If you’re trying to save big money in a short period of time, you’re not alone.
Approximately 16% of people want to save around $20,000 in the next year, according to a recent GOBankingRates survey. This number might feel unattainable, but if you fully commit to it, you’ll likely be pleasantly surprised with the results.
Perhaps you’re saving for a down payment on a house, your dream wedding, working to pay off credit card debt, or simply want more money in the bank. No matter what your goal is these 10 tips can help you get there.
Break It Down
Saving $20,000 in one year is a lot. Simply looking at this number can feel overwhelming, so Catie Hogan, head of curriculum and founding financial coach at Parthean recommended breaking it down into more digestible chunks.
“Saving $20,000 per year is about $1,667 per month or about $385 per week,” she said. “Thinking about it in smaller terms makes it less daunting of a goal.”
Set Up Automated Savings
Saying you’re going to put money in savings can be easier than actually doing it, so it’s best to reduce temptation.
“Automatically have part of your paycheck sent to a high-yield savings account,” Hogan said. “You will be forced to adjust your spending and life because the money is out of sight before it even hits your checking account.”
Boost Your Income
“It’s easier to increase your income than continue to cut expenses,” Hogan said. “To save an additional $1,667 per month, you could develop a side hustle, take on some freelancing gigs or ask for overtime from your job.”
She said you should put the additional income toward your savings goal.
Conduct a Spending Audit
“This means cutting unnecessary expenses like subscriptions, entertainment [and] dining out,” Hogan said. “Negotiate your bills and credit card interest rates — if you’re also paying down debt.”
She advised implementing a 24-hour rule for larger purchases, as a way to limit impulse spending.
“Meal prep and work out at home,” she said. “Committing to a slimmed-down spending plan for one year, in addition to the other recommendations, will get you to your $20,000 goal.”
Lower Your Housing and Transportation Costs
“You can cut out of subscriptions, lattes and brunches, but the biggest savings will always come from lowering your housing and transportation costs, if possible,” Hogan said. “Can you drive a more affordable car, take public transportation, rent out a room or even move back in with family?”
If you answer ‘yes’ to any of these questions, she said this will dramatically increase your ability to save $20,000.
Save Like You Mean It
“Begin with zero-based budgeting, a method where every dollar you earn has a purpose,” said Jake Claver, financial director at Digital Ascension Group. “Whether you make $50,000 or $100,000, allocate every penny of your monthly income to expenses, savings and investments.”
Knowing where your money is going can help you get closer to your savings goal.
“By the end of the month, you should theoretically have zero dollars left,” he said. “This forces you to scrutinize every expense and naturally cut out the frivolous ones.”
Maximize Employer Matches
“Chances are your employer offers a 401(k) or equivalent retirement match,” Claver said. “Don’t leave this money on the table.”
He advised contributing enough to maximize the company match.
“It’s essentially free money, and over a year, it can contribute significantly to your savings target,” he said.
Set Up Automatic Daily Bank Transfers
“With roughly 250 business days each year, transferring $4 each business day is $1,000 in savings,” said Noah Damsky, CFA, principal at Marina Wealth Advisors.
Adjusting this number to match a $20,000 savings goal means you’ll need to transfer around $80 to your savings account per day. He said breaking your savings strategy down will make it feel more attainable.
“It will also help impulse spending, as you’ll think twice about small purchases since that could amount to your daily savings,” he said.
No matter what your salary, adjusting your spending to save $20,000 in one year may feel like a lot. If this seems daunting, try to change your mindset.
Instead of viewing this savings goal as something difficult and overwhelming, consider it a challenge. Think about how accomplished you’ll feel 12 months from now when you achieve this feat, and use this as motivation to keep going if there are times you feel like giving up.
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