Personal Finance Isn’t Just For Accountants

You know that you’re ~supposed~ to have an emergency fund. But it’s one thing to save money when you’re already making bank and a very different thing to find money to put away when you’re broke.

Like a lot of twenty-somethings, I graduated college with a good amount of student loan debt ($26K), a less-than-stellar paycheck, and no savings. Not exactly the poster girl for financial independence. Basically, I’d never taken the time to learn how to manage my money. I was a “support the arts” kind of girl, a psych major, a writer – not an accountant.

But after struggling to do basic adult money stuff for way too long, I decided to do a little digging into personal finance. Actually, I did a full-on deep dive into the personal finance world. I scrolled through “frugal living” blogs and checked out boring-looking finance books from the library.

One of the gems I uncovered was personal finance god Dave Ramsey and his famous “baby steps” to financial wellness.

Maybe you guessed it from the title of this post, but the first step in Dave’s plan is to create an emergency savings fund. More specifically, step one is to save $1,000 – and then not spend it unless it’s really, truly, 100% an emergency. (And I learned that most things aren’t actually an emergency. Like, did you know you’re supposed to budget for car repairs?)

Tons of people have written really impressive testimonials about how following Dave Ramsey’s plan has helped them turn their lives around. I can’t do that (yet). But I can tell you how I managed to save $1,000 over 6 months when I was super broke. Like, living on peanut butter and $2 bread broke. If creating an emergency savings fund sounds like something you want to do too, keep reading for tips to start saving money – even if you’re living paycheck to paycheck.

Note: Personal finance is, by definition, personal. Tons of factors impact your income and expenses. For example, I’m single, kid-free, and work full-time. If your life circumstances are significantly different than mine, what worked for me may or may not work for you. That being said, here’s my experience with creating an emergency fund – hope it’s helpful!


How to Create a $1,000 Emergency Savings Fund When You’re Broke


1 | Get to Know Your Spending Habits

A lot of people will tell you to track every single expense. I don’t know if you need to go that far, but it is important to get a good sense of your general spending habits – both good and bad. You can, of course, do this the old school way by recording your expenses by hand. If that seems like too much work, though, there are a ton of different personal finance apps and tools out there.

I say this all the time: The best tool out there is the one that works for you. It doesn’t matter how well-designed or popular a tool is if you don’t use it.

After trying several different personal finance apps last year, I settled on the built-in budgeting & spending tool available through my bank’s (Bank of America) online banking system. Since it’s attached to your bank account, the tool automatically keeps track of your purchases and can auto-sort your purchases by category – whether you’re paying rent or buying take-out. Then later on, you can go back through your purchases to get a better idea of how you’re spending your money.

If you’re not with B of A, though, no worries. There are tons of alternate budget and expense tracking tools out there!

Here are some popular (and free!) financial tracking tools you may want to give a try:

  • Mint: Free money manager & budgeting tool
  • Empower: Another free finance tool that can look at your spending to help you find easy ways to save money
  • Wally: Free income & expense tracker with a simple, attractive interface


Why You Shouldn’t Skip This Step

If you’re living paycheck to paycheck, you likely know where most of your money is going. Because after rent, bills, groceries, and gas, you might not have a lot left over for discretionary spending. But it’s still important to get in touch with what’s going on with your finances. You never know what you’ll find out about your financial situation when you get a closer look!

Taking this step helped me ensure that I had enough money each month for my top-priority purchases – like puppy food for the love of my love – while showing me costs I could cut to save money (like impulse purchases from the grocery store).

I know it seems boring, but give it a chance. You can’t fix your finances if you don’t know what’s going on with them!


2 | Cut Costs That Don’t Provide Value

One of my biggest pet peeves is when people tell you to save money by cutting coffee out of your life. They don’t tell you to cut back on the amount you spend at Starbucks a week. They don’t say to treat cold brews as a special occasion kind of thing. Nope. Just stop going.

They literally believe that someone who goes to Starbucks every day is going to be happy and successful giving up their coffee habit for good, just because they really want to save money.

And sure you can be successful – if quitting coffee (or eating take-out, or whatever) is what you want to do. People quit stuff all the time. But if you’re doing something regularly, it’s because at least part of you believes that the value of doing the thing outweighs its financial cost.

Don’t get me wrong. That doesn’t mean you can afford to keep spending money on a $5 latte every morning if the numbers explicitly state that you can’t. But it’s overly simplistic to suggest that you should cull every single small luxury from your life, just because you don’t technically need lattes to survive. It’s okay to buy things you don’t need some of the time. You’re not a robot!

Instead, let’s focus on the easiest way to cut costs. Look at your spending (you did step one already, right?) to find categories where you’re (a) spending money but (b) not getting much out of it.

If you’re stuck, think of an expensive habit or routine purchase that you don’t really look forward to or enjoy anymore. Maybe for you, it is Starbucks. Or your barely used gym membership, or Friday nights out at the bar. Maybe it’s something smaller, like the pack of mints you purchase every week but lose in your purse within a few days. Whatever.

Once you find the money leaks in your budget, so you can start to patch them over – either by cutting back on the amount you spend on them or cutting out these low-value purchases altogether. (Yes, that might mean giving in and drinking the free coffee at the office.)

Why You Shouldn’t Skip This Step

Cutting out high-cost, low-value purchases is hands down the easiest way to save money. And you don’t even have to feel like you’re depriving yourself of anything, since you’re only cutting out expenses that don’t do it for you anymore. This step is a big one because it will help you start to redirect some of your spending toward your growing savings account.

When I was starting my emergency fund, I cut back on low-value purchases in a lot of ways, including:

  • Simplifying my grocery list: Fewer expensive, processed foods and more staples like rice, beans, and cheap produce)
  • Cutting out delivery food and restaurants from my budget: Temporarily – now that I have my emergency fund saved, I have a small amount of money budgeted each month for eating out
  • Minimizing my beauty buys to the basics: No more impulse buys from the beauty aisle when I should be grocery shopping

Remember: Only you get to decide which purchases bring value to your life, and which ones don’t. Weigh what you’re getting out of a purchase vs. its cost to help you decide whether it’s worth the money – or whether the money would be more useful sitting in your savings account.


3 | Save Money on Your Must-Haves

All right, so if you’ve done everything up to this point, you should have a pretty good idea of which expenses you consider necessary and which ones you can live without. But just because you’ve decided that eating out (for example) is something that’s important to you, that doesn’t mean you’re all set to just keep doing what you’ve been doing. 

Say you’re spending $50 a month on pizza and Thai food, but you would love to see some of that money sitting pretty in your savings account instead. So, what’s the first step?

Learn to Compromise

At least while you’re building your savings, set a stricter budget for your monthly takeout. Maybe split a takeout order (and the check) with a friend once a month to get your Thai fix at a lower cost. Or skip the takeout every other month to save money in the long-run. Do whatever you need to do to save money without feeling too deprived. 

This works in other contexts, too. Maybe live music is your one true love, but there’s no way you can afford a full-price concert while building your emergency savings fund. Scout around for free (or almost free) live music events in your area. Or get creative and stage a “concert” in your best friend’s living room using the best concert footage YouTube has to offer.

Let’s get real: If you want to make your emergency savings fund a priority, you’re going to have to sacrifice a few things. But remember that those sacrifices should be ones you’re okay living with.

You don’t have to give up your favorite things altogether when you’re trying to build your savings. But the money does need to come from somewhere. That’s actually the cool thing about budgeting – it’s all about choosing where your money goes, instead of spending like crazy and then wondering where all your money went once your balance is back down to the single digits.

But What If You’re Already Super ~Frugal~?

Maybe the idea of spending money on delivery when you’re tight on cash is super weird to you. Maybe you’re not broke because you’re spending too much, but just because your necessary expenses – rent, bills, all that good stuff – use up a solid chunk of your paycheck. How do you save money, then?

This was totally me last year. My base expenses – rent, utilities, gas, student loan payments, and pet care costs for my new puppy – ate up legitimately 85-90% of my income each month. That’s before groceries. Yeah, I definitely wasn’t buying takeout with my leftover pennies.

If that’s your situation, is it even possible to reduce your spending enough to make a difference?

Well, imo, it’s still worth looking into ways to cut your spending. You can try choosing generic brands at the grocery store, cutting coupons, or even making significant lifestyle changes like switching to a lower-cost, plant-based diet.

BUT if you’re barely scraping by, it’s going to be way more effective to work on generating extra income, rather than going crazy trying to spend even less than you’re already spending.

Like I mentioned earlier, I partially funded my emergency savings by living on peanut butter and discount bread I bought on sale from Big Lots. I kept drinking coffee, even though the frugal living bloggers told me not to – but only whatever kind I had a coupon for. It’s not always easy or fun to save money this way, but you can probably find enough extra money saving here and there this way to justify it, at least temporarily until you’re pulling in more income.

Why You Shouldn’t Skip This Step

Saving a few cents or dollars here and there on stuff you pay for on the regular might not seem like a big deal, but it adds up. Especially when you’re able to reduce your spending on big-ticket expenses, like food, entertainment, or even rent. Plus, the money in your savings account has to come from somewhere. Why not start by saving money on your repeat expenses?

If you struggle with this, here are a few ideas to save money on things you buy all the time:

  • Buy the generic brand, not the name brand
  • Use coupons, shop sales, and sign up for rebates
  • Reduce your purchase frequency (i.e. buy lunch out once a week, not every day)
  • Find cheap or free alternatives – check out garage sales, thrift stores, or social media (e.g. Facebook “for sale” groups) to get better deals on physical goods


4 | But First, Savings

Okay, so we’ve talked a lot about how to save money here and there, but we haven’t really gotten into the meat of this whole thing: The part where you actively put money in your brand-new savings account.

Here are the rules to help you save more money, faster:

  1. When you get paid, pay yourself first. Not your money-hungry, short-term gratification seeking self, but your super chill future self who would really love the security of a fully stocked emergency fund. To make this easier, try automating your savings deposits with an app like Digit.
  2. Practice the 50/30/20 rule (loosely). Try to spend 50% of your income on basic living expenses, 20% on savings, and 30% on stuff you want. If you have the funds, you can allocate a higher percentage toward savings until you meet your $1,000 emergency savings goal. Alternatively, if you can’t afford to save that much right now, that’s okay – do the best you can. Every little bit moves you closer to your goal.
  3. Leave your money alone. Once you build up a small amount of savings, it can be tempting to pull money out when you think you ~need~ it. Unless you’re dealing with a genuine emergency, don’t. It would suck to get hit with a real emergency and not have the funds to address the problem because you used your emergency fund on something like a new pair of boots.


Why You Shouldn’t Skip This Step

Your money isn’t going to wander on over to your savings account all by itself. You have to choose to invest in your savings fund – and then you have to choose to leave it the f alone so it can grow. Because saving money on your expenses is nice, but it won’t get you where you want to go, until those dollars and cents are safe and sound in your savings account.


Here’s What Helped Me Save My First $1,000

As I mentioned, I’m no personal finance expert. I’m just a girl who stuck with my first “big” financial goal to create an emergency fund. But to recap, here’s how I did it:

  • I cut out a bunch of stuff I didn’t mind sacrificing. From paid entertainment and eating out, to new clothes and my daily Starbucks run. I made the sacrifices I didn’t mind making to free up more money to put toward my savings.
  • I saved money on the things I didn’t want to give up. I bought store-brand groceries, made DIY skincare recipes, and shopped at discount stores. I made cost-effective substitutions wherever I could so I could save money without giving up the little things that make life more enjoyable.
  • I contributed as much money to my savings as I could. I saved every dollar I could spare until I hit my savings goal. And then I backed off a bit. (I needed to breathe. And order Dominos.)

That’s it!

I know this all looks boring af – and sometimes it was. But honestly, saving my first $1,000 wasn’t as hard as I thought it would be. I definitely have better money habits now than I did before. And it’s a huge relief to know that I have a little bit of money saved up in case something comes up.

Getting into the saving mindset can be a challenge, especially when it requires sacrificing a few things. But it’s definitely possible to hit that first financial milestone with commitment and a little practice!

Good luck saving! If you found this post helpful, I would love if you shared it with someone who might find it useful, too!

♥ Meg





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