“When you get to the $10,000 level stop and look around,” he added. “Take the time to reflect and see if one tradeoff was worth it or not.”
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1. The need for speed
One of the hardest things about getting started is that you don’t yet have the essential habits. When you’re building the habits, growth is slower. “The smaller your investment balance, the more slowly your money grows,” Sabatier said.
The first 90 days are key, because that’s where you need to work hard to build momentum.
The longer you take to get there, the harder it will seem. Saving up $10,000 in five years will seem like a burden. “If you do it in a year, you’ll say, ‘Wow! In five years, I could have $50,000,’” Sabatier said.
2. Save more by a tiny amount
Next, increase that amount frequently: every 30 days. “It’s less painful,” Sabatier said.
You can think about money in one of two ways: in terms of dollars, or in percentages. Using the percentage lets you trick yourself into saving more without feeling it as an immediate hit to your wallet.
That’s because you cannot buy anything that costs 1%. Instead of saying you’ll save $300 more each month, an amount you can easily understand and be tempted to spend, express your savings goals in these tiny increments.
“Go into your 401(k) every 30 days and change your contribution amount,” Sabatier said. Depending on the platform and the plan design, you may be able to set your increase automatically.
3. Invest your side hustle cash
Sabatier made $60 taking care of his neighbor’s cat, among other side hustles. Instead of spending it, he deposited it right away into his brokerage account.
That is another way to manually increase your savings. Take any extra money, whether it’s a few dollars you find around the house or a forgotten $10 someone returns to you. Instead of treating it as surprise cash to buy lunch, invest that money.
“Every dollar you make on the side, invest as quickly as possible,” Sabatier said. “Because you want to get the extra money you’re making to start working as quickly as possible.”
4. The roundup strategy
Contrary to popular recommendations, Sabatier checked his net worth daily. If the number was $7,987, he’d come up with $13 to invest, just so he could round it up to an even $8,000.
“I’m a little OCD,” he said.
His no-fee method was to deposit bits of extra cash into a money-market account at Vanguard. When he had accumulated enough, say $200, he’d invest it in low-cost index funds.
The point is to use mindset to get extra money into your investment account.
Original Article https://www.cnbc.com/2019/12/12/grant-sabatier-shares-his-best-tips-for-getting-that-first-10000.html