No Savings? Don't Panic. Here's Where to Start

There have been several points in my life where the idea of saving money seemed like an impossible luxury. One was when I'd just graduated and was living in an expensive city with rent that came to way more than half my income. Another was when I'd poured all my available cash into a struggling startup.

It's true that having savings stashed away can cushion you against life's curveballs. But knowing that doesn't necessarily make it any easier to put cash aside. This is particularly true when you feel as if you're playing Whac-a-Mole with a never-ending stream of bills.

The most important thing you can do is face the problem. Look for ways to save even a small amount so that it can add up over time. Here are five steps to take.

1. Don't panic

Stressing about your financial situation is unlikely to change anything. Indeed, personal finance guru Suze Orman says it can often make it worse. She says people often spend more on things they don't need when they are worried or anxious, which means less cash to put toward other things.

Try to turn that panic into action. Sit down and look at where your money goes each month. If you've never made a budget before, now is the time to take control of your money. Whether you use a budgeting app or old-fashioned pen and paper, analyze your spending and find out exactly how much you spend versus what you earn. The ability to budget could become the most powerful tool in your financial arsenal.

2. Look for areas you can cut back on

If you can increase the gap between what you spend and what you earn, you'll have more cash available for other things. The bigger the gap, the more you can squirrel away into a savings account. Use your budget to give yourself more wiggle room. Start by breaking your spending into essential and non-essential columns. Things like housing, healthcare, and utilities are unavoidable. But subscription services, dining out, and vacations are not.

I'm not suggesting you become a miserable hermit and never have any fun again -- especially because there are lots of ways to have fun that don't involve spending money. But it is time to look at each spending category and see what you can realistically cut. You might be able to reduce your grocery bill a little by couponing and switching to house brands. There might be subscription services or a gym membership that you barely use, or ways to shave your utility costs. Depending on your situation, you might consider more drastic action -- for example, looking back, I could have moved to a cheaper apartment.

3. See if you can earn more

There is a limit to how much you can cut your spending, but there are a number of ways you might be able to increase your earning potential. That might involve asking for a pay raise at work or taking on extra hours. Alternatively, could you take on a side hustle or use a hobby or interest to generate cash? Do you have a spare room or a parking space you could rent out?

Sure, time and space are both limited commodities, but so is money. If you can make some compromises, you might use them to boost your savings. Another short-term option? Sell unwanted items online or at a yard sale and put any cash you generate straight into your savings account.

4. Automate your savings

The great thing about making a budget is that you'll be able to set a realistic savings goal. It may only be $20 a month to start with -- you don't have to build your savings overnight. What matters is consistently saving a part of your income. Once it becomes a habit, you might up the amount you're putting aside.

Some people get nervous about automatic payments as they don't want to accidentally become overdrawn or lose control of their money. That's understandable. On the flip side, if you set up an automatic transfer from your checking account to your savings, that cash won't get swallowed up by other bills or demands.

5. Avoid high interest debt

Debt is like an unwanted guest who shows up at a party, eats all the food, and then hangs around when everybody else has left. Unfortunately, if you don't have savings, Mr.-Death-of-the-Party will be pushing on an open door. It can be all too easy to use a credit card to cover an unexpected expense or pay for a meal out if you don't have enough cash in your account.

It's true that there can be benefits to credit cards, such as rewards and additional fraud protection. But if you can't pay off the balance at the end of the month, that debt will start to accrue interest. This can quickly become costly, and those debt payments can make it even more difficult for you to save money.

Bottom line

If you don't have savings, you're not alone. Indeed, half of Americans couldn't handle an unexpected expense of $500. But for many of us -- my younger self included -- there are steps you can take to change your situation. Use a budget to put yourself in the financial driver's seat and start putting some money aside.