In keeping with last week’s theme of honoring those who work hard, this week’s Money Tune is Donna Summer’s “She Works Hard for the Money”. I can’t think of another song with a serious message that has such a good beat. (Also, I love Donna Summer. “On The Radio” is an awesome song):
The following is a repost of an entry first posted on my other (and original) blog, The Empty Kitchen. I thought it was relevant here as well:
All financial experts agree on one point: an emergency fund is a must. It’s crucial to have cash on hand in the event of an emergency such as an unplanned doctor visit, a flat tire, a service call on an appliance (if you own your home) or you simply need food or milk. However, the recommendations for the amount of money in the emergency fund vary from $500 to $1000 to 3-6 months of expenses. For people just starting out, living on a strict budget, or living paycheck to paycheck, that amount of money seems impossible to achieve. So for those of us in that situation, I propose another amount for an emergency fund: $20.
$20 does not seem like a large amount of money. I contend that it is. $20 can cover a co-pay for a doctor visit or an over the counter medication. $20 can buy several days worth of food. $20 can put gas in your car to get to work or buy a bus pass. $20 can buy many loads of laundry at a laundromat, including some detergent and dryer sheets. It can even buy you a cooler and ice if your refrigerator breaks.
But what if several of these things happen at once? After all, Murphy likes to not only knock at the door, he likes to come in, prop his feet up and have a snack. My best suggestion for that scenario is this: prioritize. Figure out what is the most important and spend the money on that. If you can take that $20 and spread it out over a few, then do that, too. For instance, if you suddenly find yourself with a vicious cold, a broken fridge and no clean clothes or undies, $20 can cover one load of wash (use a drying rack to save money on the dryer if you can), some OTC cold medicine and tissues and a few bags of ice.
So how do you start the $20 emergency fund? There are a few ways. One way would be to, on your next payday, rearrange your budget to allow for $20 to come out (if you have to, take $20 out of your grocery budget and eat from your pantry for a few days or find some free entertainment and take $20 from your entertainment budget). Another way would be to cash in your change jar, if you have one, and use that money to start your emergency fund (caution: do not use the machines in supermarkets. They take out an 8.5% fee. Try to find a bank instead). A third way would be to save the $20 over a few paychecks. For instance, take $5 or $10 from each of your next few paychecks and stash it away until you get to $20. And yet another way: see if you can find a babysitting, dog walking or some other odd-job type gig, even if it’s just for one day, and use whatever you earn from that to start your $20 emergency fund.
Once you have your $20, stash it somewhere, whether it’s in an envelope marked “Break only in case of emergency” or a compartment in your wallet or your jewelry box. Just make sure that you keep it somewhere you remember! It’s also extremely important that you do not use this $20 for something frivolous with the promise to yourself that you’ll pay it back. The one thing that I’ve found is when you make a promise like that, it’s hard to keep it. And I’ve also learned that when you need the money the most is exactly when you don’t have it.
It is also extremely important that if you have to use your emergency fund for something necessary, or any portion of it, that you pay it back as soon as possible. The $20 is there to act as peace of mind in case Murphy makes himself as home. There is nothing more unsettling as knowing you’re not armed for his visit.
I also suggest that, when possible, keep $20 as a house/personal emergency fund and a separate $20 for a transportation emergency fund. If it’s not possible at first, don’t worry. Just start with one general $20 fund and work your way up. This also will serve as the baseline for building a bigger emergency fund later on.
This $20 is not intended to be your entire emergency fund. I wholeheartedly agree with Dave Ramsey’s suggestion for $1000 baby emergency fund and eventually 3-6 months of living expenses. My family is working on our 3-6 months right now and it is hard and it took us a while to get to the $1000. But the $20 is a good place to start. It gives you a small cash cushion to handle many minor emergencies. And that peace of mind is priceless.
(Full disclosure: This idea is not entirely mine. Special thanks to Wendy K. for suggesting this!)
When most people are looking for budget assistance, one of the first suggestions made is to eliminate memberships and subscriptions: diet programs like Weight Watchers, gyms, Netflix, magazines, etc. While that is an excellent suggestion, there’s this to remember–what if you actually use those memberships? What if those memberships actually enhance your life?
Take the gym, for instance. I will agree that gym memberships can be expensive and if you’re on a very tight budget, it may not make sense to keep it. But what if you go to the gym every day? What if you use it not only for the health benefits but for a social outlet or a networking mechanism? You never know who you might run into while you’re on the treadmill or in a Zumba class! You might be a social worker in dire need of a job who just happens to strike up a friendship with the HR rep for a local counseling agency. You might be a high school graduate in need of some income who happens to run into a family who’s looking for a weekly babysitter. Not only that, but you might find out that your gym has an opening in one of its departments (this mainly applies if you belong to a YMCA-type place); that job might then come with a free or reduced cost membership. Let’s not forget the classes, programs and facilities that most gyms offer. Seems to me that the perks are worth the money, even on a very tight budget.
Netflix is another membership that, to me, is worth the money. The streaming feature alone will make you forget that you no longer pay one of the greedy cable companies. If you’re low on funds, movies and old TV shows may provide one of your only sources of indoor entertainment (board games and cards can get old if you’re playing with the wrong people), especially for date nights. In addition to movies and TV shows, there are also educational documentaries and exercise videos available. It’s a comprehensive source of entertainment that serves as the pepper to the salt of free TV through Hulu or streaming through the network channels.
Magazines are a tricky one for me. I used to buy my husband a magazine subscription every year for Christmas and he would do the same for me. But the magazines wouldn’t come regularly, we would get bothersome phone calls from a company selling one of the subscriptions, they would automatically renew the subscription even though we never selected that option, and most of the content is online anyway. Not worth the headache or the money. This year, though, my in-laws bought us subscriptions and I’m quite enjoying them (probably because it’s on someone else’s dime). I get a monthly subscription to Southern Living and I am in love with the recipes! I have a pile of recipes that I’m dying to try. My husband gets Money, Maxim and Conde Nast Traveler–nothing like an ecclectic mix of magazines with expensive tastes to give someone a case of the “I wants” (for the record, I don’t care that he reads Maxim. The pictures don’t bother me and some of the articles are really good. And funny. I was as surprised as you.) I can’t say that I would purchase a subscription for myself, but I can see why if you’re in a niche industry or have a very specific hobby why a subscription would be worth it.
Obviously, it does not pay to keep memberships if you don’t regularly use them. They become a drain on your budget and a waste of services. If you’re not getting anything out of the memberships–educationally, socially, physically–then dump them, stat! But if you do find value in any memberships that you do have, I would look to see other places to cut before getting rid of those. If it’s important to you, find the money for it. I promise not to judge your priorities.
What memberships do you have that are worth the money?
Having just finished David Shipler’s The Working Poor, I could not think of a more beautiful, poignant song to accompany that book than Billy Joel’s Downeaster Alexa. It’s not a long song, less than 4 minutes, and I really encourage you to watch it. I am literally moved to tears each time I hear the song and watch the video:
There are dozens of websites and books and blogs devoted to saving money on grocery shopping. Money Saving Mom has a 31 Days to a Better Budget series, which is far and away the most comprehensive I’ve seen. 5 Dollar Dinners is another outstanding resource for frugal cooking and smart shopping. For a good view of one family’s healthy and comprehensive menu on a very tight budget, check out Another Housewife. And I cannot even begin to assemble a list of couponing websites!
Those are all resources I use for myself. If I had to classify my style it’s this: I’m a sometimes couponer, a frequenter of Aldi, and a lover of store brands and menu planning. I shop on a budget that’s sometimes a little looser than it should be, but we get by. I guess my point in mentioning all of that is that I am no expert when it comes to grocery shopping. However, one tip that I use that I don’t see mentioned in most frugal grocery information is this: portion sizes.
Portion sizes are, for obvious reasons, a popular point of information for diets. But they work for frugal groceries as well. Let’s use this scenario: you have $50 for groceries for the week. With that $50 you must buy food for breakfast, lunch, dinner and snacks. For lunches, it’s just you and your husband because your child gets lunch at school. You buy peanut butter, jelly, bread, carrots (the whole ones, not the pre-cut baby carrots), and grapes for lunch. You’re left wanting something salty and crunchy and you only have $2 left; however, nothing that you and your husband can agree on is on sale and you’ve left all of your snack coupons at home. You find a bag of store brand snack size rice cakes in a flavor that you both love. You see that the bag has 8 servings–enough for each of you to have a nice, crunchy chip-like snack for 4 of 5 work days for only $1.50! You compromise and on the 5th day you each bring leftovers, plus you walk out with $.50.
It can work the same way for cereal. A box of Cheerios may cost $5 but if you get 15 servings out of it, and you measure those servings, you’ve only spent $.33 per serving and you’ve fed your family of 3 breakfast for an entire week (excluding weekends). If you were to just haphazardly pour cereal into a bowl, the box may only last 3 days which means your weekend breakfasts now become your weekday breakfasts or you have to run back to the store to buy another box; either way, you’re spending more money. Which is not a good thing, especially when you’re working with a fixed budget.
I will concede that many serving sizes are not intended to make you feel stuffed. But adhering to the portion sizes on packages will leave you satiated and satisfied, in your stomach and your wallet.
What unusual dollar stretcher tips do you use at the supermarket?