One of the more formative experiences that came out of my first adult job was when I received my first paycheck—the largest I’d ever received at $743. That thrill of seeing the money get deposited in my sparse bank account didn’t last long, though; the money was quickly wasted as I started buying up video games and eating expensive restaurant meals with friends.
In the following months, I mishandled my paychecks in various ways, and while I had good intentions, I never seemed to get anywhere with my savings or budgeting.
In the search for financial progress, I returned to one of my original money influencers, Dave Ramsey. I’m no longer a big fan of Dave’s methods, but he had a profound effect on my financial decisions early in my money-making years. My first goal was to make his first prescribed Baby Step®, a $1,000 emergency fund. This seemed overwhelming; it was more than I typically made in a month. Could I do it?
With this goal in mind, I gave up many of my comfort purchases and cut back on my favorite restaurants. On a few occasions, I opted to treat my wife to a dinner of my making rather than taking her to our favorite Hibachi restaurant (I’m pleased to report that she loved my grilled chicken and mac and cheese dinner).
Within a few months, I had finally reached my milestone. I deposited the lump sum into my savings account, and with an impending wedding and honeymoon to pay for, I made a promise to myself that I wouldn’t touch this money unless I encountered a true emergency. While the amount has fluctuated over the years with emergencies and windfalls here and there, it’s remained an integral part of my finances.
The Art of Saving Money
From achieving this goal of saving $1,000, I learned the art of saving money.
Saving that $1,000 emergency fund taught me that I can save money, and I can save a lot of it if I need to. While $1,000 isn’t an enormous amount of money to have stashed away, if you’re someone who’s living paycheck to paycheck or struggling with debt, you’d probably enjoy a newly-acquired $1,000 sitting in your bank account.
There’s a good reason that this $1,000 emergency fund is on the top of almost all personal finance gurus’ to-do lists. Saving this amount of money is hard, but it’s not so hard that it’s impossible for most people. If you’re living in the U.S. and have a steady job, you can save $1,000. It might take several months, but this is where your financial journey truly begins.
We all possess the ability to save money to buy something we want, but we rarely save money that then goes untouched long term. Before you can ever hope to make a positive change in your finances, you must first learn how to hold on to your money. What better way to do this than by building up a fund that’s “just for emergencies”? Whether that’s its eventual use or not, every day you go without spending this money is a victory for your finances and your willpower. If you can responsibly hang on to $1,000, you can do the same with $100,000.
The $1,000 number is important because while saving an amount like $100 is nothing to scoff at, it’s simply not as compelling. You might feel proud of yourself if you’re able to leave $100 untouched, but this won’t change your bad money habits. It won’t get you out of debt. It won’t allow you to retire.
One thousand dollars, on the other hand, holds power. For some people, $1,000 provides food and shelter for a month. For others, it’s several months-worth of expenses in a foreign country.
As you continue saving month, you continue building a strong financial life, and you can look back and know, like me, that it all started with the very first time you saved $1,000.