Reader Question: How To Save Money When You’re Living Paycheck To Paycheck

February 25, 2014  |  

We’d like to once again thank our special guest, financial expert Lynn Richardson, for taking a reader question. Known as the “Madea of Money,” Richardson is a money coach, author, the president of Hip Hop Sisters and COO of Russell Simmons’ Hip Hop Summit. You can follow her on Twitter and on her website. And be sure to join us next Thursday at 7pm ET on @MadameNoireBiz for the next in our #MNBizChats series. We’ll be offering tips and discussing all manner of financial matters. Don’t miss it! 

Reader Tomeya Coker asked us on Facebook: How can you save money outside of a 401K when you’re living from paycheck to paycheck?

Lynn Richardson: According to author Pepper Miller in her book What’s Black About It?, African-American females are making the financial decisions in our households more than 80 percent of the time, whether we are married or not. Yet we are lagging far behind in the wealth gap, with an average net worth of less than $6,000, according to a recent Pew Hispanic Center report. Even though we may be educated, paid and gifted, the unfortunate truth is that many of us find ourselves not just living check-to-check, but Living Check to . . . Monday and a long way from achieving the financial freedom and retirement security we dream of.

With pension plans being virtually obsolete, the amount of money we are contributing to our 401k plans will not be enough to sustain us in retirement in most cases. So we must find new ways to make sure we will have a “playcheck” when we can no longer work to get a “paycheck.”

How can you save for retirement when the ends aren’t meeting and the next payday seems like forever? 

Well, the first step is to track your spending.  That’s right — each and every penny. Some say “money talks,” but I say “money walks” away from you quietly and you don’t know where it went!  In order to find additional money to add to your retirement account, you must get control of your cash flow so you can make better decisions.

The second step is end your spending addiction, which is what you have when you go into a store with the intention of buying toothpaste, but you walk out with $179.47 worth of stuff you don’t need! We’ve all been guilty of it, and if we’re honest with ourselves, we can all find ways to skim some of our unplanned and unnecessary spending so we save extra money and build our retirement nest eggs.

Here’s a few tips:

– Cease and desist all coffee shop activity. Drink free water instead. But if you absolutely must have a daily boost, pick up your favorite blend at the grocery store, add your favorite flavored cream, get generic hot chocolate packets for a rich mocha flavor, and if you absolutely must flaunt like you’ve actually visited the coffee shop, get the decorated cups at your local discount warehouse. Instead of spending $6 per day on coffee, you can spend $15-$20 per month and retain the additional cash to add to your retirement account.

–  Get rid of your landline.  Chances are, you and every breathing soul in your household owns a mobile phone. If you’re holding on to your landline for faxing, go to your local office supply store and spend the $5-$7 if and when the need arises. The number of faxes you need to send is probably not worth the $600-$2400 spent annually per household on landlines.

–  Contact all of your essential household service providers (electric, gas, mobile, cable, etc) and negotiate a lower payment.  If they tell that you must be a “new” customer, ask to speak to the boss and explain that you may just have to leave them in order to become new again! Chances are, they won’t want to risk losing you as a customer and will find a way to keep your business while saving you a few dollars.

– Eliminate housekeeping expenses and do the work yourself.  Better yet, if you have children and they aren’t making their own beds, doing their own laundry, and earning their keep, then shame on them and you, too!  Any person who can use any kind of electronic device, including the TV remote control, can do chores and this is a great way to build responsibility and cut expenses.

–  If you are a member of any kind of group that requires regular meetings, conduct the majority of your business via conference call.  It’ll increase the available cash you can allocate towards retirement by ending the impulse spending, preserve your time and gasoline, and help you keep a few pounds off in the process.

The only difference between where you are and where you want to be financially is the choices you make. Remember that, “A penny saved really is a penny earned.” (Really!) So make better choices with each one so your savings and retirement accounts will have more when it’s time to enjoy the fruit of your labor in your later years.

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