The first $1,000 you save might well be the most important money you'll ever come up with in your entire life. That $1,000 gives you flexibility to handle many of the everyday curveballs life throws your way while also providing you the first step on your journey to long-term financial freedom.
Still, getting started saving money is easier said than done. If you regularly find yourself running out of money before you run out of month, coming up with that first $1,000 may seem like an out of reach pipe dream. If you find yourself in that situation, here are six tips to help you save up that first $1,000.
Tip 1: Snowball your debts
A debt snowball can be one of the fastest ways to knock down your debt, and the less you spend on debt service, the more you can put toward savings. To start your snowball, line up everything you owe, in order from highest interest rate to lowest interest rate. For every debt except the highest interest rate one, pay the minimums. For the highest interest rate one, pay every penny above and beyond the minimum that you can afford to pay, until it's completely paid off.
Once that debt is gone, roll the entire amount you were paying toward that debt to what's now your new highest interest rate debt. Repeat until your debts are gone, which then frees up all the money you had been paying on debt service costs to instead put toward your $1,000 savings target. Note that if you have a low interest rate mortgage, it's OK to exclude that from the debts involved in the snowball.
Tip 2: Renegotiate your interest rates downward
As you establish yourself as someone who responsibly pays your bills and pays down your debt, lenders will start viewing you as lower risk. Lower risk borrowers usually get better deals. So as you're working your debt snowball, call up your lenders and ask them to lower your rates. Any reductions you get translate to more money you can put toward your debt snowball, which will get you saving that first $1,000 sooner.
Tip 3: Cut out spending you'll never miss
Once you get your debt snowball in place, it's time to go over your spending with a fine-tooth comb and look for things you can cut out or cut back on that won't really affect your life. For instance, if you have an automatically renewing subscription for something that you don't use anymore, that would be an easy candidate to drop. In addition, you might find that you can cut back your cellphone's data plan to save a few bucks on extra capacity that you don't really use.
Tip 4: Find lower-cost alternatives to things you enjoy
On top of completely getting rid of costs you don't really use, try to implement lower-cost alternatives to things you enjoy but don't really need. A daily lunch out at work might become brown bag four times a week and only eating lunch out on Fridays. Coffee shop coffee might become home brew or a coffee club at work. A full-fledged cable TV subscription might become a streaming subscription to the small handful of channels you actually watch.
Tip 5: Sell stuff you no longer use
Craigslist, eBay, and even a good old-fashioned garage sale can all help you turn things you no longer use into a little bit of extra cash. The money you make from getting rid of stuff you no longer use can either help you speed up your debt snowball or get you closer to that $1,000 savings target. As a bonus, the decluttering benefit you get from selling stuff can help your house or apartment feel that much bigger.
Tip 6: Work a little bit more
In addition to paying off debts, cutting costs, and selling stuff you don't need, you can also try to figure out ways to increase your income to come up with that first $1,000. If you can pick up an extra shift here and there, put in a few overtime hours, or even take on a second job, the money can add up and help you cross that threshold. On top of the direct income, while you're actively working you're probably not spending money, and the less of your income you spend, the faster you can save that $1,000.
You can get there -- and the sooner you start, the sooner you'll arrive
Saving up your first $1,000 might seem like a pipe dream, but if you start by putting these six tips to work, you'll soon find yourself well on the path toward reaching that goal. By starting to save, you'll open up a whole new world of financial opportunities that could eventually lead to your being financially free. And that's a long-term goal worth working toward.
Chuck Saletta brown bags his lunch nearly every day, has learned to love office coffee, carries only mortgage debt, and as for his second job -- well, you're looking at it. Chuck has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.