6 Simple Steps to Saving Your First $1,000
As we’ve said many times in the past, emergency funds are crucial. You probably already know this, but getting your emergency fund to the point where it can actually help you in a time of need is easier said than done.
A recent study by GoBankingRates found that 69 percent of Americans have less than $1,000 in savings, if they have any savings at all. Are you a part of this 69 percent? Here are six steps you can take to start saving your first $1,000.
1. Create a budget.
Every month, I use an Excel spreadsheet to track my necessary expenses: rent, student loan payments, insurance bills, etc. I stack that up against my monthly income, and this helps me see what kinds of things I’m spending money on that I don’t actually need. Anyone trying to work out a budget should start out taking a hard look at their current spending activities. When I can tally up how much I’ve spent on certain things throughout the month, it’s easy to see what to chop out of my budget.
2. Cut your expenses.
After you’ve created a budget and noted what kinds of frivolous things you spend money on, it’s time to start saving money you would otherwise spend on that stuff. Some things, like eating out excessively, or impulse-buying new clothes or household items you don’t *really* need, can be curbed with just a little bit of willpower. Every time you want to get takeout instead of making yourself an easy meal at home, resist. Take the money you would have spent on that hamburger and put it in your piggy bank, or transfer it into savings.
If you already cook at home, there are steps you can take to save money at the grocery store. We’ve also talked at length about why buying generic is the best choice for frugal home cooks, but another way you can cut expenses at the grocery store is by making sure you’re not paying for “the cut.” Stop purchasing pre-sliced, pre-prepared foods like pineapple or mixed greens. In most cases, buying a whole pineapple, or an unsliced head of lettuce, spinach or cabbage is half the price AND double the food.
Another way to cut household costs? Nix the cable. It’s unnecessary these days with all the streaming options out there, and it’s easy to spend more than $200/month on a cable package you barely use! If you put away $200/month in savings instead of spending it on cable, you’d have $1,000 in just five months!
Consider, too, sign up bonuses on cash back credit cards. If you’re already cutting expenses, you may still meet spend minimums to trigger the bonuses with just your everyday spending. Sign up bonuses can be as much as $200 a card!
3. Increase your income.
Again, easier said than done, but there are ways to make a little extra cash that don’t involve getting another, life-sucking part-time job. Maybe you have your grandpa’s old camera collection taking up space in your attic. Sell it on eBay! Maybe you like to doodle on card stock in your free time. Sell those doodles on Etsy! Maybe you have an old couch, TV stand, coffee table or bed frame taking up space in your closet. Sell ’em on Craigslist!
If you have time to devote to another job, and you own your own car, check out ride-sharing companies like Uber or Lyft, which make it pretty easy to earn a few hundred extra dollars a week for driving other people around. There’s also TaskRabbit, which allows you to complete chores and other tasks for people who don’t have the time.
You don’t have to leave home to earn extra cash – sometimes it’s as easy as switching banks. You can earn up to $350 from Chase for opening new checking and savings accounts.
4. Consolidate your debt.
If you’ve made some mistakes with credit cards in the past, consider a peer-to-peer loan from a company like Prosper. They can save you money on high interest payments and stop the bleeding on fixed termed loans. You can also check with your loan servicer to see if refinancing is an option for you.
While paying off your debt is important, having an emergency fund in case you experience a job loss, a prolonged illness, or an unexpected accident should be a priority. Experts recommend having at least a three to six month cushion in your savings account to help cover the cost of living if disaster strikes. Although $1,000 is likely only a fraction of that, it’s a good place to start.
5. Be smart about random fees.
If you use cash for most purchases, you’re likely paying ATM fees that can really add up. Many banks reimburse customers for ATM fees, so check with yours to see if you’re missing out. Better yet, use a cash-back credit card for all of your purchases, which can give a percentage of your purchase back in rewards or credit card payments, essentially making everything you buy on sale. If you want to jumpstart your savings, calculate all the money you’ve saved in ATM fees or gotten back from a cash back credit card, and put it aside in savings.
6. Use automatic savings apps to painlessly store away money.
BradsDeals.com’s Rebecca Lehmann has been using the savings app, Qapital, to not only save money, but also to help encourage healthy eating. With Qapital, you set up conditional rules. For example, when she orders takeout, an extra $3 goes into her savings account; if she doesn’t meet her step goal, an extra $1.
You can set up other rules, depending on your goals, such as a Round Up Rule where the amount between your purchase and the next dollar go into savings, or the Spend Less Rule, which transfers your requested amount if you Spend Less than $20 per week on Starbucks (as an example). The best part of Qapital is that unlike other savings apps, it’s free.