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4 Ways a Thousand Dollars Can Change Your Life

According to a recent study performed by Carnegie Mellon, if you handed $1,000 to a millennial, the men would go out and buy a TV and stereo equipment, and the women would come home with bags full of clothes. Not that big of a shocker huh?

But let’s be honest, would we be any better if someone handed us a thousand bucks with no strings attached?


How a Thousand Dollars Can Change Your Life

I started writing on this blog back in 2010, and to be honest…I was terrible. I wrote as if I knew everything, but in reality I had experienced nothing and the only people I knew were the middle class or upper-middle class.

Today, I’ve got years of writing, research, and speaking under my belt and I can teach from experience. Especially on this seemingly innocent topic centered around $1,000.

Why is it so important to have a thousand bucks (Note: I said have $1,000…which means to keep it in savings and not touch it)? And can it really change your life?

The simple answer is a resounding yes. And for four major reasons.


a thousand dollars can change your life1) It Keeps You From Going Back Into Debt

I’m entering the stage in my life where mentoring and meeting with others in a one-on-one setting is common. We sit down, look over their stats (mainly their income vs. expenses), and I make my recommendations. During the short meet and greet, I stress two things:

  1. You need to have a reason for getting out of debt
  2. You’ve got to save up $1,000 before you tackle it

And why is this so important? Let me paint you a picture…

Jenna and Kirk have $80,000 of student loan debt, and it absolutely terrifies them. They want to get rid of it like…yesterday. “That’s awesome you guys!” I respond, “But let’s make sure we do this right. Before you do anything, put $1,000 in the bank for a mini-emergency fund. THEN you can aggressively pay down your debt.”

They completely ignore my recommendation and pay off $10,000 in just two months.

….and then their car breaks down. It’s going to cost them $2,000 to put it back on the road. So, instead of having only $70,000 left in their debt snowball, they have to pull out their credit cards and tack on another $2,000. Their debt is officially headed in the wrong direction.

And do you know what this does to their motivation? It deflates it faster than a popped balloon. I check up with them a few months later and their debt is still at $72,000…and they’re loaded with excuses as to why.

Do you know what would have happened if they actually saved up their mini-emergency fund?

Here’s how it would have played out…

They save up $1,000 in about a week (mainly by selling stuff), then pay off $9,000 of debt in two months. Their car breaks down and this time they don’t panic. Sure, the mechanic says it will cost $2,000…but they only have $1,000. So they start asking themselves the powerful question, “How can we get this car fixed for $1,000 or less?”.

Let’s see…their buddy’s pretty handy, and they know of a cheap online parts store where they can buy all the materials for just $600. It ends up taking 5 hours on Saturday to get the car in working order again, but it’s back on the road and cost only 1/3 of what the repair shop quoted them originally! They quickly build their emergency fund back to $1,000 and continue to tackle the debt.

Because they didn’t go backwards into debt (like the example above), they were still motivated and got right back to it once the car was back on the road.

THAT’s what a thousand dollars can do for you. And that’s just one reason why a thousand dollars can change your life.

2) You Can Stop Buying Stupid Warranties

When you have absolutely no money, every warranty under the sun seems like a necessity. What if you drop your cell phone in the toilet (how is it that so many people do this…?)? You can’t possibly muster up $600 to buy a new one. Guess you’d better get the warranty…

Your washing machine, the refrigerator, the TV – it’s all the same story. You buy the extended warranty for everything because if it breaks you know there won’t be enough money in your account to replace it.

But what if there WAS enough money?…

What if you had a thousand dollars in the bank that could replace any one of those items? Suddenly, you discover that you really don’t need those warranties, which means even more money in your pocket.

Plus, buy replacing the items with cash instead of on credit, you’ll think twice about buying a brand new replacement. Maybe you could get buy with a flip phone for a while (*gasp*!), or maybe a used washer could handle your laundry for the next year or two (do washing machines really need to be the best looking thing in the basement…?).

Yet another way that a thousand dollars can change your life. It’ll save you money in warranty costs, and it will have you thinking twice before making that big purchase.

Things are looking up for you already.

3) It Can Kick Start Your Debt Snowball

You’re all pumped up about getting rid of your debt and you already saved up your $1,000 (Nice job! And thanks for actually listening to me), so now what? Well now, thanks to that $1,000 savings account, you’re going to be able to reduce your monthly expenses – specifically in the insurance department.

Because you never had any money before, your car insurance has always had a low deductible of just $50. Meaning, if you get into a wreck, you’re only on the hook for $50 and the insurance company pays the rest. This sounds pretty awesome until you realize that you’re paying through the nose on a monthly basis to make it happen.

  • $50 deductible = $100 a month
  • $1,000 deductible = $60 a month

If you raise your deductible, you could save $40 on your car insurance premiums each month (and you can absolutely do this for your other insurance items as well!). This small change will save you $480 a year!

Put this money straight toward the debt snowball and you’ll get out of debt months faster than if you sat on the sidelines and did nothing.

Are you starting to believe that a thousand dollars could change your life? I sure hope so!

4) You Can Begin to Self-Insure

When you’ve got only a few bucks in your bank account, you can pretty easily get scared into buying some bad insurance policies. Things like:

  • Child life insurance
  • Cancer insurance
  • Accidental death insurance

These policies are absolutely unnecessary.

  • Does your child provide any income to the family? No. There’s no need to have insurance on them.
  • Is cancer covered under your current medical policy? Of course. Do not buy medical insurance on top of medical insurance. It just doesn’t work out.
  • If you already have life insurance, do you really need more if you die by accident? Ummm, no. Get rid of this policy.

The chance of a child (age 1-4) dying in the United States is 0.024%. Does this warrant buying life insurance to cover their funeral on the off-chance that it actually happens? No (and Money Magazine agrees with me). You’ve got $1,000. You can make it happen if you absolutely have to. And believe me, I hope you never have to.

Cash in the policy. Take the money and put it toward your debt snowball. It’s time to get out of debt!!

Related: How the Debt Snowball Really Works (Free Tool Included)!

In Summary: How a Thousand Dollars Can Change Your Life

Alright, what do you say?! Will you put together your one thousand dollar emergency fund and let it change your life forever?! This seemingly unimportant task could help you:

  • Stay motivated to keep driving down your debts
  • Stop wasting money on extended warranties
  • Save money by increasing your insurance deductibles
  • Get rid of unnecessary insurance

Stop letting other people take your money! Save up a bit of your own and then start paying down your debt like your life depended on it (because in a way…it actually does).

Will you let a thousand dollars change your life? I sure hope so!

Battle of the Mind Money


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. I sure wish someone would drop off $1,000 check with no strings attached! Seriously though, I would definitely have the temptation to treat it as “found money” and treat myself to something like a new TV for my home office. I already have a good sized emergency fund so I’d put it toward paying down some of our debt. Well, maybe I’d take a little and enjoy dinner out with the wife and kids. 🙂

    • I always say that you should have a plan for “found” money, whether it’s a gift, an inheritance, or a tax refund. For us, we put bonus money toward our daughter’s college fund. If it was substantial (>$100k), we’d put that money toward another rental (and then enjoy the benefits of the additional cash flow). 🙂

  2. This is the best article I’ve read in a while, thank you so much for writing it. I hope it helps a lot of people look at $1000 in a different way, especially the stuff about not buying extended warranties and increasing insurance deductibles ( we call it excess here in Aus).

    • Glad you loved it Miss Balance! This is one of the points I’m trying to drive home in my classes. Sure, it’s great to pay off debt, but you really need to have some cash to fall back on if you want to be successful for the long term.

  3. *snif snif* I smell hints of DR on here. 🙂

    Great 1st step for anyone. When we started the snowball years ago, 1000 seemed like a lot. Still is, but just getting to that point was huge for us.
    I truly believe anyone can get 1000 bucks within a month if they are willing to work hard for it.

    • DR? You typically lose me for a moment whiskey, but I normally catch on. This one stumped me. 😉

      • Dave Ramsey

        • Ahhhh!! Yup, for sure you do. He recommends that people save up $1,000 before paying off debt. I obviously wholeheartedly agree.

  4. As a teenager I definitely would have put it all in clothes because we were fairly poor and I never had a lot of clothes like some of my friends. However, as I grew up I started thinking in terms of what that amount of money would cover in terms of bills. For example, it might cover a years worth of cable and telephone bills or it would pay two months rent. Now, being fairly financially independent, it would probably go straight into the investment account to be used with other funds to buy a really solid dividend paying stock or nice yielding bond. Amazing how your thinking changes over the years, isn’t it?

    • It is crazy how our mindset changes. I thought I was mature when I was 20, and I was mature for my age, but I think way differently today than I did 11 years ago.

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