4 Steps I Took To Save $5,000 In One Year (& What I Learned From Doing So)
During the 2016 holiday season, I realized that I wasn’t saving as much money as I could be. My boyfriend and I had just moved in together, and we relied heavily on credit cards to pay for our new furnishings because neither of us had enough money in the bank to cover our initial expenses.
After the holidays settled down, I decided to get serious about saving more than just a few dollars here and there. Between December 2016 and November 2017, I’d put away $5,000 in the bank.
We learned the importance of having personal savings the hard way. Shortly after we started saving, my boyfriend was injured in a car accident and was out of work for two months. Had either of us saved our money the way we should have been, this wouldn’t have been an issue financially, but we struggled to make it work for those two months. Ultimately, we were fine, but it could have been so much worse — and both of us have since been committed to having money in the bank for if we ever find ourselves in a similar situation. Here’s how:
1. Assess our spending over a three-month period.
The first thing to do was be honest with myself. I knew I spending way too much money on Target runs and going to dinner with my friends. I looked at all my online statements and wrote down all the money I’d spent on things I can’t even remember buying — trips to Ulta for nothing in particular, online shopping when I was bored, and takeout food, even though my freezer is almost always fully stocked. Many of these charges were totally unnecessary, and I found ways to cut back on this spending, like leaving my Macy’s, Loft, and Gap credit cards home unless I really need something. But a girl has to have some fun with her money, which brings me to step two.
2. Create a budget and find a way to stick to it.
I used the 50-30-20 rule…50% of my money goes to fixed expenses, like car payments, rent, and student loans. 30% is what I call “fun money”. I keep this money in a separate checking account, and from every paycheck, I transfer a set amount into my fun money account. The rest stays in my bill money account, and that debit card stays home. 20% goes straight into savings. These numbers may not work for you, but once you find the right way to divide your paycheck, it becomes much easier to reign in your spending.
3. Open an online savings account…or four.
Having a specific reason to save made it a lot easier to justify my frugal living. I used CapitalOne 360 to open four new accounts…one for when we decide to buy a house, an emergency fund, a car insurance fund (I pay every six months), and a wedding fund. (The last account was not for my own wedding, by the way, but for the four I’m invited to this year. When all those are over, this account will become my rainy day fund.) The beauty of an online savings account is that there is little temptation to spend because you can’t just roll through the bank drive-thru and take out your money. Plus, these accounts usually have a way better interest rate than brick-and-mortar banks do. And don’t forget to automate your savings!
4. Enlist the help of a friend.
Saving money is a lot easier when you have support. When all your friends are spending frivolously, it’s easy to give in and pay to do things you don’t really want or need to do. Share your goals and strategies with your friends, and maybe even use some of those rainy day savings to do something fun.
This experience was not without its challenges. Originally, my goal was not to save $5,000. I had wanted to put away 20% of my post-tax income, which would be $7,200. But four weddings, two bridal showers, a bachelorette party, a christening, a car accident, a cervical cancer scare (get your Pap smears, ladies), and a puppy adoption later, I fell short of that number. I try not to look at it as a loss, because getting my finances in order was a huge step for me in terms of planning my future and becoming more fiscally responsible. I learned that I can take control of my money, and I also appreciate the things I have even more. I shop my own closet when I need a new outfit, use all of my beauty products until they’re empty, and cook at home even more.
Most of all, I learned how lucky I am to have the means to save my money. So many of my friends spend every extra dime paying back student loans or wiping out credit card debt, and I count myself fortunate to have the extra funds to put aside. When I feel down about not having a ton of spending money for shopping sprees and vacations, I open my banking app, look at my savings, and remember why I started in the first place.
This post was originally published on November 9, 2017, and has since been updated.
Krystine is a high school English teacher from New York City who should have saved more money while she lived at home. Oops.
Image via Unsplash