Saving and Investing with $1,000 per Month

Welcome to the big leagues! If you can save and invest $1,000 per month, you will eventually become quite wealthy.

I remember four years ago (2019) when I didn’t even have $1,000 in my savings account. Even worse, I had $77,000 in debt; those were not fun times.

I remember thinking that having $10,000 in my savings account would be the most fantastic thing ever! Today, my wife and I have over $300,000 in our savings and brokerage accounts.

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The value of $1,000. Most Americans cannot come up with $1,000 during an emergency. Therefore, if you can save and invest $1,000, you’ll quickly move to the top of the food chain.

Saving and investing $1,000 means you understand how to budget, organize, document, and evaluate your financial situation. 

As you move forward with our saving and investing plan, ensure you understand “why” you are putting your money in particular buckets.

At this point, it all comes down to risk tolerance and your personal safety level. Some people may want to keep money in a high-yield savings account, and others are income investors (like me).

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Don’t choose a saving or investing vehicle because someone else recommended it. Every single person on Earth has a different investment philosophy, risk tolerance, and relationship with money; you’ll need to find your path.

Start with your emergency fund. I always like to save money in my high-yield savings account (HYSA), even if it is complete. 

The good part is that HYSAs yield close to 5%, at least for the next 6-12 months. It wasn’t long ago that my HYSA paid me 0.4%; yikes.

You must determine how much you want to keep in your emergency fund. If you have a secure job or pension, and keep a lot of cash flow moving through your household, then you may only keep six months of expenses in your emergency fund.

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If you are an entrepreneur or freelancer or want to change careers, you should keep 12-24 months in your emergency fund.

Series “I” Bonds for Life. You can keep a portion of your emergency fund in Series “I” Bonds. They yield less than HYSAs right now, but that wasn’t always the case. 

Series “I” Bonds protect you from inflation for 30 years. I prefer to keep Series “I” Bonds for long-term compounding growth than my HYSA. 

As soon as the Federal Reserve lowers rates, HYSAs will lower their interest payments. They have no loyalty to your savings accounts.

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At least Series “I” Bonds try to be on your side. I currently have $8,000 in my HYSA and $12,000 in bonds, which gives me roughly five months of expenses (including my mortgage).

Understanding the power of Treasury bonds. You can use Treasury bonds to extract safe income from the government.

However, a word of caution. The best way to consume treasury bonds is to buy and hold. These bonds are marketable securities, which means they trade on the bond market.

If you hold them until maturity, you won’t lose anything. However, you could lose some of your principal if you attempt to sell them early. 

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The moral of the story is that Treasury bonds are extremely safe investments as long as you have the proper disposition. If you attempt to wheel and deal, you could lose.

The power of real estate. Now is an excellent time to get into real estate. In fact, it is almost always an ideal time to gain exposure to the housing market.

I recommend investing $100 monthly (not investment advice) in Fundrise (affiliate). I have been a strong advocate of Fundrise since I joined in September 2019.

Back then, you needed a $1,000 buy-in to get started. Things are much more accessible now. I currently have over $10,000 in Fundrise and love receiving quarterly dividends.

Indexing to greatness. Index funds are some of the safest products on the stock market. Most people focus primarily on index funds; however, I use caution.

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I love index funds, but selling shares is the only way to extract a livable income from them. I never want to sell shares, so I invest for dividends elsewhere.

If you are new to stock market investing, index funds are a wonderful place to start. After some time, think about how you want to receive your income throughout retirement.

Dividend Growth Investing (DGI). If you are looking long-term, creating your own paycheck machine is a great alternative to selling index funds.

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Dividend growth investing involves buying solid blue-chip dividend-paying companies over a long time horizon. Eventually, you will receive great income and capital appreciation while building a nest egg you can leave to your kids.

The magic of income investing. Finally, for the hardcore investors, we have income investing. Income investing takes the most knowledge, but learning reduces your fears.

At this point, you understand how interest rates affect all securities (bonds, stocks, cryptos, housing, commodities). Income investing is not for the faint of heart.

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However, if you want to feel confident in your investing prowess, take it a step further and become an income investor.

Putting it all together. How would I invest $1,000 per month? As I said earlier, everyone is different, and we must invest as such. Here’s how I would allocate my resources.

1. High Yield Savings Account /Emergency Fund– $100
2. Series “I” Bonds– $100
3. Treasury Bonds– $100
4. Fundrise– $100
5. Index Funds– $50
6. Dividend Growth– $50
7. Income Investing– $500

As you can see, I want my income today. Eventually, my income investing portfolio will spit out so much cash I can reinvest into other regions.

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For example, I currently use my dividends from my M1 Finance brokerage account to fund my shiny new M1 Finance HYSA that pays 5%.

I simply transfer my dividends into my M1 Finance HYSA (affiliate) and collect the interest. Once I reach $1,000 in my new HYSA, I will continue to reinvest my dividends.

Dividends give you multiple options that you can use today. That is why I focus almost exclusively on building my cash flow.

Conclusion. Welcome to the elite savers of America. Very few people can save and invest $1,000 per month.

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Remember, your saving and investing preferences are highly subjective to your spending habits, career, and risk tolerance.

Notice that I didn’t put any money into speculation plays on the stock market like Nvidia (NVDA) or Tesla (TSLA). Yes, you can win with these stocks long term, but to me, they are speculative. 

Once I have enough cash flow, I can allocate 1-2% of my cash flow to speculative growth stocks and cryptocurrencies. 

However, the most vital part of my plan is building an emergency fund, generating safe returns via bonds, and going all in on income investing. 

I receive $1,500 monthly in dividends, which gives me multiple options for allocating my resources. You want to provide yourself with opportunities to further build upon your success. Good Luck!

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