How to Save Money — Putting Away Your First $1,000
Reading time: 6 minutes
Just about everyone can agree that saving money for retirement, college or emergencies is important, but how many of us actually make it happen? According to a survey by BankRate.com, almost 60 percent of Americans don’t have enough money in their savings account even to pay for a $500 car repair or a $1,000 medical bill.
If you’re facing a financial hurdle — whether you’re living paycheck to paycheck, struggling with extreme debt or dealing with another issue — it can be daunting to find extra money in your budget to set aside for a rainy day. Rome wasn’t built in a day and, luckily, your savings account doesn’t have to be either. Start with these strategies for putting away your first $1,000 gradually, and let your savings grow from there.
Track your spending and build a budget
You can get started by creating a budget that compares your expenses to your income and identifies how much money you have left over at the end of each month. List all your income for the month — from your paycheck, your partner’s paycheck, investments and any other sources of regular household income, such as cash you earn from doing odd jobs or child support and alimony payments.
Next, list everything you spend in a given month, including rent or mortgage payments, utilities (including internet, cable and cellular service), groceries, pharmacy items, child care costs, home maintenance, car loans and related expenses, other debt payments and insurance premiums. Look through your receipts, credit card accounts and bank account transaction history over the past few weeks to see how much you spent on entertainment, eating out and other miscellaneous shopping.
Track your expenses for at least two months. There may be costs you don’t incur every month, but over a two- or three-month period, they’ll turn up.
Once you have a good idea of what you spend each month, divide your expenses into necessities (such as rent or mortgage) and things you can live without for now (such as eating out, vacations and other discretionary spending).
Where can you make spending cuts or money-saving swaps?
Certain items in your budget are non-negotiable. A place to live, groceries, utilities, transportation, health care and, if you have kids, childcare are all necessary expenses. Similarly, if you’re working on paying down debt, be sure to keep up with the minimum payments on each account to avoid damaging your credit scores.
Prioritize the rest of your expenses. Where does your savings strategy fall on that list? It should be near the top. Plan to put money into your savings account before spending it on other things; in other words, pay yourself first.
What can you cut out of your current spending to make that happen? Removing some lifestyle expenses from your budget can be painful, so think about “trading down” instead. Each week, try to find a simpler and less expensive way to do the same thing. If you drink a bottle of $25 wine each week, find one you like that costs $10 to $12 per bottle. If you eat out twice a week in restaurants, cut that back to once a week or once every other week. If you spend $200 for a night out (babysitter, dinner, theatre or movie, transportation, etc.), try to cut that back to $100 per night.
Make saving automatic
Saving money is easier when you don’t even have to think about it. If your bank allows you to schedule automatic transfers, set one up to pull a certain amount from your checking account into your savings account on a weekly or monthly basis. It doesn’t have to be much — you can start with just $5 to get the hang of it and then bump it up to $10 or $20.
It can be hard to see the full potential of your savings if you’re only putting away small amounts at a time. But your efforts will add up. For example, saving just $50 every two weeks will amount to $1,300 per year, and in five years, you’ll have $6,500.
Try the snowball strategy
The 52-Week Money Challenge has been popular on social media sites for a while now. The idea, also known as the snowball strategy, is simple: During the first week of the year, put $1 into your savings account. The next week, increase your deposit to $2, then $3 the third week and so on. At week 52, you’ll put $52 into your savings account.
The amounts are small, but the payoff is big. At the end of this year-long savings challenge, you’ll have $1,378 in your account.
The key to the snowball strategy is actually keeping up with the weekly deposits. It’s a simple thing that takes very little time to do, which makes it easy to forget. You can overcome that hurdle by setting an alert on your phone or calendar to remind you each week to make the deposit.
Research and reevaluate your ongoing expenses
Are you getting the best deal possible on your car insurance? What about your cell phone plan? It can be easy to just renew these kinds of agreements each year without thinking, but it could pay off to shop around.
Next time a recurring expense (insurance, cell phone, internet/cable package, etc.) comes up for renewal, take some time to research similar options from other providers. You may find that new products have been introduced or prices have changed since you last paid attention. If you find a better deal, make the switch.
Also, check into combining services and insurance policies under a single provider. Some companies offer discounted rates if you bundle, for example, your cable and internet services or your homeowners and auto insurance. Although bundling doesn’t always give you a better deal, it’s worth looking into.
Be sure to take into account any discounts for which you may be eligible. Many car insurance providers offer deals for students with good grades, seniors, teachers, veterans or people with good driving records. You may be eligible for one or more discounts without even realizing it.
Clear out the clutter
Clutter around your home could be costing you. How many times have you searched for an item, couldn’t find it and bought a new one? Then you probably got home with the replacement only to unearth the original within five minutes.
Go through your living space room by room and evaluate its contents. Decide what you want to keep and divide the things you want to get rid of into three piles: donate, sell and trash.
Have a yard sale, take unwanted items to a consignment shop or list them for sale online to make some extra cash for your savings account. Things you don’t sell can be donated to your favorite charity, which can then be used as a tax write-off come April.
A cleaner, less-cluttered space will increase your enjoyment of your home, save you time spent searching for misplaced items and keep you from replacing the things you didn’t actually lose.
While putting away your first $1,000 might not be instantaneous, if you stay diligent with your spending habits and savings strategy, it will happen over time. From there, you can continue to grow your savings and rest easier knowing you have money set aside for a rainy day.