Many Americans have nothing — or next to nothing — saved for an emergency. A recent GOBankingRates survey found that 19% have no savings, 21% have between $1 and $250, and 11% have between $250 and $500.
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When you’re starting from $0, building up a $1,000 emergency fund may seem impossible — but it can actually be done pretty quickly if you make a few simple moves and stay disciplined. Ramit Sethi, money expert and host of “How To Get Rich,” shared the steps anyone can take to quickly save $1,000.
Step 1: Cut Your Biggest Discretionary Expense
The first thing Sethi recommended is to look at your monthly spending and determine the discretionary expense you spend the most on, whether it’s dining out, streaming services or making impulse purchases on Amazon.
“Take your biggest discretionary expense — for 99% of you, this is eating out — and cut it in half immediately,” he said in an Instagram post. “Now, here’s the key. Don’t just cut it in half — immediately send that money to your savings account.”
If you’re spending $400 a month on going out to eat or ordering in, that means you would send $200 to your savings account right away.
“Let me tell you something shocking — when I ask people how much they think they eat out, and then we actually calculate the numbers, reality is they spend three times more than they actually thought,” Sethi said.
That’s why doing just this one step can significantly boost your emergency fund.
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Step 2: Automate Your Savings
Next, set up a monthly automatic transfer from your checking to your savings account for whatever that amount from step one is. This ensures your emergency fund continues to grow.
Step 3: Pay Yourself First From Every Paycheck
The final step is to “pay yourself first” every time you get paid.
“Go into your savings account and instruct it to automatically pull 5 to 10% of your take-home pay every single month,” Sethi said.
This will prevent you from spending the funds unnecessarily.
“You do these three things, you’re going to already have $1,000 in a matter of weeks,” Sethi said. “Now, of course, $1,000 is not enough for an emergency fund, but this is going to get you set up and started.”
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This article originally appeared on GOBankingRates.com: Ramit Sethi Shares 3 Simple Steps To Quickly Build a $1,000 Emergency Fund
