I am asked all the time the question, "if people don't have a savings account or anything else, where should they start building a positive financial future?" My answer is always, start at the beginning and what I mean by that is that folks who do not have any money to start must start by saving small amounts first and growing into larger amounts. OK but where do those small amounts come from?
A recent study concluded that 69.2% of Americans had NO savings account and shockingly around 12% had no bank accounts. That statistic should shock everyone into asking what can be done. Our nation does not have the resources publicly to take care of 69.2% of the population because they've failed to build their own nest-egg. Two issues must be addressed then; a) how does this happen in the wealthiest country in the history of the world and b) how can it be changed?
In terms of how it happens, let's recognize that the average American family of four earns around $60,000 per year. After tax, they bring home around $43,000 or $3,600 per month. The average home when you include all related costs of taxes, insurance, heating, etc is around $1,400 per month so they're now left with $2,200. Cars and transportation on average take $500 per month when maintenance and all costs are considered which now leaves $1,700. Food for four people if you're living frugally runs about $300 per week which now leaves our average family around $500 for clothing, activities, & emergencies. That's not a lot so what happens simply is the average family borrows to accommodate the balance of their spending desires. So saving money, eh... never happens.
OK if the issue is that taxes and living take out the lions share so what can you do? There are some basic things. First, cut up your credit cards... period, no exceptions, no arguments. Utilize a debit card that allows you ONLY to spend that which you make. Second, NEVER use your bank to provide short term liquidity by writing checks for which there are no funds. The average bank charge for returned check is more than $25 per hit and it's shocking how much American's use their banks to float money only to pay enormous charges. Third, to the extent you have debt payments, or service for water, gas, electric, cable, etc, make sure you do everything possible to avoid late charges and over limit fees. The average late charge or over-limit fee is another $25 so these begin to add up quickly to several hundred, if not thousands of dollars per year. Fourth stop squandering the pennies. Yes it does matter if you spend $4.00 for a gourmet cup of coffee rather than $1.00 for a basic of coffee. And while at it, yes it does cost more to go out and eat instead of grocery shopping and further, it costs more to grocery shop at a major chain than a discount grocer like Sam's Club or Costco. Fifth, don't hesitate to visit dollar-stores or places like Big-Lots for basic needs too. You'll be shocked how much you can save by paying a little less for basic household items.
It's not easy to build discipline into your life. I know, I've been there in my life too. But the way out is paved with discipline and you must discipline yourself to begin saving 5% or 10% each month. Just start... Open a savings account and make it a habit to put that money away. This is a poor analogy perhaps but when people start exercising, it's typically painful, but after they've done it long enough, their endorphins begin to flow and they feel good about it to the point of not wanting to miss a workout. Saving is sort of like that. It's painful to start, but when you see your money growing you become enamored by it and actually can get the emotional high from building your savings, rather than spending your money! As the old adage says "take care of the pennies and let the dollars take care of themselves!"