Your very first milestone to not struggling paycheque to paycheque is by saving your first $1000 buffer or emergency fund. You need this step even before you start paying off your credit cards or other debts.
The purpose of this buffer is mainly to stop the need of reaching to your credit card or into your dedicated savings for your goals and dreams. You can use it anytime something you forgot to budget for or something entirely unexpected comes along. If you didn’t have this buffer, you would end up going round in circles having to put your unexpected expenses on the same credit card you have been trying to pay off. This is called getting caught in the credit card float.
This buffer can act like a credit card if it is set up in a direct debit account. But
instead of borrowing from a bank and being charged interest and then needing to owe them back, you simply owe yourself back. No strings attached. Ideally, any time you need to dip into the $1000 buffer you would pay what you have used back as quickly as possible.
As time goes by you will get more practice planning ahead for your larger and usually expensive true and long term expenses that crop up throughout the year or even over several years. The need to dip into your $1000 buffer will diminish or even be eliminated entirely. It takes approximately one year to get to this stage.
So how fast can you save $1000? Many of my clients achieve their first $1000 in just 1-2 months. Of course this is going to depend on your personal financial situation but the first thing to look at is your savings capacity. This means working out your living expenses and calculating what you have left over from your income.
You can find the expenses worksheet here.
If your income is less than your living expenses, you are currently not ‘living within your means’. This needs to change urgently! Make it your first priority. Attempt to get your living expenses down or your income up as quickly as possible. Otherwise, you will only continue to get yourself into more debt and financial worries.
If you need some ideas to reduce your household budget you can download my “60 ways to Save” PDF ebook here.
So how much do you have available to save towards your $1000 buffer so far? At this point you might like to consider a ‘sprint’ to save for that $1000. A ‘sprint’ is made up of short term tactics to both reduce your living expenses and increase your income.
A sprint is just that, a short term commitment. Maybe one month, maybe just one week. But these tactics are not meant to be a long term marathon of regular savings in your household budget. That will only lead to burnout. This sprint is just a means to reach that $1000 as quickly as possible. After you get there, you get to ease off and return to your normal budget and continue living within your means.
Short term sprints might include:
- No eating out or getting take away for one whole month. If that seems impossible, just commit to one or two weeks for now.
- Offer to mow your neighbours lawns or if you’re a little handy, maybe some small maintenance jobs for cash.
- Take one or two extra overtime shifts.
- Challenge yourself to only making meals from the pantry supplies or left overs.
- Put your gym membership on hold for a couple of weeks and enjoy going for an outdoor run instead.
You may find many more ideas from the “60 ways to Save” ebook to try also.
Want to take it one step further? Why don’t you try Tash Corbin’s #7dayfastmoneychallenge to help save for your first $1000 buffer and bring in some extra cash?
Tash Corbin is my business strategist and an expert at lean marketing strategies for heart-centred entrepreneurs. If you are interested to find out more of what Tash can offer you, check out her courses here.
If you would like to join me in saving for your first $1000 with the #7dayfastmoneychallenge follow this link here to sign up and let me know in this Facebook post on my business page that you are in!
Affiliate Disclaimer: I’m proud to endorse Tash Corbin and her lean business marketing strategies as an affiliate partner. If you join one of Tash’s courses in the future I may receive a commission.