Here’s a hint: Skipping your daily coffee isn’t going to cut it.
Little luxuries are a popular punching bag for financial gurus, but they’re usually not what really keeps you from reaching financial goals. Instead of eliminating lattes to save that first $500 — and beyond — try changing your mindset.
Why $500? It can be a solid start to building an emergency fund. It might not seem like much, but that amount can keep a car repair or an unexpected medical expense from going on your credit card.
NerdWallet gathered perspectives from a financial planner, a blogger and a writer and strategist on how to get started.
» Want the basics? Here’s what you need to know about emergency funds
Change the way you think about saving
It’s tough to save when that means saying no to things you want (or could really, really use).
“Most people tend not to save because they feel like it means delaying gratification or sacrificing something now for some future benefit, and that's really hard for anyone to do,” says Eric Roberge, certified financial planner and founder of Beyond Your Hammock, a Boston-based financial planning firm.
Roberge suggests a perspective shift. “Stop looking at it as savings. Start looking at it as purchasing more freedom, flexibility and choice for yourself in your life," he says. "The more you save, the more freedom you buy to use in your life when you want to leverage it."
While $500 is a smaller goal, it’s also specific, which Roberge says is helpful. “If you just say you want ‘more money,’ then you'll never have enough," he says. "That's a moving goal post."
'Grow the gap'
Financial blogger Paula Pant started seriously saving while earning $21,000 as a newspaper reporter. Back then, Pant, the founder of AffordAnything.com, didn’t have many places to economize. “At a certain point," she says, "especially if you’re lower income, you just can’t cut any further."
To build her savings, Pant turned to freelance writing. She used the money to travel and, eventually, buy real estate and quit her 9-to-5.
Writing — or freelancing — might not be your thing, but there are other ways to make money alongside a full-time job. You can dogsit for Rover.com, for example, or rent out your car when you’re not using it with Getaround.
» Increase your income: Side hustles you can start with no money
Or maybe there are ways you can cut back on spending. If so, Pant suggests focusing on three main areas: housing, transportation and food.
“It’s easy to point the finger at things like getting a manicure," she says. “But the reality is that if you get a manicure once a month and it costs $20, I can tell you exactly how much you'll save." For real savings, she says, keep the manicures and downsize your home: “You’ll save a lot more money.”
» Not sure where to cut back? Try NerdWallet’s easy ways to save
Either way, you’ll want to increase the difference between what you earn and what you spend — or “grow the gap,” as Pant says.
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Make it automatic
So you’ve decided to save, and you’ve found space in your budget. Next, make it habitual. That’s the approach writer and strategist Erika Sabalvoro takes.
“I found that the most effective way to pinch some money for an emergency fund is by treating it as a bill to pay," she says. "It was a bill, billed by my future self to my current self."
Many banks and credit unions offer automatic savings transfers, making it easy to move money on a schedule you choose. But most savings rates are low; the national average is just 0.09%. Picking a high-yield savings account with an annual percentage yield closer to 2% will help your balance grow faster.
» If you’re looking for a new account, check out a few of our favorite banks and credit unions
Sabalvoro says she started by putting aside $35 here and there, and increased the amount as her circumstances changed. If she has money left over at the end of the month, she’ll add that to her “take care” fund, too. She says she uses this term, rather than “emergency fund,” because she sees the money as an all-purpose buffer that gives her choices, say, to leave a bad job.
But sometimes it comes in handy for actual emergencies. Sabalvoro recently sent multiple months’ worth of rent checks at once to avoid late fees and online payment costs. She asked for them to be cashed as they came due, but her landlord cashed them all at once.
“I thought, oh gosh, good thing I got it covered. It was really helpful,” Sabalvoro says of her savings.
Like Sabalvoro, you might find that your emergency fund picks up steam once you’ve made space in your budget, but getting started is the most important thing. You never know when you’ll need to dip into your savings — the only sure thing is that you will.