I used an old savings trick to grow my emergency fund by $5,000 in less than a year
- By paying myself first, I was able to save $5,000 for my emergency fund within a year.
- I socked away $400 a month from my paycheck, plus “extra” money from side hustles.
- Auto-saving made it painless and easy to save on a regular basis.
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When I got my first “real” job after college, editing horoscopes for an astrological publisher, I got into the habit of paying myself first, a popular savings strategy often touted by personal finance experts.
Practically, that means that before I spent any of my paycheck, I socked away a bit of cash toward my money goals, such as an emergency fund and a short vacation. It was a simple way to make sure I was making headway on my emergency fund.
I created a basic spending plan
First, I made a budget to see where my money needed to go. At the time, my take-home pay was about $1,800 a month. And as the rent for my studio apartment in West Los Angeles was about $700, that didn’t leave a ton of wiggle room for everything else.
My budget needed to account for gas and power bills, phone bills, groceries, and student-loan payments. I realized that, with a ton of discipline, I could live off of $1,400 and tuck away $200 every two weeks, or $400 a month.
I was frugal to the core
As I had only $700 a month after rent and my savings to spend each month, I had to be mindful and prudent with my spending.
I was one of those enthusiastically frugal types who strung LED lights and showered by candlelight to save on electricity. I also rarely went to the movies, checked out DVDs from the local library, and looked for free concerts instead of paying for tickets. I bought the same staples from Trader Joe’s or bought only food that was on sale at Ralph’s.
I rarely bought any nonessentials. If I did buy something, it was heavily discounted, used, or picked off the sidewalk. I bought a used bike on Craigslist for about $80 and an oak side table from a yard sale in Beverly Hills for $20.
I set up auto savings
I had a day job and a steady paycheck, so I opened a separate account for my emergency fund and set up automatic transfers of $200 every two weeks. This took minutes but saved me a lot of inner turmoil.
After setting my savings on cruise control, I didn’t have to toil over whether I could afford to save. I’d be saving without having to give it a fraction of thought or effort. I didn’t have to fret over whether I could afford to spend $10 and splurge on that fancy cheese at Trader Joe’s or whether that money would be better put toward savings.
I was aware of the simple fact that I had only $700 to cover all my expenses in a month and that I couldn’t spend any more than that.
By setting ahead aside that money each paycheck, I saved $5,000 within a year.
I saved all my ‘extra’ money
While I saved the same amount from each paycheck, the amount I saved each month wasn’t always the same. That’s because I also squirreled away “extra” checks and money earned from side hustles or cash I received in red envelopes from birthdays or from relatives at Chinese New Year.
I proctored tests at a nearby university and pet-sat for friends for extra cash. While I didn’t earn a ton of money that year from side hustles — about $1,000 — every little bit I made went straight into my emergency fund. Once I hit the $5,000 mark, I focused on saving for fun goals, such as getting scuba-certified and taking a solo trip to Seattle.
While I got there slowly, I was able to save $5,000 for my emergency fund by paying myself first, setting up automatic savings, and committing to saving any extra money earned from side hustles.
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