First thing’s first: I am the complete opposite of a financial expert. So take my advice (or don’t!), as coming from a regular person with a regular job who just wants to do better. And if you are better at this and have any good advice to add on, please share!
Here’s a short rundown of my money history: I grew up with people who had no real stable relationship of money, so I picked up a lot of bad habits. I dropped out of college due to tuition cost and lack of resources; and thanks to some very complicated personal reasons I filed for bankruptcy less than 6 months ago. I’ve been scrapping and working my way through life since I was 16, so I took the very long way to get to where I am with money. I’ve made a lot of bad decisions, and now I’m going to share my rebuilding blocks with you.
The very first thing you should ever do, and I wish this was a thing I had gotten into even before my first job: SAVE YOUR MONEY. You don’t need to save a lot of it, just save anything at all. Even if it’s just a couple of bucks, throw it into a savings account that builds interest, because you never know what’s going to happen. A third of adults in the U.S. would be fucked if they had an emergency; or they’d have to cover it all using credit cards, which should be further down the list of options on what to do for many people. Let me tell you, there’s a special kind of humiliation that comes with getting stranded on the road in a broken down car. Especially when all you can do while waiting for help is to think about how you don’t have the money to fix whatever’s wrong.
So how much should you have saved? The experts all say that you should have anywhere from 3 to 6 months of your income saved for emergencies. When you’re starting with nothing, that amount can be very intimidating. Don’t give up all hope, just start small. Make it a goal to save $5 a week to start. Just $5, less than a dollar a day. By the end of the month, you’ve saved $20! Woohoo! Now try bumping it up to $10 a week. And then $20 the next month. After 3 months, you’ve already saved about $140! You can keep going with this pattern or you can pick a number and just keep it consistent. Even if you stick to $5 a week, you’d still be ahead of any emergency by $260 by next year plus whatever interest you earn. It may not be the price of a new car, but you will feel less broke in the end.
The easiest and most straightforward way to save money is to open a savings account and have the money direct deposited straight from your paycheck. This way, you never even see it near your spending money and will be less tempted to dip a few bucks here or there. (Not so fun fact: if you’re the kind in the habit of borrowing money from your savings account, the feds will close your account or roll it over into a checking account after 6 withdrawals a month.) The first check or two might feel like you got a bit of a pay cut, but after you adjust how much you want to save and your expectations settle, you will barely even notice it’s gone.
When picking out a savings account, be sure you go with one that has the highest interest and the lowest fees, the flexibility of the account will be up to you. This way you are making extra money just for parking your money on one place. Nerdwallet always has an up to date list of the best rates, so shop around and see what works best for your needs. Some banks may pay you in higher interest, but the trade-off is that you’re going to have to start with a couple thousand dollars. Some banks and credit unions do the complete opposite, where they cut off your high interest if you have too much in your savings account. Banks are weird and make up weird rules, so take your time finding a good match.
Is all of this starting to sound too complicated? Let a program like Digit save for you. It will automatically pull a few dollars here and there from your account, and the amount pulled will based on your spending history, so they make as little impact on your spending as possible. They guarantee to never interfere with your bills or leave you with an overdraft, so it’s like a little cat burglar for savings. It’s similar to Bank of America’s “Keep the Change” program, except can use whatever checking account you want. And now they offer 0.05% interest as well if you maintain at least 3 months over $100. It’s not much, but this is all secret money stashing anyway so it will be a nice surprise.
If you really want, you can have your traditional emergency savings account and a Digit account to save up for something fun, like a nice vacation or to buy me this cake. My birthday is coming up, just sayin’.
I hope this was useful to you in some way, I’ve spent a lot of time reading and learning all of the way people who are good with money actually live. Knowing that there’s a healthy in median somewhere in between collecting cans and blowing every dollar you have on something shiny makes life a little easier.