What do most people do when they have a $1,000 emergency? Based on my observations over the years, they…
- Set up a Go Fund Me account (eye roll…so because you don’t manage your money well and now have an emergency, you think I should foot the bill for you??…I don’t think so)
- Put the emergency expense on their credit card and then try to pay it down over time (which never works because inevitably another emergency pops up before you can…or you know, you need to fund a vacation or something)
- Borrow the money from a family member and pay it back as quickly as possible…as if there’s not already enough fuel there to start a family feud
- Scrimp and save to come up with the money quickly
Or, people simply take $1,000 out of their savings account, pay the bill, and get on with their lives. Obviously this is the best option in my book.
There are so many financial gurus out there that talk about stock market trading, the flux in world economies, or the political atmosphere that’s hindering growth in various sectors… In reality, all that mumbo-jumbo is just noise and has very little impact on your personal finances. And the truth is, saving up $1,000 is probably the most important step for people to start winning with their money.
I firmly believe that everyone should have $1,000 in the bank at all times, and there’s actually six solid reasons for doing so.
6 Reasons You Should Always Have $1,000 in the Bank
Do you realize that 61% of Americans cannot cover a $1,000 emergency today? In other words, if their:
- water heater stops working,
- furnace breaks,
- tires go bald,
- kid has to spend the night at the hospital…
…they probably need to whip out their credit card and go into debt to pay the bill.
That’s pretty sad.
For all of you that land in the 61%, I’m here to tell you that having $1,000 in the bank is one of the most important steps in your financial journey. Get this one done and you’ll be amazed at how it propels you toward financial success.
“Really? Is it that big of a deal?”
Absolutely. Here’s why.
1) Avoid Going Deeper into Debt
Debt doesn’t happen all at once. It’s usually the story of death by a thousand cuts. First this happens, then that happens, then this other thing popped up…suddenly (or so it seems) your credit card balance is $10,000 and you have absolutely no idea what you bought that could have possibly cost $10,000!
If you would have had $1,000 in the bank, you could have avoided much of this small, accumulated debt.
2) Allows You to Think Your Way Out of Trouble
When I was fighting my way out of debt a few years ago, I was surprised how powerful that mere $1,000 really was. Instead of just whipping out my credit card to pay for an unexpected $1,500 bill, I started to think instead…
“I wonder if I could cover this with my $1,000? Is there any way I can get this done for cheaper and NOT go into debt?”
Here’s a great scenario. Let’s say you were driving home from work yesterday and your dashboard suddenly lit up like a Christmas tree. Something was seriously wrong…so you pulled over, called your mechanic, and he told you that it was likely a small part that’s not expensive, buuuuuuuttt it’s tough to get to. It’s basically in the middle of the engine block. His estimate? $1,500…and most of that’s labor.
Alright…you don’t have $1,500…
So what do you do? Well let’s see, your friend is pretty handy, and has a ton of tools that can basically do any job. You figure he’d help you out for a 6-pack and a pizza this Saturday… Sure enough, he’s up for the challenge! All in all, the repair took you 6 hours, you and your friend were able to catch up, and it only cost you $82 (including the beer and pizza). Your $1,000 in the bank…is still in the bank, and you didn’t have to go into debt either. Now THAT’S powerful!
3) Save Money on Insurance
I can’t find any stats on it, but I’m willing to bet that the majority of people out there have full coverage car insurance and a very low deductible. Why do I assume this? Because if you have a lease, it’s almost always required, and if you’re like most people (remember? 61%), you wouldn’t have the money to cover a high deductible if you got into an accident.
So what can $1,000 in the bank do for you?
Based on my experience, it can save you about $50 a month on your car insurance premiums. How? By simply raising your deductible to $1,000 (since you now have $1,000 in the bank and can cover the costs of the accident).
- As long as you don’t get into an accident every year (if you do…please just hand your keys to your toddler and let him hide them…forever), you’ll definitely come out ahead financially.
- This will also keep you from using your credit card and paying 20% interest on $1,000 for years and years.
Put $1,000 in the bank and you’ll really notice the difference in your insurance costs.
4) Save Money on Warranties
Warranties… Almost every one of them is a complete rip-off.
Buy a $700 TV that already has a 1-year manufacturer’s warranty. If it makes it past the year mark, it’s probably going to last for a long time. But, let’s say it only makes it four years…your TV is almost obsolete at this point anyway! Do you really want to get it repaired? Or are you going to buy an even better one for an even cheaper price (the cost of technology continues to plunge)?? I’m pretty sure you’ll choose the latter and head to Best Buy before I can even say “movie night”.
Save up $1,000 in the bank and skip the extended warranty on all your stuff. If something breaks, just look at getting it repaired. If it’s not possible (or too expensive vs. the cost of new), then just buy a new one! Or heck, maybe you can find a decent used one that will last you for a few more years. Either way, please stop buying those expensive, rip-off warranties… Please???
5) Allows You to Give
When you don’t have any money to cover an emergency, that also means that don’t have any money to give away either…and that often creates an incredibly needy, selfish, and ungrateful individual.
When I was broke and in debt, I can attest to being that money-hungry individual
- My friends often drove me from place to place, never asking for gas money.
- My brother freely gave me a working thermostat to replace my broken one.
- And, my parents had me over often, serving me lunch well into my young-adult years.
So what did I do in return?
- I purposefully never offered to pay for gas…even though I knew I should give them some money.
- I never offered any money to my brother…and hardly ever gave him anything for free ever.
- And, of course I just continued to raid my parents’ cupboards, never thinking twice about what my constant eating was costing them.
Beyond this, if I had something that I didn’t want but thought I could get $5 for it, I’d never consider giving it away. Instead, I’d put it up on Craigslist or Facebook, hoping to make some spending money so that I could buy something for myself.
It’s true…I was a pretty sad case…
But, now that my wife and I are completely debt free and have a seemingly sparking financial future, giving is becoming one of my favorite things to do!
- We give to the church
- We’re looking to have some get-togethers at our house this summer
- And if some need comes up that both my wife and I have a heart for, we gladly give of our time and money to help
Having just $1,000 in the bank can do this for you too. When you’re not worried about your bank account hovering near zero, you’ll stop thinking about numero uno all the time and your thoughts will actually go towards those that might be worse-off than you. Because believe me, there are plenty of people out there that have a tougher life than you’ve got.
6) Get Rid of Unnecessary Stress
When you’ve got practically no money in the bank, life is stressful!
- The roof starts to leak
- The car is making a rattling sound
- Your wardrobe needs a complete makeover (like…3 years ago)
- Your kid is getting close to college age and you have no idea how you’ll pay for it!
But you know what? When you work your butt off and get that $1,000 in the bank, life starts to change for you. You stop worrying about your flat tires and minor engine repairs. Then, you’re so empowered that you start tackling your debts! Once those are gone, you build up a real emergency fund that will cover 3-6 months’ worth of expenses. And after that, you can invest for retirement and for your kids’ college! And you know what? You might even be able to pay off your house!!
Talk about a stress free life. And it all starts with $1,000 in the bank.
What Now? How Can You Get $1,000 in the Bank?
Think getting $1,000 in the bank is impossible for you?
In fact, I’ve laid out a plan that will get 99.9% of people to a thousand bucks within just 4 weeks. Check it out: “How to Save Up $1,000 in Just 4 Weeks (Without Getting a Second Job)“
With this plan, you can find $250 a week with four totally different methods (a different method each week). And at the end of the month, you’ll have your thousand bucks and your life will start to transform before your eyes. Trust me. You’ll never regret getting that $1,000 in the bank. And I bet you’ll never live without it ever again.
What about you? Do you have $1,000 in the bank that you could access in seconds?
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.