I haven’t always been a big saver. As a matter of fact, when I was younger, I would spend everything that I had on clothes and beauty products. My mom always joked that I shouldn’t “let a hole burn through my pocket” every time I spent my last dime of allowance on cute clothes at the mall. It wasn’t until graduate school that I realized that something needed to change to have a life not entirely stressed by money.
With the little that I had in graduate school ($600 per month from a graduate assistantship), I began to save — a whopping $20 a month and as I earned more money on side jobs and such, I saved more. Now, a monthly savings amount of $20 sounds like a small amount of money but what it did was allow for me to get into the habit of saving and create momentum for myself. It was a small seed that shifted my mindset around money and positively influenced my future habits. In addition, the bucket of money that I saved during graduate school helped me put a downpayment on a brand new car and finance my move to to a new city for work which allowed me to not rely on credit cards to get by in the beginning stages of life. These good habits that I started long ago are how I (along with my husband) can save lots of money for travel, home projects, emergencies etc. to this day.
If you want to start saving, let me tell you how to get started:
- Create a budget. I know, I know — no one wants to do this, but it will allow you to see your financial obligations and your savings potential.
- Set your goal and decide what you will save. Determine what your savings goal is. If you are new to saving I would suggest making your goal $1,000. This is enough to cover small emergencies that may crop up throughout the year. Based on your income divide $1,000 (or your goal) by the amount of money that you have leftover each month based on your budget. If you don’t have anything leftover at the end of the month — determine what you can cut to make room for savings. There is likely a subscription service you don’t need and could cut from your budget to come up with the amount you need to save. It doesn’t matter how much this amount is, just start with what you have available and grow from there. As you keep saving, I promise you’ll want to save more and more. Once you have that amount, divide $1,000 by your savings contribution. This calculation will show you how many months it’ll take to reach $1,000. Adjust this timeframe as needed if you find that it will take too long for you to reach your goal AND/OR you have more money to contribute on a regular basis.
- Open an online-only bank account. This is an important step. If you are like many, you probably have a linked checking and savings account at a brick-and-mortar bank. For many people, this means transferring money back and forth from savings to checking and not really saving anything. Unlike most banks, online banks don’t allow quick transfers, they typically take 1–3 business days. I like this because it means that whenever you transfer the money out of the account, it’s likely a serious purchase and not just a random shopping trip. My favorites are Barclays Bank and Ellevest but there are plenty to choose from online. Make sure you do your research and bank with a reputable company.
- Set up automatic deposits to save directly from your paycheck into the savings account. This is the best way to ensure that your money skips your main bank account and goes straight to where it belongs. This method takes out the manual labor of transferring money to your savings account — as soon as you are paid, the money is transferred to savings. *Ching, Ching* watch the money pile up! To set this up, you will need to log in to your payroll portal and set up direct deposits into your new savings account — you will send your savings percentage to the new savings account and the remaining into your main account.
- Watch your savings grow. As you contribute more and more money consistently, the growth will amaze you. You will likely want to start saving more and will probably increase your contributions from what your starting amount was. As life events come up, you’ll be able to draw from your savings to address those events instead of getting payday loans, using credit cards, borrowing money etc…
When do I get to use the money?
I hope this is helpful. Leave me a comment and let me know what your starting savings percentage will be. Happy Saving!
There are tons of reasons to save; however, if you are new to saving, I suggest simply saving to create an emergency cushion for yourself. Once you’ve gotten into the habit of saving, have debts paid off, etc… then you should be aiming to save about 3–6 months of your income or expenses. In addition to saving for emergencies, you can also save for recurring expenses — think car taxes, car maintenance, trips, insurance premiums, etc.
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