$1,000. A grand. One large. No matter how you say it, $1,000 sounds like a lot of money. Thinking about saving that much may feel overwhelming. But instead of worrying about where you’re going to find $1,000 to set aside, we recommend taking baby steps toward the full amount, over a period of six months. That’s about $167.00 a month, and may be easier to achieve than you think, even if you are thinking at this very moment that it seems impossible!
Your real goal is finding a predictable amount of money to set aside in an automated way to build a cushion for yourself. This saves you from reaching for a credit card in times of emergencies and creating debt.
Whether it’s the start of an emergency fund to protect yourself against unexpected expenses, or your retirement savings, your first $1,000 is an important step in securing your financial future.
Here are some simple steps you can take to reach this important savings milestone:
1) Open a savings account. You only need to hear one tale of someone losing or being robbed of their hard-earned savings to resist the urge to hoard money beneath your mattress. A savings account is one of the safest place for your savings, and when you deposit your money into one, you’re allowing it to earn interest and grow.
2) Pay yourself first. Have small percentage of your paycheck automatically deposited into your savings account, or a set dollar amount, such as $10.00 a week. Once you are saving adequately for retirement, consider setting aside another $84 per paycheck to reach your $1,000 goal.
This is a key component to changing your behavior, which is the most successful method when it comes to saving.
3) Cut back and cut out. Think before you spend. Take a good look at your expenses and start trimming the fat. First, separate needs from wants. Then get rid of extraneous expenses. For example, if you have three movie streaming services, nix two of them. Don’t deprive yourself, but cut out things that you know you can do without. Eat out twice a week instead of five times. Make your coffee at home. Downsize your cable package. Ditch bottled water for a filtered pitcher. All of this will help free up cash flow for your financial goals. Remember that having a coupon for something isn’t reason enough to make a purchase. Make sure you have the money for it in your budget.
4) Create a budget. Following a budget may allow you to take control of your money so you don’t spend more than you can afford. Don’t forget to work both entertainment and at least $84 of savings per paycheck (twice a month) into your plan. That should guarantee you save at least $1,000 in six months. Sticking to your budget can be hard at first, but it gets easier over time.
5) Celebrate meeting your goal—but don’t splurge. Once you meet your $1,000 goal, find a financially responsible way to celebrate! Maybe it’s a special walk or hike in that scenic spot you’ve been thinking about, or giving yourself permission to binge for a night or two on that new series.
Watch out for options that cost money, as you want to change the behavior of always basing a reward on something that is monetarily based. So if you do choose a nice meal, keep it within reason and remember it’s a one-time event — not a recurring treat each week or even month.
6) Repeat the process. The goal is to cement your dedication to this process.
Ultimately, you’ll want to use this method so that saving becomes automated and you are able to put aside three to six months of living expenses so that dipping into credit card usage is as rare as a blue moon. That emergency fund gives you a cushion if something were to happen like losing your job or getting seriously ill. Be diligent about not touching the emergency fund unless it is a true emergency. Holidays, new clothes, and/or vacations are not emergencies!
Soon you’ll be able to start making plans for investing — and this is where the real building of wealth happens. That’s right…get excited!
For help creating a budget so you can stay on track with your $1,000 goal, check out USAA’s tips here.
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