How Do I Save When I Live Paycheck-to-Paycheck?

Q: I’m living paycheck to paycheck and just can’t seem to save any money. How do I get started with saving?

Rachel’s Answer: I understand. A lot of us have so much to take care of right now that we can’t afford to think about later.

But in reality, the 35-year-old who didn’t have time to save becomes the 70-year-old who is still working full time with 20 years of mortgage payments remaining.

The answer is to make saving a priority right now, no matter how old you are. You begin saving by building a “baby emergency fund.”

How do you do that? Sell stuff. Work overtime. Do whatever you need to do to get that $1,000 as fast as you can. Put it in a basic money market account. This is your cushion. When you get a flat tire, when the little one needs to go to the ER, when the friendly officer pulls you over for going 55 in a 45, this savings account will keep you from using credit cards and going into debt.

After you save up that $1,000, it’s time to get out of debt using the debt snowball. Basically, it’s just a matter of paying all of your debts in the order of smallest to largest. You pay like crazy on the smallest one. When you’ve paid that off, use all of the money you were paying on it to put toward your second smallest debt. Follow that process until you’re out of debt.

Saving $1,000 and, especially, getting out of debt won’t happen overnight. But you’ll be amazed at how much momentum you can gain with your money by just focusing on saving that first thousand dollars.