When it comes to saving $20,000, it’s unlikely that one financial move is going to help you achieve that goal in a short amount of time. For instance, you could finally work up the courage to ask your boss for that raise you deserve, but even if your raise equaled an extra $500 each month it would take you more than three years to get to $20K.
In other words, you’re going to have to do various things to reach your goal faster, and the quicker you want to reach that savings balance, the more things you’ll need to do.
Start With Your Goal
Jay Zigmont, Ph.D., CFP(r) and founder of Childfree Wealth, said to ask yourself why you want to save $20K. “If it is for a specific goal (such as a down payment on a house or a car), make sure you both literally and figuratively have a picture of that goal,” he said. “You need to keep that goal at the forefront. It sounds corny, but hang photos of it in your house, make it your phone wallpaper and know what you are working toward.”
Zigmont also advised setting a SMART goal, which stands for Specific, Measurable, Attainable, Related and Timed. “If you decide you are going to get to your goal in the next 10 months, then break it down by month and week (e.g., saving $20k in 10 months is $2,000 per month or $500 per week),” he said.
Create a Budget and See What You Can Save
“As with any savings goal, the best way to save $20,000 is to create a monthly budget based on existing income and expenses,” said David Frederick, the senior manager of private client tax services at LBMC. Frederick said once you’ve created your budget, you should determine how much surplus you have available to save.
Open a Savings Account and Set Up Automatic Contributions
“Have the savings contribution drafted electronically into your savings account before you can spend it,” said Gene McManus, CPA, CFP(r), partner at AP Wealth Management. McManus said that even though it may seem like painful deprivation at first, it will get easier as you get used to not having those funds to spend.
Find Ways To Cut Back
If you’re not able to save enough from your budget to get to your $20K savings goal in the timeframe you’ve set, you’ll need to find ways to cut back on discretionary expenses in your budget. Look at areas of your budget where you spend the most on things you really don’t need.
Steve Sexton, founder and president of Sexton Advisory Group, recommends cutting back on dining out. “This doesn’t mean you’re not allowed to enjoy a nice meal at a restaurant from time to time — it means doing some meal planning ahead of time or committing to bringing a packed lunch to work every day,” said Sexton. He gave an example of a client who was spending $1,200 a month on dining out for every weekday meal and dinner on the weekends. By cutting back to dining out only twice a week, the client was able to save almost $900 a month or $10,800 a year.
Sell Your Unwanted Stuff
“Do you have some things you need to get rid of?” asked Kasey Ring, president of Upward Personal Finance. “Are there items in your home you haven’t used in over 180 days? Do you have luxury items you are willing to part with to reach your goal? Sites like eBay, thredUP, or Facebook Marketplace are easy to set up.”
For example, if you have 20 designer items that you’re willing to part with (and that people are eager to buy), and you can sell them for a minimum of $50 each, that’s $1,000 you can put toward your savings goal.
Evaluate Your Insurance
“Review current policies to make sure you are getting discounts for safe driving records, home security systems and joint policies,” said debt and consumer finance expert Tanya Peterson, vice president of brand with Freedom Financial Network. “Take a look at your car insurance deductible. Depending on your car’s age and value, it may be time to raise the deductible. Visit online sites to compare rates on home and auto insurance. If you find better pricing, talk with your current insurer and ask if they can match the price.
You could save a couple of hundred dollars per month by doing this, which would add up to $2,400 extra per year you could put in savings.
Generate Additional Income
“For larger goals, sometimes the reality is that you just have to bring in more money,” said Peterson. “Aside from taking on a part-time retail job (which can pay very well), depending on your skills, you could consider a number of options. There’s tutoring, teaching a language and teaching (or assisting) in a learning pod or school. You also could look into teaching ESL online; some programs require certification, but this could be time to do it.”
She continued, “If you are computer-savvy, offer to help with website maintenance and updates, virus removal or cleaning up a hard drive. More people working at home mean these skills are in greater demand, and many can be done remotely. Pet-sitting, dog-walking and yard care (or snow removal) are all in demand.”
Generating an extra $1,000 per month after you set aside what you need for taxes could help you reach half of your $20,000 goal in less than a year.
More From GOBankingRates