The 1% Challenge: Ramping Up Savings Painlessly

The idea of saving money can evoke emotions like stress, annoyance, and even frustration. A recent U.S. News survey shows that 43% of people don’t have $1,000 to cover an emergency. So, if you’ve felt it to be impossible to set money aside, you’re not alone.

However, if you want to change your financial trajectory, you do so by making small adjustments over time. WorkMoney has your guide to stack up your savings a little at a time.

What is the 1% Challenge?

The 1% challenge isn’t a new financial challenge. It’s a simple way to build your savings: by saving 1% more today than you did yesterday. Even if you’re saving $0, that’s okay. Going from 0 to 1% is still a start. If you’re saving 5%, bump it up to 6%

Why Small Changes Work

Small changes are often easier to stick with compared to major overhauls.

Behavioral research shows that habits are more likely to last when they feel manageable. This applies to eating habits, budgeting, and a variety of other personal goals. Starting small reduces the resistance that comes with lofty goals, while still making meaningful progress over time. The result is an achievable goal that can significantly impact your future savings.

Here’s what that 1% change looks like in a monthly budget:

What 1% Looks Like in Real Life

If you can squeeze 1% out of your monthly income and put it towards savings or retirement, you’re already up for the 1% Challenge.

Here’s what that looks like based on different incomes.

Why Most People Struggle to Save More

The Myth of Needing Big Sacrifices

Many people assume that saving more money requires giving up everything they enjoy. Images of strict budgets, canceled vacations, and cutting out every small luxury can make saving feel overwhelming. When a financial plan feels too restrictive, it's harder to maintain over the long term. One study shows that less than 25% of people stick to a budget. 

Lifestyle Creep

As income rises, spending often rises along with it. A raise, bonus, or new job can quickly get absorbed by a larger home, more dining out, or other lifestyle upgrades. This is lifestyle creep, or where small increases add up over time, creeping in without you realizing it. 

Decision Fatigue

Saving money requires lots of choices — both big and small — that can be draining. Motivation alone doesn’t always work, which is why it’s important to set up systems.

For example, set up regular auto-contributions from your checking account to your savings account so you don't have to remember to do it yourself.

Step 1: Find Your 1%

The first step is to find that 1%. There are a few places to look:

Start by reviewing your recent bank and credit card statements, especially recurring expenses that automatically renew each month. 

Next, look at any potential “invisible” spending you may have. Items like: forgotten subscriptions, insurance policies that haven't been shopped around recently, overpaying on cell phone plans, or throwing money away on monthly bank fees. Even small charges can add up over the course of a year.

A few small adjustments may be enough to free up the money needed to start the challenge.

Step 2: Let Raises and Windfalls Do the Heavy Lifting

One of the simplest ways to increase your savings rate is to save money you haven't gotten used to spending yet. When you receive a raise, bonus, tax refund, or cash gift, consider directing a portion of it toward savings before it becomes part of your regular spending habits.

This approach works because it minimizes the feeling of sacrifice. Since the money wasn't previously part of your budget, you're less likely to miss it.

Additionally, if you happen to have some extra money come your way, commit to saving that additional income. The same strategy can apply to annual bonuses, tax refunds, side-hustle income, or other financial windfalls. Even saving a fraction can make a meaningful difference over time.

Step 3: Find Your 1% Through Savings Programs

Government Programs Can Create Savings Opportunities

One of the easiest ways to find an extra 1% for savings is to reduce expenses you're already paying. 

Depending on your situation, programs such as the Low Income Home Energy Assistance Program (LIHEAP), Lifeline phone and internet discounts, SNAP benefits, and Medicare Savings Programs may help lower monthly expenses or put money back in your pocket.

A little bit goes a long way.  If you can use these programs to lower your utility costs or cover healthcare expenses, the money you save can go toward an emergency fund, retirement account, or other financial goals.

Unclaimed Funds

The government may be holding money that rightfully belongs to you. 

Billions of dollars in unclaimed funds sit in state treasuries waiting to be claimed by their rightful owners. These funds can come from forgotten bank accounts, uncashed paychecks, utility deposits, insurance payouts, stock dividends, tax refunds, or other financial accounts that have lost contact with their owners.

On the official unclaimed property website, searching for unclaimed property is free and takes only a few minutes. Most states maintain searchable databases where residents can look up their name and file a claim if money is owed to them. If you discover money that's rightfully yours, consider using some or all of it to start an emergency fund, pay down debt, or kick-start your 1% Challenge savings goal.

Step 4: Lower Existing Bills

Another way to find an extra 1% in savings is to reduce expenses you're already paying. Here are a few places to start looking for potential savings:

• Shop your insurance policies: Insurance can be a significant expense for many households, but it's also one of the easiest to shop around for. Comparing quotes through marketplaces such as Insurify or directly with insurers can uncover opportunities to reduce costs without adjusting coverages.

• Banking and debt savings: Small (and unnecessary) financial fees can quietly eat away at your budget. For example, if you have a checking account for which you’re being charged monthly maintenance fees, you may consider switching. If you carry debt, refinancing or consolidating loans may reduce your interest rate and monthly payment. The faster you can pay off your debt, the sooner you can redirect that into your savings goals.

• Saving on utility bills: Housing and utilities often account for a large share of monthly expenses. Energy-efficiency improvements and utility assistance programs may help reduce energy bills. Additionally, it may be worth asking your internet and cell phone providers about promotions, discounts, or retention offers to see if any are available.

Final Thoughts

The 1% Challenge works because it focuses on small, manageable improvements that add up over time, rather than a massive change all at once.

The most important step is the first: find that 1% you can either add or trim back to get started saving. Consistent progress, even in small amounts, can help strengthen your financial foundation and move you closer to your long-term goals.