How to Save $1,000 a Month

When you're looking to save $1,000 a month, you're going to have to employ drastic measures. This is a lot of money to save. You might need this money to save up for a vacation, buy a new car, or even make your regular utility bills or pay off old debts. If you're making a comfortable monthly income, but have significant expenses, this will be possible only if you're willing to increase the efficiency of your budget.

Things You'll Need

• Will Power

Instructions

1. Make a budget if you already have not done so. A budget will help you organize all of your income and expenses. Using a simple spreadsheet can quickly show you how much you make and how much you spend. Dedicated budgeting software costs money, but is a bit more detailed than a simple spreadsheet. These more advanced software programs help you to see where you are spending money and identify patterns in your spending habits. From here, you can cut out waste in your budget based on what you think you can live without, or what you think you can cut back on.

2. Increase deductibles on all of your insurance policies. If you can't remember the last time you filed a claim with your health insurance, auto or home insurance carrier, consider raising the deductibles on these insurance policies. Your premium decreases when your deductible increases, allowing you to save money.

3. Refinance your home. You may save a significant amount of money through a refinance. A lower interest rate, a lower amount owed on your original loan or a combination of both could easily put several hundred dollars into your pocket.

4. Open an Individual Development Account (see Resources). An IDA is made available to low-income families and allows you to earn $1 or more for every $1 you contribute to a bank account. Banks and credit unions sometimes place significant restrictions on what the money may be used for in an IDA. However, if the purpose you have in mind for saving $1,000 per month is consistent with the guidelines of the IDA, this account may be beneficial for you.

Tips & Warnings

• When you save money on your insurance premiums, keep this money in a liquid investment. This money should be accessible if you ever do need to file a claim. Whenever you need to spend this money, try to replace it as soon as possible.

• When refinancing your mortgage, consider a variable rate mortgage if interest rates are trending downward. Falling interest rates on a variable rate mortgage mean that your mortgage payments will continue to become cheaper over time, thus maximizing your monthly savings. If you're not comfortable with this strategy, a fixed-rate loan will still provide significant savings if the rate is lower than your current rate or if the rate is the same but your total remaining principal mortgage balance is lower than when you first started your mortgage loan.

• While variable rate mortgages are good when interest rates are falling, they can turn against you when interest rates rise. Your monthly mortgage payment would increase when interest increase. Consult with a professional financial adviser before undertaking this strategy.

References

• CFED: Individual Development Accounts (IDAs)
• "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A. Crane; 2007
• "Ernst & Young's Personal Financial Planning Guide, 5th Edition"; Martin Nissenbaum, Barbara J. Raasch, Charles L. Ratner; 2004

Resources

• Read this Article in Spanish