When I first started working around 20 years ago (yes, I am that old) fresh out of polytechnic, I had zero savings. My first job made $1,200 a month. 2 years in, I still don’t have $1000 in savings in my bank account. I was a spendthrift back then. I was buying new gadgets almost every quarter. New CD players, MD players and MP3 players.
My mom found out I wasn’t saving any money, and made me go on a trip to the bank with her, to open up another savings account. For those residing in Singapore, this was the SAYE POSB account. Basically, this account help me save monthly automatically. It will transfer $100 at the beginning of every month from my other bank account to this account. On top of that, it pays out an additional 2% interest at the end of 2 years. This was how I started saving.
Start Small
Focus on what you can do, not what you can’t do. I love this phrase. This is true for when you are trying to start a habit. E.g. it can be starting to exercise. Can you do 30 mins of exercise per day? No? What about 15 mins? No? What about 5 mins? Yes! Keep reducing until it reaches your threshold.
The same goes for when you are just starting to save. Focus on what you can save a month. This can be $500, $100 or even $50. If $50 is what you are comfortable with, just go with it.
I was only making $1,200 a month back then. I can’t possibly save $500 a month, which was why I went with $100 a month.
The last thing you need is the stress from struggling to save because you set an audacious goal, that causes you to give up saving all together.
Set a Time Frame
Once you find out the amount that you are comfortable to save every month, then you can work out the time frame to reach the $1000 savings.
In the case saving of $50 a month, it should take 20 months for you to save $1000.
Automate your Savings
Spend 10 mins to setup a recurring transfer for the time frame that you have work out in the above step. I like to set up the transfer to happen one day after my salary gets credited. This means I will be able save before I even start spending.
Automating your savings also helps to reduce all the manual process that you need to do if you do it manually. Set it once, and you can forget about it. So you are more likely to reach your saving goal of $1000 within the time frame.
Summary
These are the 3 simple steps I took to kick start my savings 20 years ago.
- Start Small – Start with an amount that you are comfortable to save every month
- Set a Time Frame – Once you have the monthly amount, you can work out the time frame needed to save $1000.
- Automate your Savings – Set up a recurring transfer once and forget about it.
The whole goal of this, is simply to help you kick start a savings habit. Once it becomes ingrained into your money system, you’ll realized you can save subconsciously.
To this day, I still use these same steps to continue to save and grow my emergency funds.