You know how important it is to have an emergency fund for weathering financial disasters. But when you’re living paycheck to paycheck, starting an emergency fund can be tough. If you’re already spending every penny you have just to pay the bills, putting aside three to six months’ worth of living expenses seems like an impossible goal.
However, you can give yourself a lot of financial breathing room by scraping together just $1,000. It’s enough to cover unexpected expenses such as a car repair or an emergency root canal without pulling out the credit cards – a crucial step if you’re trying to break the debt cycle.
For most people, creating a $1,000 initial emergency fund is a doable goal. In fact, with a little effort, you can even create one in a month or less. Here are eight strategies to make it happen.
Find Easy Ways to Cut Your Expenses
The first place to look for savings is in your household budget. If you’re like most people, some of the things you spend money on each month could be cut, or at least reduced. Trimming these expenses can provide a fistful of dollars to put toward your emergency fund in the very first month, and it will continue to free up cash in your budget every month after that.
1. Find Your Budget Busters
Nearly everyone has a couple of sneaky budget busters that are derailing their attempts to save. In many cases, these are costs you’re just so used to paying that it’s never occurred to you to find ways around them. Examples include:
- Cable TV. A 2018 CNBC survey found that roughly one in three Americans no longer relies on cable or satellite TV. The reason is plain to see: it’s the cost. According to Fortune, the average cost of pay-TV service in 2018 was $107 per month, while streaming services such as Hulu and Netflix typically cost less than $15 per month. By swapping out your cable for streaming, you could add about $100 to your emergency fund in just the first month, getting you one-tenth of the way to your goal.
- Utility Bills. The 2017 Consumer Expenditure (CEX) Survey by the U.S. Department of Labor shows that the average U.S. household spends about $320 per month on utilities, such as gas, water, phone service, and electricity. There are a lot of little things you can do to reduce those utility bills without a large upfront expense. For instance, in the summertime, using a fan instead of running your air conditioning for four hours each day could save you about 30 kilowatt-hours of energy per month – about $15 worth.
- Bank Fees. A 2019 GOBankingRates survey found that the average American pays $7 each month in bank fees. That doesn’t sound like much, but there’s no reason to pay it at all. You can avoid most bank fees by taking a few simple precautions, such as keeping a close eye on your balance, sticking to your own bank’s ATMs, and always waiting for checks to clear. Or, if the fees at your bank are simply too high and hard to avoid, choose a new bank where the fees are more reasonable. Simple.com and Chime are great options for fee-free accounts. If you can manage to avoid just one overdraft fee this way, you’ll save about $35.
- Bad Habits. In addition to the effects bad habits like smoking, drinking, and gambling can have on your health, they’re also bad for your wallet. Smoking a pack of cigarettes per day costs over $200 a month. Drinking two beers every evening will cost you about $70, and buying a daily lottery ticket costs about $60. If you can’t kick these bad habits entirely, just cutting down by half can still give you a nice chunk of change to stick in your emergency fund.
- Eating Out. According to the CEX Survey, the average household spends about $275 per month on food consumed away from home. That includes everything from your daily latte to a dinner out with your spouse. If you don’t want to quit eating out entirely, you can still save quite a bit by cutting back. Eliminating two lattes each week can save you about $25 per month, taking your lunch to work two days a week can save you around $40, and skipping just one dinner for two will save you at least $20.
- Bottled Water. It’s crazy the amount of money Americans spend on bottled water when most of us can get perfectly good, safe water from a tap for nearly nothing. If you can replace just one $1 bottle of water per day with tap water, you’ll save $30 in a month.
2. Lower Your Monthly Bills
Some expenses in your budget aren’t optional. When you get a monthly bill for your phone, Internet, or electricity, you have to pay it if you don’t want to lose your service – right?
Well, not exactly. The price on the bill isn’t necessarily the price you have to pay. The companies that provide these services are often willing to negotiate with you over costs rather than risk losing you to a competitor.
You can call the companies up and negotiate on your own, but you’re likely to have more success with less work if you hire a third-party service to do it for you. Services like Trim, Truebill, and Billcutterz call up the companies you do business with and do the bargaining for you in exchange for a cut of the savings, which ranges from 33% to 50%. If they can’t find any savings for you, you pay nothing.
The amount you save depends on what service you use and what bills you have. Trim says it can save you “up to 30%” on all your bills, but it keeps 33% of the savings; BillCutterz estimates savings at between 25% and 40% and takes a 50% cut of the savings for the first year. If you currently pay $170 per month for all your bills, one of these services can probably cut that amount by around $50, with $25 of that going into your pocket.
If negotiating with your providers doesn’t get you anywhere, consider shopping around for new ones. Switching to a cheaper cell phone plan from Mint Mobile or Ting, for instance, could save you as much as $70 per month. You can also save on your car insurance by shopping around. A service like Esurance or The Zebra can help you get quotes from several insurers in a matter of minutes.
Earn Extra Money Fast
If you can’t find anything else in your budget to cut, and you still haven’t reached your $1,000 target, it’s time to look at the other side of the equation: your income. There are several ways to earn some extra cash, some easier than others. You can do them for just one month to fund your emergency savings or keep them up to create more wiggle room in your budget month after month.
3. Collect Shopping Rewards
One of the easiest ways to make a little extra money is to take advantage of shopping rewards apps that give you rebates when you shop, both in stores and online. These apps get a commission from stores for steering business to them, and they split that money with you. Depending on the app and the store, you can get back between 1% and 12% of what you spend.
These apps include:
- Rakuten. When you shop online through the Rakuten (formerly Ebates) app, you can earn cash back at more than 2,500 stores, including Amazon, eBay, and Walmart. The site promises “up to 40%” cash back, but a more typical rebate is 2% to 5%. You get paid by check every three months.
- Ibotta. With the Ibotta app, you earn cash back on specific products at specific stores. You use the app to “unlock” a deal at one of Ibotta’s 300 partner businesses, then buy the product and scan the receipt. Rewards go into your in-app account. Once you’ve earned $20 in rewards, you can trade it in for cash or gift cards.
- Paribus. Paribus helps you get the lowest price whenever you shop online. You give the app access to your email, and it scans your inbox for receipts from its partner stores, such as Amazon, Target, and Macy’s. The app them monitors the price of all the items you bought, and if the price drops, it helps you collect a refund. Paribus can also help you get the lowest price on hotel rooms booked through various sites.
- Shopkick. With Shopkick, you can earn rewards, or “kicks,” even when you don’t buy anything. The site offers some kicks just for visiting particular stores – in person or online – or viewing specific items. If you buy the item, you earn even more kicks. Once you have 2,500 kicks, you can cash them in for a $10 gift card.
The amount you can earn with these apps depends on how much you spend at participating stores. For example, if in a typical month you buy $200 worth of stuff online, buying it through Rakuten could earn you around $10 cash back. However, you have to be careful. If these apps lead you to buy stuff you ordinarily wouldn’t buy just to get the rewards, your extra spending will eat up all your earnings and more.
You can multiply your earnings when you shop by using both a rewards app and a cash-back credit card. These cards typically earn you 1% to 1.5% cash back on all your purchases. However, some cards, like the Chase Freedom® Card, offer rewards of up to 5% cash back in certain stores at certain times. To maximize your rewards, keep track of these bonuses and always make sure to use whichever card gets you the biggest reward.
4. Do Online Surveys
Another way to earn a little cash each month is to fill out online surveys in your spare time. Sites that pay for your opinion include Swagbucks and MyPoints, which also offer shopping rewards, as well as Survey Junkie, Inbox Dollars, and E-Poll Surveys.
You can’t earn a lot of money this way; a typical 20-minute survey only pays about $1 in rewards. However, if you fill out surveys while you’re on a Netflix binge or waiting for a bus, you can pick up an extra dollar here and there throughout the month. If you spend just a couple of hours filling out surveys each week, that could add up to around $10 for your emergency fund.
Also, both Swagbucks and MyPoints pay a $5 sign-up bonus once you’ve completed your first few surveys. If you sign up with both these sites and complete the required number of surveys in one month, they’ll pay at least $10 toward your emergency savings right off the bat.
5. Get a Side Gig
Shopping rewards and online surveys are easy, but they don’t pay much. You can earn a good deal more by taking on a side gig in addition to your regular job. The modern gig economy offers lots of choices for earning money in your spare time, including:
- Ride-Sharing. An analysis by TheStreet found that you can earn about $9 per hour driving for a ride-sharing app such as Uber or Lyft. That’s about on par with working at McDonald’s, and less than you’d make as a clerk at Walmart, but it offers the advantage of setting your own schedule, so you can fit in your driving shifts around your main job and other obligations. If you put in just four hours per week driving for one of these services, you’ll be able to add $162 to your emergency fund.
- Food Delivery. If you’d rather transport food instead of people, you can earn extra cash making deliveries for services such as Uber Eats, DoorDash, Instacart, and Grubhub. These services offer flexible hours and quick payment. According to USA Today, earnings for drivers average between $10 and $18 per hour. With four hours of work per week, you could earn about $250 per month.
- Car Sharing. If you don’t use your car every day, you can share it with others and get paid. Companies like Turo, HyreCar, and Getaround let you set your rates and start earning passive income from your idled car.
- Airbnb Hosting. If you’ve got a spare bedroom in your house, you can rent it out on Airbnb as a place for travelers to stay. The site takes care of all the details of booking, payment, and insurance in exchange for 3% of your earnings. The amount you can make this way depends on your space and your location. In central New Jersey, where I live, renting out a private room for two people, 15 nights per month, could net you around $675.
- Odd Jobs. On TaskRabbit, you can find people in your area willing to pay you for a variety of odd jobs. According to the site, you could earn between $47 and $119 for assembling furniture, $56 to $119 for cleaning a kitchen or bathroom, and $48 to $99 for hanging a TV or mirror. The site keeps 15% of the payment as its fee, so if you can pick up ten $80 jobs in a month, you’ll earn $680.
- Online Freelancing. You can find online freelance work in a variety of fields, including writing, computer programming, Web design, data entry, and marketing. You can search job boards such as Guru and Freelancer or sell your services through sites such as Upwork and Fiverr. According to Glassdoor, different types of freelance work can pay between $10 and $74 per hour. To pick an example from the middle of the scale, if you do 10 hours of work per month as a graphic designer, earning $40 per hour, it will add $400 to your savings.
Pay Less on Loans
Debt can be a real drag on your budget. Month after month, you have to keep making payments on things you’ve already bought, and you don’t get anything new in return.
Fortunately, there are a couple of ways to reduce your debt burden without needing to make any extra payments. For revolving debt, such as credit card debt, you can negotiate with your creditors for a lower interest rate. For debts with a fixed monthly payment, such as mortgages or student loans, you can refinance.
6. Negotiate for a Better Rate
Credit cards are a useful tool, but the interest on them can be punishingly high. According to CreditCards.com, the average interest rate for new credit cards in March 2019 was 17.64% – at a time when the best savings accounts on the market were paying only 2.20%.
However, if you have a good credit score and decent negotiating skills, you might be able to talk your credit card company into lowering your rate. Start by looking at offers for other credit cards that are similar to yours. If you find one with a lower interest rate, write down the details of the offer, then call up your credit card issuer and ask them if they can beat it.
Explain that if your bank can’t lower its rates, you plan to open a new card with the other bank and transfer the balance on your card to it. That would mean all the interest you’re paying on your debt would go to the new bank, so it gives your current one a good incentive to negotiate. There’s a good chance it will agree to at least match the other bank’s interest rate to keep your business. If the bank isn’t willing to negotiate, try calling back on a different day and making the same pitch to a different customer service rep.
If you still get nowhere, consider following through on your threat to transfer your balance. If you can find a credit card with a low-interest or 0% balance transfer offer, you can pay off your balance faster without increasing your monthly payment. You might even be able to pay it off entirely before the zero-interest period runs out.
For example, if you currently have a $3,000 balance on your credit cards at 18% APR, and your goal is to pay it off in two years, you’ll have to pay $149 per month and a total of $594 in interest. Lower your APR to 15%, and you can reduce your monthly payment by $4 and your total interest by $103. Switch that balance over to a card with a 0% APR for the first year and 15% APR after that, and you can save a total of $431 in interest and still pay off the card three months early.
7. Refinance Your Loans
If you can’t reduce the interest on your debt by negotiating, look into refinancing. As noted above, you can refinance credit card debt by transferring your balance to a new card with a lower rate. It’s also possible to refinance a mortgage, car loan, or student loans. If you have several different debts, you could save money by consolidating them into a new loan at a lower rate.
Refinancing has the potential to save you a significant amount of money. For instance, suppose you bought your house nine years ago with a 30-year, $150,000 mortgage at 6% APR, and you still owe $100,000. If you can refinance to a new 15-year loan at 4.5%, you’ll lower your monthly payment by $134 and save more than $85,000 over the life of the loan – and you’ll be out of debt six years sooner.
Refinancing isn’t always a good deal, however. When you refinance, you often have to pay an origination fee on the new loan, which could be around 5% of the total balance. Refinancing is only worthwhile if the savings are significant enough to offset this upfront cost. A refinancing calculator, such as the ones available at LendingTree, can help you figure out whether refinancing your debt is a smart idea for you.
There are several websites that can help you find a good rate on a refinancing loan, including:
- LendingTree. If you want to refinance your mortgage, LendingTree can get you offers from several competing lenders. The site asks you a few questions, sends out a request to lenders, and shows you offers within seconds. In many cases, you can choose the best loan and apply for it immediately online.
- SoFi. This site is the top refinancing provider for student loans. You can complete the entire loan process online and choose from a variety of rates and terms, depending on whether you want the most savings or the lowest monthly payment. You can also use SoFi to consolidate multiple student loans into one. The site charges no origination fees and no prepayment penalties if you choose to pay off your loan early.
- Fiona. This site can help you take out a personal loan for debt consolidation. Like LendingTree, it asks you a few questions and then presents you with offers from multiple lenders.
Maximize Existing Savings
If you want to save money as quickly as possible, it makes sense to maximize the value you get out of the money you already have in savings.
8. Boost Your Rate of Return
As of 2020, the average annual percentage yield (APY) on a standard savings account is just 0.09% – not even enough to keep up with inflation. In other words, any money you have in a basic bank account is actually losing value over time.
You can boost your return significantly by moving those savings to a high-yield online savings account. For example, if you currently maintain an average of $5,000 in a bank account earning 0.09% APY, you’re collecting just $4.50 in interest per year. If you move that money to an online savings account with a 2.30% APY, you’ll make $115 per year.
Some good choices for online banking include:
- CIT Bank. The Savings Builder account at CIT Bank offers an excellent APY of up to 1.80%. However, to earn this rate, you must keep at least $25,000 in the account, so it’s not the best choice for someone who’s struggling to raise $1,000. CIT’s lower-tier Premier High Yield Savings account requires only a $100 opening deposit, but the APY is just 1.55%.
- Varo. The savings account from Varo will give you the opportunity to earn up to 2.80% APY. They also offer an online checking account that comes with no fees and gives you access to your paycheck two days early.
- Ally Bank. Online savings accounts at Ally Bank pay 1.60% APY, with no monthly maintenance fees and no minimum balance. Ally also has a partnership with the Allpoint ATM network, giving you access to more than 43,000 ATMs across the country. If you can’t find an Allpoint ATM near you, Ally will reimburse you up to $10 per month for ATM fees from other banks.
- Aspiration. What sets Aspiration apart from other online banks is its focus on social responsibility. The bank does not invest in fossil fuels and donates 10% of its earnings to charity. Its Spend and Save Account offers 2.00% APY, plus cash-back rewards for shopping at socially conscious businesses. Aspiration also reimburses all your ATM fees worldwide, with no limit.
- Bank5 Connect. For a high-interest checking account, Bank5 Connect is a good choice. Its Connect Checking Account has an APY of 0.76%, no monthly maintenance fee, and a reimbursement of up to $15 per month for foreign ATM fees. The bank also offers a savings account at 2.05% APY and an assortment of CDs with interest rates up to 2.90%.
- Discover Bank. The Cashback Checking account at Discover Bank doesn’t pay interest, but it rewards you differently: Every time you make a purchase with your debit card, you get 1% cash back. You can earn up to $30 per month this way. Discover also has an online savings account with a 2.10% APY, a money market account that pays up to 2% APY, and CDs with terms ranging from 3 months to 10 years.
None of the steps listed here will be enough to earn you $1,000 in a month all by itself. However, there are many ways to combine several of them to reach this goal. For instance, you could save $100 by cutting your cable, $100 by refinancing your mortgage, $30 by giving up bottled water, and $30 by renegotiating your bills. That gets you to $260, which you’ll go on saving month after month.
You can then earn the other $740 through a combination of jobs. You could rent out a room on Airbnb for six nights to earn $270, do six $75 jobs on TaskRabbit to earn $450, and pick up the remaining $20 from online surveys and shopping rewards.
This is just one example of how to combine these strategies to make $1,000 in a month. If it doesn’t work for you, no problem; just swap out the strategies in this example for different ones. If you don’t have a room to rent out, do more odd jobs instead; if you’ve already dropped your cable, try giving up lattes or lottery tickets. You have plenty of options to choose from.
Do you have any other ideas for quick ways to raise $1,000?