The ‘experts’ can’t quite agree on it, but every family is apparently supposed to have between three and nine months’ worth of expenses socked away somewhere, preferrably in a high-interest earning place that you can get to without penalty. This is in case of job-loss, medical emergencies, household repairs and other life-changing and expensive events.
Think about the numbers: the average four-person Canadian family spends $800 a month in groceries, alone. Nine months of groceries is $7,200.
How long would that take you to save?
Baby steps are much less daunting, aren’t they? That’s why I have a greater appreciation for Dave Ramsey’s Debt Snowball method: a seven-step plan that basically waltzes you through, from barely making ends meet, to fully-funded retirement savings, a paid-off home and money to play with.
Step one of the plan is to save a $1,000 emergency fund; not $7,200, and not the approximately $32,000 that would represent a lot of families’ nine months of expenses.
One measly grand.
But when you’re living tight and paycheque dates are already circled on the calendar, when a fluctuating cell phone bill is the frequent cause of you either breathing a sigh of relief or getting a migraine, $1,000 can still seem like a chunk of overwhelming change. Unless you…
- Buy a roll of quarters every week
Saved: $10 a pop
- When you use cash: throw your change in a opaque jar/container/bucket out of reach
Saved: $0.50 to $6.50 a day (average)
- When you debit: add your own ‘service charge’ of $1.25 per transaction, payable to your savings’ account
Saved: $25 a month
- Return empties to the liquor store and grocer
Saved: $0.05-$0.20, each, depending on size
- Open a no-fee bank account with a credit union, ING Direct or President’s Choice
Saved: $5-20 per month for ‘plan’ fees, not including service charges for going above allotted debits, interest on overdraft, etc.
- Quit a habit
Saved: $3-23+ a day, depending on if it’s visiting the coffeeshop, smoking cigarettes, drinking booze… and so on
- Go meatless
Saved: $5-15 per meal
You’ve got to admit, those seven things aren’t too time-intensive, painful or even very obvious. You’ll barely miss the funds, right? Now, let’s figure out how long it’ll take you to save a grand. Don’t worry, I’ll do the math for you.
A family of four, who uses one returnable container each a week, debits 20 times a month and eats a meatless dinner twice a week:
- Can save $1,000 in only four months and 17 days by saving the minimum amounts above;
- Can save a bit more than $1,000 in one month and sixteen days by saving the middle-of-the-range of the amounts above; and
- Can save more than $1,000 in less than four weeks by saving the higher end of the ranges above.
Totally doable. Quick, where’s your change bucket?