saving money is a calm state of mind. Before you can even begin, you have to say NO to all of the spending-and stop thinking that you actually need all the stuff you're spending all of your hard-earned money on. Just don't spend.

That is simple enough! Say NO to all of the excuses and reasons for why you feel you MUST spend. Tell yourself, NO MORE EXCUSES, PERIOD! The very next time you want to buy something, take the $50 or $100 out of your wallet, instead and stash it away somewhere. Do you see the logic? That's why you call saving. You don't end up with stuff; you end up with the hard-earned MONEY.

Another new way of thinking will be to think of frugality as your savior. Become a confirmed cheapskate and do as your most frugal friends do. Pay special note to the fact that frugal friends fix the shower curtain instead of buying a new one. Sit down with Depression-era relatives and ask about how they made ends meet despite even desperate times. You want to learn to economize.

The next step in rethinking is to become inspired. Spend all of your spare time online and search out those frugal Web sites. Look at "living cheaply," "frugal living" and "voluntary simplicity." You'll find a ton of good Web sites devoted to living on less, such as: thefrugalshopper.com, simpleliving.net and frugaliving.com.

Learn to turn shopping time into activity time. Go for a bike ride, walk down memory lane, take the kids to the park; do anything and everything that you can to take your mind off shopping and spending. It works!

Step # 2: Time to Save!

There are any number of creative ways to live on less. However, you don't want to make your life miserable. Here are some great ways to economize without missing quality of life.

Don't think too much about it - just do it! Direct deposit is now your best friend! Your money is whisked away into your IRA, 401(k) or money market account-and you don't have to do a thing to make it happen. Just drop by your payroll department and/or your bank and fill out the forms. Do it today.
Eat meatless some of the time. Go veggie. Prepare just three meatless days a week (without substituting pricey fish) and you could save $25 a week, which equals $100 a month, which equals $1,200 a year! Beans: You will learn to love them.

Play the money game. Whenever you get a $5 bill, put it aside for later. Alternatively, do the same with ones, with quarters or even all your spare change. You'll have a nest egg built up before you even miss a nickel.
Never spend the extras. Save all of your income-tax refund, your holiday money from the folks, the $20.38 overpayment check from the telephone company and any other extras and save every penny.

Negotiate and Haggle. You will be impressed by who will drop their prices, fees and interest rates: airlines, hotels, credit card companies, and even computer/appliance/rug salespeople. Before you even think about paying full price: Haggle a bit first.

Re-evaluate your money before you spend. That dinner out for the family will cost more than you spend on groceries in a week. That fancy pair of shoes is worth half the cost of a commuter pass. Learn what your money is worth to you, and you won't be so quick to dispose of it.

Don't overpay on your taxes. Yes, you love to get a big refund from the IRS every spring. The fact is, though, you're effectively lending money to the government and interest-free. Go through your tax return and see if you can hold out until Dec. 31 to maybe get a $150 refund. That way you can use your money NOW should you need it for an emergency and bank the refund when you get it later.

Decide to raise your insurance deductibles. Reassess each of the deductibles for your various kinds of insurance. If you can raise them at all, your premiums will drop.

Bring your mortgage costs down. Look at whether or not the rate is too high. If it is, look to refinancing - this will save you money. Now, let's look at the private mortgage insurance (PMI) you've been paying because you didn't have enough money to make a 20% down payment. If the equity in your home is greater than 22%, make sure that it is canceled. It's the law. Finally, pay up on your mortgage. If you can manage an extra $100 per month, you will save thousands in interest costs over the long haul.

Toss out those nasty, glossy catalogs. The best-known form of spending temptation known to man or woman is the catalogs. Sure they are fun and look good, but are they worth the risk of spending? Chuck them straight out into the trash.

Refuse those unnecessary fees. Like the $2.50 you pay just because the ATM is right there, right now as opposed to walking two blocks to your bank, where you don't get charged at all every time you use your cash card. Alternatively, how about the late fees for returning videos? These really add up. Don't forget those fat charges banks hit you with when you write a check that, well, bounces.

Clean it yourself. I've discovered a very cool trick: When a clothing label says, "Dry Clean Only," I wash it. On the other hand, dab out that little mustard stain with an old-fashioned cleaning device cleverly known as a sponge.

Don't pay for a pro. If you can fix the neighbor's garage door and she can paint the kitchen: go for it and save.

Put your raise in the bank. Put that tiny 3% to 5% boost in the paycheck on your direct deposit and live on your previous salary.

Pay smart for long-distance. Evaluate all of the different telephone plans for value. Pay attention to what you are currently paying per minute. Some dial-around codes or cheap calling cards (one without a surcharge per call) may give you a better rate. Not only will you save, but also you may find you won't need to speak to Alvin in Schenectady so often.

Just buy the basics for the pets. Say no to pet pampering. Does your dog need those t-bone snacks? Does your cat need that rabbit-fur-lined toy? Probably not.

Vow never again to pay full price. The next time you must shop, hop onto the World Wide Web. Look for eBay, half.com and craigslist.org for excellent sources of "lightly used" goods-everything from books to jewelry to office furniture-even the entire first season of Star Trek on video.
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When you are focused on being savings minded, you're thinking about money changes. Before you know it, you have substantial savings.

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