“I can’t save very much, so I won’t save at all.”
“Forget conventional budget advice, I WANT my daily $5 latte.”
“I’m paying off loans. There’s no way I can pad my savings.”
Allow us to talk you down from that No-Savings ledge.
If you want that awesome beach vacation, you need to book your airline tickets first; similarly, before you can book your trip, you need to put aside $5.
But why just $5?
Savings don't have to be "all work and no play until retirement." Your savings are the bridge between you and any practical or pleasurable goals. But padding your emergency fund or saving for fun goals – like that beach vacation – can be tough when you have major financial obligations, like loan payments. You might also think a larger number, like $5,000, is next to impossible when you’ve got daily necessities, like rent or car payments, to budget for.
Building your savings while living your life doesn’t mean you need to adopt a frugal lifestyle. (Though kudos to you if you embark on that journey!) You can pull $5 from almost anywhere:
- Your morning coffee or breakfast on the go
- That oversized sub sandwich for lunch
- Your change jar
- Your streaming music subscription
- Regular ATM fees
- Your weekly lotto ticket
Really, anywhere. For that reason, $5 is the small, realistic goal that you can stick to.
It’s also a defined goal: specificity is key in setting an achievable goal. “I’m going to automatically save $5 every day with an app” is far more effective than simply saying “I’m going to save money.” You’ll feel less pressure in saving $5 a day, versus struggling to cut costs at the end of the year to hit your savings goals.
Once you start, you can also take a closer look at where you may be unintentionally spending more. Knowing exactly where your money is going is the best way to cut any needless spending. If you haven’t stuck to a regular budget, your $5 savings challenge may even be the incentive you need to map out your budget and stick to it.
If you do commit to saving $5 a day for the long run, you could also commit … to the Millionaires’ Club. Let’s take a moment to do the math: $5 a day turns into $1,800 per year. If you can save about $1,800 every year for 45 years with a 7% compounded interest rate (compounding, of course, refers to your savings generating their own earnings year over year), you can retire with half a million in the bank. Imagine what saving $10 a day can do.
Motivated yet? Take your decision-making out of the process and automate your savings. Apps like Acorns, Digit, or Simple securely connect to your bank account and automatically transfer a set amount of money into your savings account. You are your own biggest obstacle to saving $5 a day.
Would you laugh at the real Abe Lincoln? Don’t scoff at his paper alter ego.
Photo: Modified from janeb13