Many of us can agree that saving money isn't easy. But if you don't have emergency savings, you could be headed for trouble -- and you wouldn't be alone. It's estimated that 66 million Americans have no money set aside for emergencies whatsoever, and that's a problem in more ways than one.
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Why aren't we saving more?
Some people, despite their best efforts to live frugally, don't earn enough money to give their savings a significant boost. And while lower earners attempting to save have some options, like looking into tax credits and working side gigs, those don't always pan out.
But for some of us, our collective lack of savings boils down to misplaced priorities. Many of us have the ability to live comfortably, but below our means -- yet we don't. In 2015, almost 12 million households spent more than half of their income on housing. In 2016, the average American spent over $900 on holiday purchases alone. And it's estimated that the average U.S. household spends close to $3,000 a year on entertainment.
Now you might argue that there's no sense in making money if you can't enjoy it, but there's a difference between blowing your entire paycheck and treating yourself to a responsible degree. And unfortunately, many Americans wind up doing the former.
RELATED: 6 ways Americans are wasting their money:
6 ways Americans waste money
6 ways Americans waste money
1. Overspending on Education
The U.S. spends more on student education each year than most other countries, according to a 2013 report by the Organisation for Economic Co-operation and Development. Yet despite spending more, American students don’t perform as well on test scores.
Furthermore, college tuition continues to climb in the U.S. and family income hasn’t kept up, according to a recent report from The College Board.
Choosing to stay inside your home state for college can be a smart move for your pocketbook. Average in-state tuition and fees at a public university is $9,650. You’ll pay more than $15,000 to cross state lines, with average out-of-state tuition and fees at public universities at $24,930. Meanwhile, tuition and fees at private colleges averages $33,480.
If you really don’t want to waste money, consider community college, said Timothy Wiedman, a retired associate professor of management and human resources at Doane University in Crete, Neb. The average cost of in-state tuition and fees at a community college is $3,520.
“Completing a two-year transfer program locally while living at home — andthentransferring to a more expensive four-year school to complete a bachelor degree — will often save a great deal of money,” he said. And the coursework will be virtually identical, he added.
2. Purchasing Expensive Diapers
Diapers are a messy business, and an expensive one for parents. According to Babies R Us, a baby will need up to 3,360 diapers in the first year of life. If you spend an average of 25 cents per disposable diaper, that is $840 for the first year.
Diapers are a necessity when welcoming a new life into the world, but don’t use them longer than required. “People waste hundreds, if not thousands, of dollars by believing that children need to wait until certain things happen before they can potty-train their children,” said Michelle Swaney, owner of The Potty School, where she teaches people how to toilet-train their children ages 18 months and up.
In fact, the U.S. lags in toilet-training when compared to some other parts of the world. For instance, Vietnamese babies are usually out of diapers by 9 months of age, reports NPR. In the U.S., the average age for a child to be toilet-trained is somewhere between 24 and 30 months, which is a conservative estimate, according to Swaney.
America wasn’t always so bad at teaching the bathroom habit. In 1957, 92 percent of children were toilet-trained by the age of 18 months, according The New York Times.
A baby registry checklist often includes every gadget imaginable for infant care. Just for starters, you’ll need a diaper pail that collects dirty diapers, and a bottle warmer that warms milk.
According to the book “Baby Bargains” by Denise Fields, a baby will cost your household an average of $7,000 in the first year alone. With a price tag like that, it’s important to spend money wisely.
So, stick to buying only what is necessary. For instance, do you really need to purchase a Playtex Baby Diaper Genie Complete Diaper Pail at Target for $34.99? Or could you just simply recycle grocery bags to bag up and quickly dispose of dirty diapers?
The same holds true for a bottle warmer. You can warm up a bottle by simply using warm water. And do you really need a specialty baby-food maker, when a regular blender will do the trick?
4. Betting on Lottery Tickets
We all have dreams, but spending cash to become a millionaire shouldn’t be one of them. Americans spent $73.8 billion on lottery tickets in fiscal year 2015, according to the North American Association of State and Provincial Lotteries. A quick look at the Powerball website tells you the odds of winning the lottery grand prize are 1 in 292,201,338.
Even if you win the lottery, you have to wait to be paid. You also fork over taxes, which can drastically reduce your winnings. Some people believe only the poor play the lottery religiously, but a study in Virginia found that 55 percent of people who play at least once a month have an income of $55,000 or more.
Instead of wasting money on lottery long shots, spend the money on something that’s attainable — such as a dinner out. At least spending in that manner allows you to enjoy yourself.
5. Failing to Shop for Bargains
Never shop without scoping out discounts and deals first. Fail to do so, and it’s basically like leaving free money on the table — which, of course, is never the smartest idea.
“Although today’s online shoppers are very savvy, many do not take advantage of free money, such as cash back,” said Brent Shelton, an online-shopping expert at FatWallet. For example, you can earn cash back by shopping through sites such as Ebates, and many credit cards offer cash-back rewards on purchases, he said.
Savings add up when you take advantage of incentives such as these. Missing such opportunities can leave you feeling cash-strapped sooner. In addition to Ebates, other sites that offer promotions such as cash-back deals include:
Don’t forget to check out individual store saving opportunities too. These include the Cartwheel app at Target and Yes2You Rewards at Kohl’s. Check details of your credit or debit card for other saving and earning opportunities.
Your wedding day is supposed to be the best day of your life, so spend a fortune, right? In fact, Americans spend a ton to say “I do” — a record-amount average of $32,641 in 2015, according to the latest survey from The Knot.
Europeans on the other hand, are much more conservative with wedding expenses, spending an average $5,495 on nuptials, according to a survey by ING, the Dutch-based multinational and financial services firm. Europeans would rather spend money on a house than a wedding, the report found. That does make more sense financially than spending cash on an occasion that’s here today and gone tomorrow.
So, how can you save thousands on your wedding? Think smaller — reduce the guest list, buy fewer flowers and settle for a smaller diamond.
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You need emergency savings
Regardless of your age or income level, you need to have savings in place to cover yourself in the event of a financial emergency. What might an emergency constitute? It could mean that your car gets totaled and you need to buy a new one, or that your heating system goes kaput and needs to be replaced overnight. Or, it could mean that you've lost your job or fallen ill, and have no income coming in for an extended period of time.
No matter what type of unplanned expense you end up facing (and trust me, something will sneak up on you sooner or later), if you don't have emergency savings in place, you'll be putting your long-term financial well-being in serious jeopardy. You might, for example, lose your home or car if you can't make payments for months. You might also have no choice but to take on loads of credit card debt, which could damage your credit score and kick off an evil cycle of accumulating interest.
That's why it's critical to have enough money in the bank to cover three to six months' worth of living expenses. Which end of that range should you aim for? If you're single without dependents and you don't own a vehicle or home, three months' worth of expenses is probably fine. If you're the sole breadwinner in a family with multiple children and you own your home, six months' worth of savings sounds a whole lot safer. Furthermore, while investing money you're not currently using is a great way to grow your wealth, your emergency fund should be held in a risk-free, easily accessible savings account. This way, your balance won't be at the mercy of how the market is doing.
Working your way up
Of course, most of can't change our ways overnight and go from having no savings to suddenly socking away thousands. But if you start making lifestyle adjustments to free up extra cash, you'll be well on your way to building that critical safety net.
For starters, take the time to draw up a household budget. Almost 60% of Americans fail to follow a budget even though it's one of the most effective tools for managing finances. Once you have a budget in place, you can see how you're spending your money and identify opportunities to save.
The next step in the process is equally simple: You'll need to start spending less money. You can achieve this objective in one of two ways. The first is taking one major expense category, like housing, and slashing it significantly. If, for example, you're able to shave $400 a month off your rent by downsizing to a smaller space, you'll accumulate $2,400 in half a year's time. On the other hand, if you feel that making a bunch of minor changes will achieve the same goal without cramping your lifestyle, you can scrape together that savings by cutting back on restaurant meals, scaling back your cable package and data plan, and walking or taking buses instead of paying for taxis.
No matter what strategy you employ to build your emergency savings, the key is to do something before you find yourself staring down a sizable bill you can't pay. Saving money won't provide the same instant gratification that many of us are used to, but when the time inevitably comes to tap that emergency fund, you'll be more than grateful it's there.