What should I do if I have no money in the bank?

The first time I gave any thought to my finances was when I realized I was an actual adult. I went out for drinks with some coworkers from my first job after college, and we got to talking about our own savings goals. Since I wasn’t putting money away for the future or anything else, all I could talk about was making it to my next payday. That night, I went online and searched for “how to start saving money.” You’ve come to the perfect place if that describes you right now.

Many financial experts recommend starting with an emergency fund, but what should you do if you currently have no savings and the idea of an emergency fund seems like a far-off dream? A few years after finishing college, I found myself in a similar position, and while it was somewhat daunting at first, it was surprisingly simple to construct a secure foundation. Don’t freak out if you’re just starting out on your savings adventure. You can do this; it’s not as hard as it seems, and you have plenty of time. Read on for a summary of the procedures you can follow right away to begin cutting costs.

Take a look at your current budget

Many articles on personal finance stress the need for a budget right away, but it’s difficult to create an effective one if you have no idea where your money is going. Set aside a night, stock up on your favorite snacks, and print out your banking and credit card statements from the past six months to see where you may save costs. Don’t forget to factor in your daily coffee or gym membership if they’re major sources of happiness. Pay special attention to any purchases you can’t recall making (monthly streaming subscriptions, we’re looking at you) or likely won’t miss (maybe those extra happy hour cocktails). Those are some wonderful areas to sparingly cut back on in order to free up some cash for savings.

How much money you can save depends heavily on factors like where you live and how you currently spend your money. The high cost of living in a major city combined with a low starting salary may make it impossible for an intern to save hundreds of dollars each month. Although I would never suggest that you return to living with your parents, it is worth considering whether or not your largest outlays (such as housing, transportation, food, etc.) could be reduced to increase your short-term savings.

Consider why you’re putting money aside

If I don’t have a specific financial objective in mind, I tend to waste money on frivolous purchases. Clear targets for yourself will make it simpler to stay on track, whether you’re saving for a specific amount by a given date or have a specific purpose in mind for that money. Consider your savings goal alongside your basic needs while deciding whether or not to buy something (step 4!). Say you’re debating between two options: “Do I want to go to that gym studio that charges $35 per class, or do I want to get $35 closer to my goal of traveling to the south of France?” When faced with a clear alternative, saving is the obvious choice.

The second step in goal-setting is to write them down and display them. Whether it’s a physical vision board above your desk (my personal favorite), an app on your phone, or a traditional savings tracker in which you color in a bar when you reach a new figure in your account, it’s important to keep your savings objectives front of mind.

Make a financial plan

You may start making a budget after you know how much you have to save and why you’re saving. The goal of budgeting, which can be approached in a variety of ways (e.g., the 50-30-20 system or dedicated budgeting apps), is to identify your fixed costs (such as rent and transportation to and from work) and your variable costs (such as groceries, activities, eating out, and fitness) and then cut back where possible. Consider the first step’s prioritized items when deciding which variable costs to include in your budget and which to eliminate. Save the money you’ve saved after making reductions.

If you have a specific savings target in mind, you can reverse-engineer your budget to determine where you can make cuts. While creating a budget may not be anyone’s idea of a good time, it’s important to keep in mind that it’s a plan for your success

Aim low at first

It’s easy to feel like you need to put away hundreds or thousands of dollars every month when you’re beginning from scratch, but that’s not the case. Saving just $5 here and $25 there will quickly pile up, and the cumulative effect will be substantial. When I first started saving money, one thing that helped was asking myself if I actually needed anything or if it was just a passing fancy. When I packed my (admittedly less spectacular) leftover lunch, did I really need to go out and buy a beautiful salad? Not at all; there are better uses for my money elsewhere. Do I really need to sign up for yet another magazine? Most likely, no. You get the gist, but asking yourself this question will make you think twice about impulse buys and give you time to decide if it’s worth it to you in the long run.

Put yourself on auto-savings

After settling on a spending plan and financial objectives, the next step is to begin saving. I find it helpful to open a new savings account (seek out a high-interest savings account!) for each objective, renaming it anything like “downpayment for a future house” or “vacation fund.” Then, I refer back to my financial plan to ascertain the appropriate allocation of funds. Suppose you can set aside $500 per month in savings. The first $200 may go toward an emergency fund, the next $150 into investments, the next $50 into an “other people’s wedding fund” (not the most fun, but necessary), and the final $100 could go toward your ideal vacation. After deciding how much you want to put into each account each month, you may set up recurring transfers to do just that. Since your savings efforts are being handled automatically, you can stop giving them any conscious thought.

You should not rush into setting up automatic savings without first ensuring that your budget is effective. If you’re worried about insufficient funds difficulties (like if you set aside $50 every month for coffee but end up spending $80, leaving you short $30 for your automatic transfer), it’s a good idea to test drive your budget for a few weeks before automating anything. In case there’s a problem with your paycheck, schedule your withdrawals for a day or two later than usual.

Boost your earnings

While the aforementioned suggestions are undoubtedly useful, they are mostly concerned with one aspect of saving: cutting costs. If you’ve already taken these steps but still aren’t saving as quickly as you’d like, it may be time to look for a new job or negotiate a raise. It could be something short-term, like working overtime to build up an emergency fund, or something more long-term, like starting a side business or approaching potential clients for regular work. When I was a recent college grad trying to save money for my future, I decided to take on some freelance writing and editing projects. It gave me a head start, and as my savings grew, I gained the confidence I needed to push forward and realize my ambitions. The funds I earn from doing extra work are immediately put into savings, but this is only one example of how this might be done.