Why I'm saving up $15,000 this year

Feeling vulnerable

I may be only one woman with one family, but these are scary times. Everyone is vulnerable to an unforeseen economic blow, and not having savings is like gambling with your life. (See "Why money trouble comes in threes.")

"People forget that having that cushion is what enables you to get by in tough times, but it's also what allows you to get ahead," says Jennifer Wheary, a co-author of the Demos report, "From Middle to Shaky Ground: The Economic Decline of America's Middle Class."

True economic stability is composed of a few key factors, Demos' research notes: savings or other assets, education, affordable housing, health insurance and an income that exceeds expenses (aka the ability to live within your means).

• 3 steps back to the sanity of cash

People think I'm lucky being a freelancer. I can't lose my job because I depend on several jobs and contracts. But two of those gigs are being cut back for this year. I'm one more job loss away from not being able to pay the bills. Our meager savings wouldn't last long. That's a crisis in the making.

And while fear is a powerful motivator, there's another reason I want to beef up our savings to the three-month mark. After we paid off our debt recently, I felt such relief. Right now, what I crave more than money is peace of mind.

But where are we going to find a spare $450 a month?

3-pronged saving strategy

Just as it did when paying off our debt, reaching this goal is going to require concerted efforts on many fronts:

Get support. I just joined the Women in Red Savers. Very much like the Women in Red Racers, whose MO is to become debt-free, the Savers are a special group of women devoted to saving.

And because being involved with the Racers helped us win the debt race, I think the support of being among like-minded Savers will also help.

Save big first. When I spoke to Greg Daugherty, a senior editor at Consumer Reports, he had a smart take on how to tackle that emergency cushion.

He said to forget coupon clipping (although the gals in the WIR Grocery Challenge might disagree!) and look for big chunks to save first:

• Can we refinance our mortgage to a rate low enough that it might save us some money (and be worth the cost)?

• Can we raise the deductibles on any of our insurance policies?

• Can we bring in extra money?

• Can we cut a significant expense: cable, cell phones, heat?

Have two funds. Daugherty suggested having two emergency funds, because if you have a smaller one designated to cover minor crises (car or house repairs), then you're less likely to touch the bigger fund, thus allowing it to grow into several months' worth of expenses. (See "Why you need $500 in the bank.")

Is this realistic?

Frankly, I'm a little daunted. Is this realistic, never mind possible? We've already cut so many expenses. We can't raise our health insurance deductible without switching to a plan with inferior benefits.

Refinancing is a possibility if the rates drop low enough. But I'm not sure it would be worth the $3,000 or $4,000 in closing costs; I should shop around. (See "Don't wait: Now's time to refinance" and "4 reasons not to refinance.")

That said, I'm more optimistic about bringing in extra cash. My husband is looking into extra work, which is scarce right now. I have proposals out for a couple of new projects.

My plan is to track my savings progress with each column I write. Here are two goals:

• The high road. We stick to plan and save $15,000 this year -- i.e., $1,250 per month.

• The low road. At the very least, we should be able to save $9,600, or $800 a month, just by adding our debt windfall to our current emergency savings.

We're just in time for America Saves Week, Feb. 22 to March 1. America Saves is a year-round nationwide saving support system; it's a good week to recommit yourself to saving. I hope you'll join me with savings of your own.

Published Jan. 28, 2009

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