Tips for saving money: Create a rainy day fund

A while back, on the way to work, I was listening to Charles Stanley on the radio. He mentioned the well known story of the Prodigal Son.

Most of us know the story of the young man that told his father he wanted his share of his father's estate now, rather than wait for it. There are dozens of lessons to be learned from that story, from asking for something you aren't ready for, to forgiveness, to realizing your mistakes. All are valuable lessons and can be discussed at length. For this post, I want to focus on the wild spending and not preparing for tomorrow that the young man in this story engaged in. For purposes of simplicity, let's refer to the prodigal son simply as "Son" going forward.

You may recall the story, Son left home with his share of his father's fortune and immediately he took to a life of partying and living lavishly. He spent his money on wild living and partying. The story goes on to say that soon a famine came across the land and Son had no money left. This is what caused him to have to take a job feeding pigs and living a life where the food he fed the pigs looked appetizing to him.

This is one of the things that we have seen during the recent economic collapse here in the US. Those who lived above their means and didn't save anything for a "rainy day" ended up losing their homes, working less than desirable jobs and struggling to make ends meet. Granted, some were mere victims of circumstance, but I cannot emphasize enough the value of saving.

There is a rule of thumb that people should save at a minimum 6 months worth of living expenses. This could mean mortgage payment, food, utilities and all the essentials to pay your bills for 6 months. Once you have that amount of savings, then you can decide on spending your money on more lavish things, because you will be living within your means.

How can you save 6 months worth of living expenses? It takes a disciplined approach, but there are simple things you can do daily to start saving, a few of which I will discuss here.

1. Pay yourself first: We all pay our rent/mortgage, utility bills, and all the other essentials and then we look to see what's left. What about looking at your budget and "paying" your savings as if it is a bill. You might say you can put away $100 a week, or maybe $500 a month or more. Pay that into a savings account or investment as though you were paying a bill.

2. Pack your lunch: If you make a sandwich for lunch a few times a week instead of going out to lunch, you can save $10-30 plus per week. Refer to # 1 above for what to do with that money.

3. Skip the movie: If you typically go to the movies weekly or regularly, watch one on DVD and put that savings away.

4. Don't spend your change: Bank of America has a program called "Keep the Change". I practice that in my daily life. I buy everything with dollars and put the change in a container at home. I then add it up and deposit $50-$100 a month into savings after a few months time.

5.  Dinner at home:  Yes, going out to dinner is fun and worth doing from time to time, but making dinner at home can be fun also and saves a lot of money.  Not a good cook?  These days, grocery stores sell pre-made meals, such as cooked whole chicken, sides and salads etc.  The price to feed a family of 4 this way is often cheaper than 1 person's meal at a reasonably priced chain restaurant.

Please share comments, thoughts and additional ideas.  Happy to have a conversation!

For more tips, feel free to contact me: www.movingtowardcoaching.com