Save $500, Change Your Life

If you can get just $500 in a bank account, you might change your life. That's not just platitudes, I promise.

Saving money, building an emergency fund, and the like can be overwhelming. Three years ago, if someone had said to me "make sure you have an emergency fund that can cover all your expenses for three to six months" I would have laughed at them. Not because it didn't seem like a good idea in theory, but because I was starting from zero and, yes, even though I am currently in a high paying job, saving that much money isn't exactly something I was in a position to do overnight.

In fact, it took me almost three years to build up a four-month cushion--it was a steep hill to climb, and I would get close and then have an expensive house emergency, or would backslide a little on my spending targets. I wasn't blogging for most of that, but trust me: for those first two years I felt like I was never going to get there. If I weren't extremely stubborn, I'd probably still be working toward it.

Sometimes a goal is so far away it seems, if not unreachable, then at least like too much work for something with good odds of failure.

So if you are just starting out on your financial journey, take heart. Yeah, I will continue to advise that you build up a healthy emergency savings account in case you lose your job or have some other major setback. But that doesn't need to be your first goal.

Your first goal should be to get $500 into a savings account. Liz Pulliam Weston (who might be my favorite money writer, BTW) reports on a recent study done by Stephen Brobeck for the Consumer Federation of America. Brobeck focused on low-income households (earning less than $25,000/year) and moderate income households (earning less than $50,000/year) households and found that for each category, household that had at least $500 in savings had measurably better financial, psychological, and physical health outcomes.

Five hundred bucks is an amount within just about anyone's reach. Just five hundred dollars! (I'm starting to feel like an informercial here). The study's findings indicate that within each category, a household's income wasn't a great predictor of its ability to save--in fact, higher savers actually had slightly lower incomes ($17,000/year) than lower savers. And across many demographic categories, whether gender, marital status, or employment status, high savers were not that different from low-savers.

And what, specifically, is the benefit of having $500 in savings? Those who saved less had more money worries and paid more in fees or interest. Higher savers had fewer cash flow problems, better financial habits, lower rates of high-cost loans like payday or car title loans, and better psychological and physical health.

Some ideas for where you could find $500 to put into savings:
- a tax refund
- a gift
- a part-time job
- a raise (if they don't offer, ask for it!)
- selling unused items on ebay, a used book store, or a consignment store
- save all your change, or all your $1 bills
- take a roommate
- find cheaper car insurance/phone plan/renters insurance/internet and pocket the difference
- cash in aluminum cans for the deposit
- a rebate or credit card reward check
- sell plasma
- do surveys online through mysurvey.com or pinecone
- bike or walk more, drive or bus less

Most of these ideas are not going to make you much money. I speak from experience. I've done everything on this list but one, and very few of them were real money makers. But you don't need to make a lot of money to reach a significant money-management threshold that, insignificant as it may seem, is linked to measurably better outcomes.

Plus once you've got that first $500 saved, your first month of expenses is that much closer. Progress is progress.