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Senior Correspondent

One thousand dollars in a savings account.

That’s probably the most achievable—and impactful—thing you can do for yourself as you’re trying to pull out of a financial hole … or starting to put money aside towards financial freedom once you’re out of one.  Or, even if everything looks hunky-dory on the outside, but you know your credit cards are maxed out … and you’re stressed out.

That one act is so transformational that it’s the first thing I coach my clients to do.  And it’s the first thing I did when I hit the wall financially in 2001.

So Where Does the Money Come From?

Now, I don’t care how you get that money.  It just shouldn’t come from your regular income that’s probably already stretched too thin.  Get creative.  Think of this:

  • Cut a deal with the neighbors to babysit for their kids on Fridays so they can have a weekly date night, even if you haven’t done any babysitting since you were 14.
  • Scour the house for things with some economic value, but with little sentimental or practical value to you.  Sell them on Ebay or in a garage sale.  (Why not empty the garage or the storage unit while you’re at it?)
  • Sign up for paid focus group participation through companies (one example is FG Global Research Recruiting at www.fgglobal.com).  Do your research to be sure the company is legitimate and do not pay to register, to participate or to access any lists.  Start your search on Google by entering “paid focus groups” and drill down from there.  And, better yet, start asking everyone you know; a personal referral of a company is your best bet.

[What did I do?  Back in 2002, as I was picking up the pieces, I concentrated on trial focus groups:  trial simulations held by defense attorneys who were seeking ideal arguments and jury-member profiles for their clients’ cases.  Those sessions, plus some proofreading and translating projects, were how I first funded my emergency fund.]

Whatever it is you have to do, do it.

Online Savings Accounts

But first open a separate online savings account and put $5 in it so you have a safe place to park your new-found savings.

Now, the U.S. printing presses are chugging away, printing new money in overdrive, so banks don’t need your money.  That means interest rates are miserably low these days, typically less than one percent per year.

But your top priority isn’t necessarily to build interest; it’s to build your confidence.  Your “money confidence.”

You’re more interested in:

  • low minimum deposits to open the account;
  • no monthly fees;
  • easy online access for deposits; and
  • FDIC insurance.

(You don’t want to put your money where it’ll disappear some day because the bank goes belly-up and isn’t insured.)

You might be looking at online banks like FNBO Direct (www.FNBODirect.com), Ally Bank (www.ally.com/bank/online-savings-account) that used to be GMAC, and today even American Express (www.personalsavings.AmericanExpress.com).  Long-time favorite ING Direct has been swallowed up by Capital One, so may not be such a favorite for much longer.

Why Are Savings Accounts Critical?

Having an emergency fund is just the first step towards getting yourself to financial peace of mind, where you know you (and your family if you have one) will be fine well into retirement.

But its importance comes from the fact that, suddenly, you have a feeling of control over at least one part of your financial picture.  That’s far more empowering than you can imagine.

It’s money that should not have come out of your regular earnings, so didn’t put additional pressure on any other payments.  Therefore, it’s money that should not be used for shortfalls in your regular payments either.

Actually, it’s money that will bail you out when you truly have an unexpected “emergency,” an expenditure that couldn’t have been foreseen.  Something happens to your car.  Your hot water heater bursts.  Your daughter calls from college to say she’s in trouble and needs to come home to talk to you.

By knowing you have “a little something” set aside for such emergencies somehow lowers your stress levels so you can deal more rationally with the rest of your finances.

It may seem like a small step, but it’s the most important step because it takes you psychologically from “totally vulnerable” to “taking control.” 

You can build from there.  But first you have to take that first step.

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