pennies in a jar

If you’ve never sat down to plan how you’d handle your finances in the event of an emergency, now’s the time. It’s a good thing to do no matter where you live, but Americans specifically are due for a hard look at the state of their savings.

While U.S. stock markets have been experiencing some of their worst single-day drops in history, institutional investors aren’t the only ones feeling the stress of potential financial crisis. A recent survey by Bankrate has illuminated a disturbing fact about the financial situation of the average American: fewer than 4 in 10 have enough savings to cover a $1,000 emergency.

$1,000 is a car repair. An emergency room visit. A vet bill for a pet. For many, $1,000 couldn’t cover a single month of housing, utilities, and food in the event of unexpected job loss. These situations can happen to anyone, and without enough in the savings account to act as a buffer, many have no recourse other than borrowing or going into credit card debt.

Even worse, last year’s report from the Federal Reserve shows that 44% of Americans couldn’t cover a surprise $400 bill.

Fortunately, saving doesn’t have to be painful, and there’s no better time to start than now. By buckling down, getting intentional about your finances, and modifying your daily habits, you can have that emergency fund stocked in no time.

Don’t worry–this won’t be one of those tone-deaf articles with advice like “Stop buying $14 avocado toast every day, millennials.” (I actually live in reality, and I know no one does that.)

Instead, try starting with these personal finance tips to pare down expenses and bulk up your savings account.

1. Be wary of “low monthly payments” and opt for older models.

Businesses trying to sell you big-ticket items like cars, appliances, and phones don’t typically have your best interests at heart, and this becomes abundantly clear when monthly payments and financing are concerned.

When a car salesperson focuses on monthly payments, they’re relying on you to think short-term. They want you to think “I can afford $300 a month for a car!” They don’t want you to calculate that if the lease term is 72 months, you’re paying over $21,000 for the car over time. They don’t want you to realize that the up-front value of the car is probably half that. And they don’t want you to read the fine print and figure out how much you’re paying in fees and interest.

calculator with pen and paperThis tactic is also common when it comes to appliances, furniture, and phone purchases. The seller will offer financing and break down the cost into monthly installments. Then, before you even realize it, you’ve paid hundreds extra for your phone or sofa.

Now that smartphones have been around for a while, you can find perfectly good ones for $100-$200, without getting sucked into payment plans. And unless you have a broken fridge or stove, you’re better off saving that payment and waiting to upgrade until you can pay upfront.

Ultimately, whenever you’re offered financing on any purchase, read the terms and do the multiplication. You need to understand the final cost of the item before you can make an informed purchase.

When it comes to cars and technology in any form, take some time to truly evaluate your needs. If you just use your laptop to browse the Internet and watch Netflix, do you need a high-powered machine? Do you want to pay $900 for the newest iPhone when it offers only marginal improvements over previous versions? Do you need a brand-new car to drive between work and errands and home, when older models are as reliable (or even more, since they’ve had time to do recalls and work out any kinks)?

Maybe you haven’t fallen into any of these traps, and if so, that’s great. However, many people do, and often the reason comes down to status–the mindset that the material things we own are symbols of how successful we are. It’s natural to fear the judgment of others, but if someone is going to judge you over something as trivial as the year of your car or the model of your phone, their opinion probably isn’t worth worrying about anyway.

2. Invest in a few kitchen tools and learn to cook at home.

Food: it’s a basic survival need that every human shares. But the specific choices we make when it comes to feeding ourselves and our families has a big impact on how much we’re able to put into savings. 

The general rule I’ve found is that the more prepared something is, the more it costs comparatively. I call it the “convenience tax.” So at the very top are meals from restaurants, followed by pre-made frozen meals or packaged foods, followed by food you prepare yourself from individual ingredients.

spices for cooking And yes, the “restaurants” category includes fast food. With today’s prices, even fast food meals tend to average out to around $5-7 per meal. Plus, in most cases you’re paying that for greasy, unhealthy meals that harm your body in the long term and won’t satisfy you for more than a few hours in the short term (translation: more $ out the window for snacks later).

A common objection to cooking at home is the time factor. After a day of work, commuting, and other responsibilities, few of us are excited at the prospect of an hour standing at the stove.

I have two solutions for you, and they’re called “slow cooking” and “meal prepping.”

With a slow-cooker like Crock-Pot or an off-brand, preparing delicious and healthy meals is literally a matter of finding a recipe, chopping up ingredients, shaking in spices, and leaving it to do its thing.

This can be combined with meal prepping, in which you spend time on an off day like Sunday to prepare several different meals. Then, simply freeze individual servings and use them throughout the week.

When it comes to budget cooking, staples are your friend (I’m looking at you, rice and beans). They’re cheap to begin with, and you can save even more by buying in bulk. Keep an arsenal of spices around for flavor and make a trip for fresh vegetables/perishable food once a week, and you’re set. Websites like Budget Bytes or subreddits like Eat Cheap And Healthy are good places to look for specific recipe ideas.

3. Shop around to reduce your phone bill.

Actual phone purchases are one thing, and finding a plan is another. It’s not uncommon to spend $60 per month or more for basic service on the big-name plans like Verizon and AT&T. You may not even know there are other options, since the biggest companies have the highest marketing budgets.

woman using her smartphone

First, take a look at your average data usage. If you have an unlimited data plan but are able to use wifi at home and work, your data needs might not be very high. If that’s the case, paying for the maximum is a waste of money.

There are several options for more affordable plans; Cricket Wireless, Boost Mobile, and Straight Talk Wireless are a few. My personal favorite is a relative newcomer: Mint Sim. They send you a sim card you can insert into any eligible (unlocked) phone. If you can get by on 2GB of high-speed data you’ll pay $15 a month including unlimited talk and text. $25 a month gets you 10GB. If you hit your limits, you can still use data; it’ll just be slower. I was skeptical at first that the service would even work, but I’ve been using it since November without complaints.

4. Beverages add up: watch your caffeine and alcohol spending.

Sure, maybe you don’t buy fancy $6 Starbucks drinks every morning or head to the bar every night. However, even the smaller, more innocuous-seeming routines have a large price tag over time.

black coffee from fresh coffee beansLet’s say you just swing by Dunkin for a basic $2.50 coffee before work. A year of doing that five days a week comes to $650. 

As a fellow caffeine addict, I’m not about to suggest you ditch the habit. But if you buy a cheap coffee maker for your home, you can buy a lot of ground coffee (or whole beans and grind your own) without breaking ~$100/year. For iced coffee in the summer, brew your cup the night before and refrigerate it overnight. You can even make your drinks fancier by picking up a few flavored syrups and still come out ahead. It tastes better than the chain coffee shops and you can add $500+ a year to your savings–I’d call that a win-win.

One important note: while Keurigs are popular, relying on K-Cups drastically reduces the financial upside of brewing your own coffee. (Plus, they’re so terrible for the environment that their founder regrets creating them.) Given the amount of coffee in each cup, it works out so you’re paying about $40/pound for K-Cup coffee. You can still enjoy the convenience of an instant brew by picking up reusable K-Cups with filters and using your own grounds.

It’s a similar concept with alcohol: it adds up fast (and it’s more expensive than coffee). If you find yourself regularly paying $20+ at the bar on weekends or having two beers every night, it might be time to scale back, especially if you find yourself struggling to save.

Not sure how much you’re spending on this stuff? Use a free app like Mint or Personal Capital to track and analyze your spending by category.

5. Open a separate bank account that’s only for your savings.

man using computer

Out of sight, out of mind is the key when it comes to curbing spending (especially if you know you’re prone to impulse purchases). Open a savings account at an online bank like Ally, which offers great interest rates, and whenever you have extra money in your main bank account, transfer it there. (Or, even better–set up an auto-transfer each paycheck.) Don’t think of it as your money. It belongs to future you, not present you.

It requires work and a disciplined mentality, but the peace of mind from having a financial safety net is well worth a few sacrifices. After a while, it will become second nature. Once you’ve saved up 3-6 months’ worth of expenses, you can start funneling extra cash to investment and retirement accounts. And next time you face an unexpected expense, you’ll be able to breathe easy.