14. Why you need to collect $1,000 in savings

Blog #12 in the series on Wealth Accumulation, Context: Male, 29

One of the most important tools in mastering your personal finances is learning the skill of saving. With credit cards and cheap loan rates, savings may seem overrated, but mastering this element of personal finance is an important building block in your relationship with money and your capacity to build a strong financial foundation. In a recent FINRA study 60% of adults (19,000 survey sample) claimed to be anxious about their personal finances with a leading factor being a "lack of assets".

Over the next few blogs we will discuss the why and the how of this tenant of personal finance, but first let's discuss why it matters. The following are 5 reasons you should be interested accumulating $1,000 in savings. 

1. [Practical] Cover Unexpected Costs - The most obvious and useful implementation of saving $1,000 is being able to cover unexpected expenses. A car repair, medical bill, flight, or gift are all generally covered by $1,000. Having this amount of money in your bank account will enable you to quickly cover these expenses and have peace of mind that if any of these situations arise you will be able to afford them. 

2. [Practical] Take Time Off - One of the frictions in my own life is setting aside money to take a vacation and travel. Often travel can cost hundreds to thousands of dollars if flights and hotels are required, not having the funds set aside to cover a large portion of this expense can be a considerable friction in calendaring this type of activity. If you are not paying for a vacation from your savings it is very likely that you will need to take on credit card debt or take out a personal loan to be able to fund your trip. This financial tools can be useful but also can lead to a long, expensive, and drawn out repayment process. 

3. [Practical] Save More - An underrated aspect of carrying $1,000 of cash in your bank account is being able to capitalize on bulk deals and offers. Buying a pack of 6 lift tickets at once may be cheaper than 6 individual passes, paying for an annual subscription instead of monthly, or capitalizing on a more you spend more you save deal are all examples of this scenario. Often times if you don't have excess cash lying around and you are unable to fit the purchase in your traditional monthly expenses then you end up forgoing a long term savings opportunity to maintain your short term budget. 

4. [In General] Gain Control Of Your Finances - Setting the goal of saving $1,000 is a practical way of beginning to learn how to save any amount of money. It will help you delineate between your needs and wants, expose the limitations of your income, and reveal the time it takes to accumulate a meaningful amount of money. In short, it will help you confront your finances and begin to focus them towards a meaningful goal.

5. [In General] Income Doesn't Go Up Forever - On average income growth plateau's in your late 30's and early 40's. This paired with a rising cost of living due to raising a family, means if you are going to raise your standard of living after this point on average you are likely going to have to count on a secondary means of income. In order to establish this means of income you are likely going to have to save to accumulate or invest in this secondary income over time. Understanding and starting to save early enables you to better control financial outcomes in your life.

Now that you know the why behind saving, let's figure out the how in this next blog.