I am 37 about to turn 38. I have always been broke. I grew up in that space between low and middle income that doesn't really exist anymore. When my dad died, my mom invested what money he left behind it got embezzled and we had to sell the house. I was 19 and have been drifting ever since. I've rented and couch surfed my way through the last 20 years. Which is a long winded way of saying I know very little about the wider world of finance. I want to start working towards financial independence, even if I have to start small.
On to the reason for this post. I have $500 extra right now and I want to try to do something with it that will help me going forward. I know that is a sad amount but it what I have and instead of letting it sit in my account while slowly whittling away at it for the next 6 months (this is what I've done in similar situations) I am thinking about putting it in a HYSA and making small deposits (probably about $20-$50) a paycheck to slowly build up a safety net. I've done some reading and this feels like something that is realistic and attainable for my current situation but I have no real experience with this sort of thing. I will need explanations in crayon. I know the basics but I am a toddler to this world.
Does that plan seem like a good way to build up some savings/financial independence? Are there strategies that would work better?
Thanks in advance for your time.
Broke and Late to the game
byu/piecesofchaos inpersonalfinance
Posted by piecesofchaos
2 Comments
Yes, putting that $500 in a HYSA and adding to it over time is perfectly fine. Ideally, you should have 3-6 months worth of regular expenses in a savings account, as an “emergency fund,” so this will be your first step towards getting that.
> I want to start working towards financial independence
Well, what does your income look like? What are your monthly expenses (detailed list)?
If your income is fairly low, what moves are you currently making to improve that?
Also, do you have any existing debt? If so, what are the amounts and the interest rates on each debt?
Perfect starter plan, yes! Check out the flowchart in the sidebar. The automod should reply to my comment with a link because I said flowchart.
Basically your step 0 is to budget your income, and make plans and goals. Step 1 is to save up a starter emergency fund: ~1k to 1 month worth of expenses. This fund will help address the little “ankle-biter” expenses that hit while you’re trying to work on other goals like debt repayment. A new tire, a speeding ticket, a plumbing repair.
As for strategies, I like the 50-30-20 plan. 50% of your income toward needs, 30% of your income toward wants, 20% of your income toward savings (or debt repayment, if you’re in any). If you are lower income or higher cost of living area maybe you do 70-20-10 but it’s a good goal to try to beef up the savings to what you can.