What percentage of your take-home pay are you saving? How does that translate into real dollars? Do you have an emergency fund, no matter how meagre? Sure, the point of an emergency fund is to have living expenses for 3-6 months (I recently read that in this market you should have enough for 8 months!), but for every dollar you put in, you feel that much better about your entire financial picture. I'll be the first to admit, I don't have much of an emergency fund. But I have one. And month by month it's growing.
I do realize most people don't just wake up one morning to find money falling from the sky. I realize saving money is hard when you don't have any to start with. If your expenses are greater than your income, then yeah, you don't have the money to start an emergency fund. If you've pared down as much as you can and you still are barely staying afloat, then you don't have the money.
On the other hand, if your expenses include daily (even weekly) lattes, expensive haircuts, frequent dinners out, etc, then you do have room for an emergency fund. I recently read that an alarming trend is for people who have decent salaries to piss all their money away without saving any of it. A lot of those people are just now starting to save, after we're two years into a recession. If you are among this group, I want you to think long and hard about every single money decision you make. Oh, sure, it's just a five-dollar latte, but wouldn't that five bucks look a lot better a few months from now when you've lost your job and you need to pay the mortgage? If you eschew 20 lattes, you'd have a hundred bucks in your pocket.
Plan Ahead. That's what saving is all about. If you want to take a trip, plan and save for it. Don't put it on your credit card. And don't plan on using your credit card or your HELOC as an emergency fund. Banks are rescinding HELOCs left and right, and now is about the worst time to depend on a credit card. (More on credit cards later.) How much would you need to live for 3 months without your income? Plan for that first. An emergency fund should be your first priority. Can you make improvements to your house to increase equity? Do you need to make certain improvements? A new roof, for example, may be something you will need in the near future. How will you pay for it? Start saving now. What about your childrens' college funds? If you have money in a 529, I bet it took a real beating. But your kids are still going to want to go to college. Notice I didn't mention your 401(k) because I think we talked enough about that already. You need to save. Make voluntary cuts in your spending now so later you won't be forced to.