Saving money is a tall order for the average American. In fact, 69% have less than $1,000 in the bank according to a 2016 GoBankingRates survey. Whether you're on a tight budget or simply unskilled at personal finance, the time to change is now. Consider planning for these expenses to avoid unnecessary debt and worry.

1. Emergencies

We all hope that our job is secure and our roof will survive another winter, but life's emergencies don't cooperate with a master plan. Three in five people grappled with a major surprise expense in 2016, according to a Bankrate survey, and only 41% were equipped to pay for them.

If this sounds familiar, take comfort in knowing that you aren't the only one living on the edge of financial risk. The average American household has around $5,700 in credit card debt according to a 2016 analysis by Value Penguin. Relying on credit to make ends meet isn't a sustainable strategy, and thanks to outrageous variable interest, that $5,700 balance can easily double if you make only minimum payments.

man on phone with credit card company

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Avoid the expensive mess by funneling a portion of your cash into savings before you need it. For example, if your monthly budget allows for $500 in "fun money," cut $100 (i.e., a single date night) and redirect it to your savings account. You might even consider opening a money market account, which is still highly liquid and generally provides better returns than a traditional savings account.

2. A home loan

We all need shelter and security, but when in comes to buying a home, few people plan far enough in advance. According to a 2016 National Association of Realtors survey, the overall average down payment on a mortgage was 11%, and 8% for borrowers under age 35. A small up-front investment comes with inevitable downsides, including a higher monthly payment, private mortgage insurance (PMI) if your equity is less than 20%, and more money paid in interest over time. The table below illustrates the difference a larger down payment can make on a $300,000 mortgage loan. 

Loan Amount (30-Year Fixed) Down Payment Interest Rate Monthly PMI (1% of Loan Value) Monthly Payment Total Amount Paid
$276,000 8% 3.85%  $230  $1,524 $507,748
$267,000 11% 3.85%  $222.50  $1,474 $497,413
$240,000 20% 3.85% Not Required  $1,125 $465,050


As you can see, the short- and long-term losses add up quickly. Supercharge your saving efforts by trimming even more cash from your "fun money" budget and putting it into a separate savings account. If you already own a home, consider renting out a room through a site like Airbnb to save even more cash. And finally, think about your space needs and downsize as much as possible. Choosing a more affordable home makes saving for a down payment that much easier.

3. Child care 

You might view child care as just another monthly expense, but there are a couple ways to reduce the cost. If your employer offers a flexible spending account (FSA) that includes dependent care, set aside as much as possible to take advantage of the tax breaks. For example, suppose you pay $800 a month (or $9,600 a year) in day care expenses, $5,000 of which can be saved through your FSA. By avoiding income, Social Security, and Medicare taxes, you'll save $1,400 a year.

baby eating spaghetti

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Even if you don't have access to an FSA, you'll still qualify for a federal tax credit for child-related expenses. Based on your income level, you can deduct 20% to 35% from up to $3,000 in expenses for one child, and up to $6,000 for two or more. Parents using an FSA may also use this credit for any expenses not covered by their employer. Get ahead of the game by learning which options are available to you. The result will lessen the tension on your monthly budget and make it easier to build up tax-free funds over time.

4. Health insurance deductibles

What are you doing about those out-of-pocket medical expenses? If you're like most people, that average annual cost of $1,478 is too expensive to pay in a lump sum. Often, the easiest way to save on health-related expenses is to communicate your needs. The first step is to contact your healthcare provider and explain your financial situation. Many medical practices offer interest-free payment plans to their patients, which means you won't need to dip into emergency savings. It's also a good idea to take advantage of your company health savings account (HSA) benefits. As we learned from the child care example, tax-free spending can pay off big. 

money with stethoscope

image source: getty images.

5. Vet bills

An estimated 85 million families own pets, but only 1.6 million of those pets are covered by insurance, and the costs without it are steep: The average vet bill for a dog runs $257 for routine visits and $474 for surgical, and cat bills total $182 and $245 for the same services, respectively. 

Even if pet insurance isn't for you, it's worth it to set aside enough cash to anticipate these expenses. In addition to saving, talk to your vet about practice-specific plans that could help you budget more effectively. They may provide a flat-rate for annual care and medications that you can pay in monthly installments. 

6. Retirement

It's no secret that Americans aren't saving enough for retirement, and many of those who do have trouble sticking to a plan. A 2015 National Bureau of Economic Research (NBER) working paper revealed that 40 cents of every dollar contributed to a defined benefits plan is lost due to early withdrawal. Dipping into your retirement fund usually means paying income taxes and hefty fees.

If you need cash now, join the 44 million people working at a side gig to supplement their incomes. Use the extra money to overhaul your monthly budget and to avoid touching your retirement accounts. Once you're feeling more secure, use your earnings to step up your savings and plan for the future. 

senior couple using laptop

image source: getty images.

There's no doubt that life is expensive, but a little planning can eliminate the sting of debt, fees, interest, and a life without savings. The bottom line: It's up to you to prioritize financial health. Practice some self-awareness and take advantage of savings as they come.