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Without any money saved, you're living on the edge of financial disaster since it will be difficult or impossible to cope with any unexpected expenses or a reduction in income without going into debt. Unfortunately, this is the reality many Americans live with every single day.
In fact, according to Northwestern Mutual's 2020 Planning and Progress survey, 9% of Americans have no personal savings at all. That means that close to 1 out of every 10 people has no cushion to fall back on when life throws them a curveball.
If you're one of the millions of Americans coping with this difficult reality, here's what you can do to fix the problem.
What to do if you have no savings
First and foremost, if you don't have any money saved, you need to figure out why. And doing that involves tracking your spending to see where your money is going and then creating a budget to try to tweak that.
Ideally, you should track your spending over a few weeks to get a realistic picture of how you're using your cash. To do this, review your bank statements, credit card transactions, and receipts from any cash purchases you've made. Using that information, you can write up a pretty good list of how you've spent your money over the past month.
The next step is to take a close look at where your funds have gone and make a budget that cuts spending in key areas to free up cash to save. Account for all the spending you're doing when you make your budget, including fixed expenses such as rent or mortgage payments and discretionary spending such as groceries and entertainment.
As you work on your budget, the goal should be to free up some of your income to save. Ideally, you'd be putting aside 20% of your income to save for various goals (such as for retirement, an emergency fund, and big purchases). But it may take time to work up to that.
In fact, you may want to start with a more realistic assumption, such as saving 5% of your income, and then see if you can do more. Whatever amount you pick as your savings goal, work that into your budget as a must-pay bill and then see how much other spending you can cut to save the desired amount. Remember, though, that the cuts need to be both realistic and sustainable. You probably can't reduce a grocery budget for a family of five down to $100 a month, nor are you likely to stick to a budget that allocates $0 for entertainment.
After you've made budget cuts to free up money to save, you'll have a clearer picture of where you stand. You may find that the amount you want to save plus your necessary spending far exceeds your income. Or you may discover that the tweaks you've made in the budgeting process will let you start saving close to the amount you need.
If you've found you can make realistic budget cuts to save the desired percentage of your income, you're in good shape. Set up automated transfers of the amount of money you've budgeted for savings. That way, the cash goes right into your retirement accounts and high-yield savings accounts, and you won't find yourself spending the money.
But if you can't save anything and still have enough to live on, you'll have some harder choices to make. This could mean major lifestyle changes, such as finding a roommate or a cheaper place to live. Or you may find you have no choice but to increase your income if you want to save -- either by finding a second job, aiming for a promotion at work, doing overtime, or getting some additional training to boost your earning power.
Obviously, if your income doesn't stretch far enough, it's going to be harder to fix your lack of savings. But it's worth finding a way to do it so you can have a financial cushion that gives you peace of mind and helps you build a more stable future. This may take time, but even if you can start by saving just a few dollars, you can build up a safety net that provides at least a measure of protection against life's uncertainties.