Fund Times: How to save smart without waste

The two words most people fear in terms of money is “emergency fund,” perhaps even more so than “savings account,” since the former is more fearful given that not many have one.

An emergency fund is quite simply money set aside in the event something unexpected happens. Given that the average saving account for about half the population is around $1,000 or less, the idea of an emergency fund is quite laughable.

But why don’t we have money saved? Why is our emergency fund more prepared for a few months worth of grocery bills rather than a new roof, transmission for the car or braces for the kids?

The fact remains there are two main reasons we can’t save: we don’t spend correctly, and we live far beyond our means. In both instances, you need a budget, you have to track your spending, and by doing so you’ll flush out the bad spending and keep the good (i.e. necessities).

Living beyond your means is more about borrowing money and trying to have what you want or keeping up with certain trends even though your income won’t support it. Having a budget keeps you accountable, and if you’re overspending and you write it all out on a piece of paper and can actually see you’re in the negative that could sharply change your spending habits.

Spending correctly isn’t just about paying your bills and paying them on time, but also our innate ability as a society to waste money on anything from lottery tickets to cigarettes. While some might not consider those purchases a waste of money, consider what not buying those could mean in the long run. if you spend just $3 per day on the lottery over the course of 10 years, you’ll have spent $10,000 and have nothing to show for it. And if the average lottery player spends $5 per day, that number is going to be nearly double.

And wasting money isn’t just about lottery tickets or addictive habits, but also can be something as simple as take out food on a weekly basis consistently. If you spend $10 per day on lunch, and another $10 on coffee and drinks that are just part of your day to day routine, you’re spending about $7,000 per year on one meal and a quenching your thirst daily.

What about your need to refill more than just a cup at lunchtime?

Your focus should be on tracking spending, increasing income (if possible) and budgeting what you have not what you don’t. Being wasteful is just an added negative to this entire process, one that can easily be fixed but by your hand only.

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