It’s ideal to have 6 months of expenses in your savings, but that can often be a daunting amount. Not everyone is in a position to set aside this kind of money, but it’s important to start somewhere. When I was in college, I used what I called the 5 dollar savings plan. It was simple – every time I ended up with a $5 bill in cash, I would stow it away in my secret box. Why President Lincoln’s face, you ask? Setting aside $1 bills would take a long time to save anything substantial and the disappearance of a $10 or $20 bill was always felt more. Five bucks was the perfect amount as it’s an amount that could be “lost” without being noticed and could add up to a moderate savings before you know it. I worked a meager minimum wage job in college so the cash wasn’t exactly flowing in and out of my wallet, but despite this I was able to save nearly $1000 in just my first year! Now that (to me at the time) was substantial. Consider the average millennial only has that much in their savings today and it’s not a bad start.
However, it’s important to be realistic about this savings method and it’s not for everyone. You’re probably not going to retire at 40 on the beach because you stashed all your $5 bills. Also, if you’re making $50,000/year, you should be putting more than ~ 83/mo away! It’s primarily a method for individuals who have little or no savings at all to develop good habits. I know it’s tempting to see a slight excess in money just sitting in your account after all the bills have been paid, but it’s important to be disciplined with your extra fluff. Paying down debts or saving for the unexpected is much more responsible and wise than blowing it on fancy clothes or other expendables you could live without.
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