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SOS! Where Do I Even Start If I Have No Savings?

SOS Where Do I Even Start If I Have No Savings

I can vividly recall the first time I began to consider my savings like a bona fide adult™. It happened while I was out for drinks with some colleagues at my initial post-college job. The conversation revolved around what each person was saving for, and I felt somewhat out of place since I wasn’t saving for anything specific. I was simply trying to make ends meet until the next paycheck arrived. That night, I went home and immediately turned to Google with a search query: “How to start saving money.” If you’re in a similar situation now, don’t fret, because you’re in the right place.

Establishing an emergency fund is often emphasized as the first step in financial responsibility. However, what do you do when you have no savings to speak of, and building an emergency fund seems like an unattainable goal? I found myself in precisely this position a few years after college. Although it initially felt overwhelming, taking a few small steps in the right direction made it surprisingly easy to create a comfortable safety net. If you’re starting from square one on your savings journey, there’s no need to panic. You have ample time, and I assure you it’s easier than it may seem. Below, you’ll find an overview of how to initiate your savings journey:

Assess Your Spending:

Many financial experts stress the importance of having a budget. However, it’s challenging to develop a budget that works if you’re not entirely sure where your money is going. Take an evening to unwind with your favorite snacks, and then print out the last six months’ worth of credit card and banking statements to scrutinize your spending.

Focus on identifying charges you don’t remember making (those recurring streaming subscriptions are notorious) or expenses you didn’t find fulfilling (perhaps those extra happy hour drinks). These areas are prime candidates for intentional cutbacks to free up extra funds for saving.

Keep in mind that your location and current lifestyle significantly impact how much you can save. If, for instance, you’re working as an intern in New York City, you may not be able to save substantial sums due to the high cost of living and your current income. While I’m not suggesting that you move back in with your parents or entirely revamp your lifestyle, it’s worth considering whether your major expenses (such as rent, transportation, and groceries) are worth reevaluating to achieve your saving goals within a shorter timeframe.

Define Your Saving Goals:

For me, setting clear financial goals is essential to stay on track. Whether it’s an amount you want to have saved by a specific date or a goal for how you intend to use that money, having well-defined targets makes it easier to make prudent financial decisions.

When faced with the question of whether you need something (we’ll delve into this in step 4), you can consider your saving goals as an alternative. For example, when deciding between spending $35 on a gym class or getting $35 closer to your dream vacation in the south of France, the choice becomes clearer.

Remember to keep your savings goals visible. Whether it’s through a vision board above your desk, a digital note on your phone, or an old-school tracker where you color in progress bars as you reach savings milestones, the key is to keep your goals top of mind.

Develop a Budget:

Once you’ve identified your spending preferences and the reasons behind your saving goals, you can proceed to create a budget. There are various budgeting methods available, such as the 50-30-20 rule or specific budgeting apps. The objective is to determine your fixed expenses (e.g., rent and commuting) and your variable costs (e.g., groceries, entertainment, dining out, and fitness).

Based on your preferences highlighted in the first step, you can decide which variable costs to incorporate into your budget and which ones to eliminate. After trimming certain areas, allocate those savings toward your financial goals.

Remember, budgeting may not be the most enjoyable activity, but it’s essential to recognize it as an investment in yourself—a blueprint for achieving your goals.

Start Small:

When you’re commencing your savings journey from ground zero, it might seem daunting to save hundreds or thousands of dollars each month to make a significant impact. However, this is not the case. By starting small and identifying opportunities to save a few dollars here and there, you can gain momentum that will accumulate into substantial savings.

An approach I employed at the outset of my savings journey (which I still use today) is to question whether I genuinely need something or if it’s merely a fleeting desire. Do I need to splurge on an extravagant salad when I already have a less exciting but perfectly edible lunch packed? No, I can save that money for something I’ll value much more.

Automatic purchases, like another magazine subscription, are usually unnecessary. This question forces you to pause before making minor purchases and truly consider whether you want something or if it’s wiser to save that money for the long term.

Utilize Automatic Savings Tools:

Now that you have your budget and goals established, you can begin the actual process of saving money. I find it helpful to create separate savings accounts for each goal, preferably a high-interest savings account. Rename these accounts with your goal, such as “Down Payment for Future Home” or “Vacation Fund.”

Calculate the amount you can allocate to each goal based on your budget. Let’s assume you have $500 per month to save. You might allocate $200 to an emergency fund, $150 to an investment account, $50 to your “Other People’s Weddings Fund” (not the most exciting, but necessary), and $100 to your dream vacation. Once you’ve determined the monthly contribution for each account, you can set up automatic transfers to move those sums each month.

Automating your savings removes the need to constantly think about saving since it’s happening effortlessly in the background.

When implementing automatic savings, ensure you don’t set up transfers before confirming that your budget works effectively. Test your budget for a few weeks before automating any savings to prevent potential issues of insufficient funds. Additionally, set up your withdrawals a day or two after your paycheck is received, just in case any paycheck-related complications arise.

Enhance Your Income:

While the above steps focus primarily on reducing costs to save, it’s essential to consider other income sources or increasing your salary if you’ve completed all these steps but wish to achieve your savings goals more quickly.

You might temporarily pick up extra work shifts to boost your income until you’ve established your emergency fund. Alternatively, consider longer-term strategies, such as building a client base for freelance projects or negotiating for a raise.

For instance, when I was a recent graduate, I opted to take on freelance writing and editing jobs to expedite my savings goals. This additional income helped me gain momentum, and as my bank accounts grew, I became more confident in my ability to reach my objectives.

Another benefit of pursuing supplementary income is that it allows you to segregate your funds clearly. For instance, any earnings from additional work can be designated solely for savings.

These steps will set you on the right path to embark on your savings journey, even if you’re starting from scratch. As time progresses, you’ll find that saving becomes increasingly effortless, and you’ll steadily make progress toward your financial goals.

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