It can feel daunting to start from zero when you’re a newbie saver or investor. You have financial professionals advising you to put away 20 per cent of your income and save double your salary by the time you’re 35, while you’re struggling to pay rent. Saving anything at all can seem like a pipe dream.
But similar to compartmentalising debt repayments or creating micro tasks to reach a larger goal, starting small with your money targets and building on them can help you hit them faster than you might have thought.
If you’re new to saving and investing, aim to get to the first $10,000 in your account before you worry about complex strategies or whether or not to invest in crypto.
I was inspired to do this after reading about it on Money After Graduation — a blog by Canadian personal finance writer Bridget Casey — when I started my first job.
As Casey writes, $10,000 is “attainable but still large. Secure, but not quite comfortable. It shows progress, but not completeness.” In other words, it’s definitely a reach, but not impossible to achieve.
But how do you do that, anyway? First: Figure out why saving and investing are important to you. Perhaps you want the security, or you want to quit a job you hate, or you just like the idea of having built up a surplus of cash. Whatever the reason, recognising it will help you when a rainy day comes (and one always does).
Then, remember it won’t happen overnight. It’ll likely take a few years of consistency and intent. You’ll need to start with $100, and then $500, and then $1000, and so on, but I like the idea of always keeping the $10,000 figure in the back of your mind. As I wrote earlier this week, that might help you pass up some superfluous spending because you have a higher priority.
Here’s how you do it:
- Set up a separate high-interest savings account (look at online banks for the best deals) or investment account. As Casey writes, you want a dedicated space for this money so you aren’t tempted to spend it.
- Figure out your saving schedule. Consider your take-home pay and expenses. How much can you feasibly put away each pay check that won’t have you over-drafting or running up your credit card balance? Write down your timeline in a dedicated notebook or use a tracking app. (Personally, I have a timeline I made by hand on a bulletin board in my apartment. When I make one of my “saves”, I check off one of the boxes.) As Casey notes, it takes about $834 per month for a year to save $10,000. That’s obviously a lot — so extend your timeline as needed.
- Set up an auto-transfer from each paycheck. And then forget about it. At my first job, I set up an automatic retirement contribution and then more or less didn’t check it again for a year. When I finally did, I was amazed to see how much money had amassed in the account. Similarly, I’ve had an auto-transfer from my transaction to saving account every week for a few years that’s paid off nicely.
- Save extra cash. If you have debt, it’s smart to put your tax returns, birthday money and whatever else toward paying it down, but set a little bit aside to help you reach your savings goal.
- Celebrate mini-milestones. When you get to your first $100 or $1000, take a moment to recognise your accomplishments. Those are big deals! Casey recommends celebrating with an extra contribution, but you can always treat yourself, too.
As Casey writes, reaching that $10,000 mark makes you feel a little bit different about your finances. It’s when you’re amassing wealth, not just trying to shore up your savings.
If you’ve banked your first $10,000 on an average salary, it’s probably taken you more than a year, so you’re no stranger to discipline when it comes to your finances. You’ve also watched it grow a bit on its own with interest and dividends. It represents the things you didn’t buy, and thus you understand more than ever how much they were things you didn’t need, and that empowers you to keep saving going forward.
It’s also a good benchmark for trying more risky money moves, such as investing some money in a single stock you’re interested in. Because you have a solid foundation, you can afford to try something outside the box without worrying that you’re jeopardising your entire financial well-being.
Saving $10,000 won’t be easy, but it’s a solid goal that can push you save just a tiny bit more each month.