The idea of saving $25,000 in five years may sound like a daunting prospect when you first hear about it. GOBankingRates spoke to Corey Noyes, owner and financial advisor of Balanced Capital, to get more insight into this goal. If you want to save $25,000 in the next five years, Noyes said you need to tuck away just under $14 a day.
Saving an extra $14 a day, or even more, can be done to reach a $25,000 savings goal. Now that you know how much you need to put aside on a daily basis, here’s what else you need to focus on in your five-year savings plan.
Create a Concrete Plan
If you need to save at least $14 a day each day for the next five years to reach $25,000 in savings, how do you plan to reach this goal?
Damian Pardo, director of the First Horizon South Florida Private Wealth Management group, recommends creating a concrete plan. This plan should detail exactly how you will save $25,000 over the next five years. A concrete plan has weekly goals, such as saving $100 a week for 250 weeks to get to $25,000.
“Keep a log of your weeks and the cumulative savings,” Pardo said. “You should also open a separate, interest-bearing account for this goal so you can see and be proud of your progress.”
See Where You Can Save on Fixed Expenses
A fixed expense is an expense that stays the same each month. There are fixed expenses in every budget including rent, mortgage payments, vehicle payments and insurance premiums.
Scott Trench, author of “Set for Life: Dominate Life, Money, and the American Dream” and CEO of BiggerPockets, said if you wanted to save $1,000 you would cut back on discretionary spending like daily coffees and dining out. Saving $25,000 requires thinking bigger.
“The best thing that folks can do is focus on the fixed expenses that are holding you back,” Trench said. “Where you live and how you get around are the most important things to change if you want to start saving big.”
Here’s where Americans can start trimming back on two of the highest fixed expenses: housing and transportation.
- Housing: Trench recommends starting off living with a few roommates as you save up toward the five-figure $25,000 goal. House hacking is an effective way to wipe out housing expenses. This includes buying a property with extra bedrooms, like a house, an accessory dwelling unit (ADU) or a duplex with another unit in it, and renting out spare rooms, units or floors.
- Transportation: Try to live as close to where you work as possible to eliminate this expense and utilize more affordable commuting options like public transportation, bicycling and walking. If you absolutely need a car, Trench recommends getting around with a cheap, used economy vehicle.
Practice Coupon Stacking
Saving extra money on essentials like groceries means utilizing coupons and getting into the practice of coupon stacking.
Coupon stacking means shoppers may combine nonidentical coupons like a manufacturer coupon and a store coupon on the purchase of a single item. The end result means saving more money (which can be put toward your “$25,000 in five years” fund) and the opportunity to stock up on nonperishables for less. Make sure you know what the coupon redemption policies are at your local supermarket, drugstore or retail store.
Work a Side Gig
If you find it’s too difficult to save $14 each day, working a side gig may be the answer to getting these additional earnings.
Explore popular options like driving a ride-share, food delivery or freelancing as a writer or graphic designer. You can also look into higher-paying hustles, including babysitting, language translations and tutoring, that give you the opportunity to self-determine higher rates.
Making this kind of financial shift, even if it is snipping out $14 each day for five years, doesn’t happen overnight. Trench said this kind of big move actively downgrades the cost of your lifestyle for a period of time.
A bit of patience and planning is necessary to adapt accordingly to the changes. When implemented for a few years, you’ll find these changes can have the effect of propelling your wealth forward and starting a snowball of accumulation that compounds with each passing year to hit your savings goal.
More From GOBankingRates