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MADELEINE BRAND, host:

From NPR News, it's Day to Day. Saving is essential to financial stability, but how do you do it during these economic times when you may already be pressed to the limit? Here to help is Day to Day's personal finance contributor, Michelle Singletary. And, Michelle, I know you're going to say that saving is critical to your financial well being, but what if? What if you just can't save at this moment?

MICHELLE SINGLETARY: You know, you really can't afford not to save. It's so, so critical. And it has fallen out of favor for so many people because times were so good for so long that people could rely on bonuses or getting an extra job or, you know, things not being as expensive, like gas. And then, all of a sudden, we hit hard times, and now, people realize, you know what? I should have been saving all along.

BRAND: So how much should they save?

SINGLETARY: I kind of break up savings into two major funds - the emergency fund, and that's the one you've always heard about, three to six months of living expenses. Start with just a little. Listen, just start with a month, and that means that you have enough saved up that if you lost your job, you could at least live on your savings for one month.

Then I suggest you have what I call the life happens fund. So that would be a fund that you put money in for like major car repairs or if something happens to your roof because otherwise, you're going to dip into that emergency fund, and when a true emergency comes, like a job loss - and millions of people know exactly what that means right now - that money isn't there.

BRAND: All right. Let's say you want to do that, but you are living paycheck to paycheck. How do you look through your expenses and figure out what you can trim and what you can save?

SINGLETARY: Here's what I suggest people do. Try this exercise - and if you've never done this, even if you are good with your money - try this. For one month, keep a spending journal, and write down every penny you spend - every pack of gum, every bag of chips, every soda - include in this spending journal your mortgage, everything.

You will be surprised at the end of that month how much money you waste. People always tell me they can't cut anymore, and I'll sit down with them, and typically, I can find at least $50, and in some cases, I've found two, three, $400 because people just don't realize how much they spend - on their cell phone, on, you know, cable, eating out. It adds up.

BRAND: But, you know, Michelle, I bet you hear this a lot. I really need that. I really need my cell phone. I can't cut back on my cell phone.

SINGLETARY: You know, I hate to be hard on people, but we have been so foolish with our money. You don't need a cell phone. And I don't care what anybody says. I don't need a cell phone. You don't need a cell phone. I mean, we have adopted these things as needs. I mean, constantly, I hear from parents whose children who are eight years old, nine years old, eighth graders with cell phones - have no job, mind you.

And always, people say, well, you need it in a case of emergency. And I had a parent - I challenge people to do this - I said, pull out your cell phone bill, and in the last month, show me where there was an emergency call. Not a single person can point to an emergency call that they made.

BRAND: And yet, you know, these things that we think of as - we once thought of as luxuries, we do think about it as necessities. I mean, I can't imagine living without my cell phone. I really, really can't.

SINGLETARY: You know, when I first got my cell phone, I was like a little kid, and I was on it all the time. And then I, you know, I was going over my minutes because, you know, I had the cheapest plan.

(Soundbite of laughter)

BRAND: Of course.

SINGLETARY: And I actually pulled back. I don't have a Blackberry. I don't have any Internet access. Don't text me because I'm not texting you back. And I get along fine. And if I can get along with a minimum plan, so can you. And that's the thing. These are hard times, and it's good that it's hard times because it gives people a chance to reassess the things that we have determined are needs when they're really wants.

BRAND: Michelle Singletary is Day to Day's personal finance contributor, and she writes The Color of Money column for the Washington Post. Michelle, thank you.

SINGLETARY: You're welcome.

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