5 tips to save $25,000 in less than 5 years
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The idea of saving $25,000 in five years can seem like a daunting prospect when you first hear about it. GOBankingRates spoke with Corey Noyes, owner and financial advisor of Balanced Capital, to better understand this goal. If you want to save $25,000 over the next five years, Noyes said you need to save just under $14 a day.
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Saving an extra $14 a day, or even more, can be done to reach a savings goal of $25,000. Now that you know how much you need to set aside daily, here’s what to focus on in your five-year savings plan.
Create a concrete plan
If you need to save at least $14 a day for the next five years to reach $25,000 in savings, how do you plan to achieve that goal?
Damian Pardo, group director of First Horizon South Florida Private Wealth Management, 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, like saving $100 a week for 250 weeks to reach $25,000.
“Keep a diary of your weeks and cumulative savings,” Pardo says. “You should also open a separate interest-bearing account for this goal so you can see and be proud of your progress.”
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See where you can save on fixed expenses
A fixed expense is an expense that remains 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 expenses like daily cafes and restaurants. Saving $25,000 requires thinking bigger.
“The best thing people 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.”
This is where Americans can start cutting two of the highest fixed expenses: housing and transportation.
- Lodging: Trench recommends starting to live with a few roommates while saving up to hit the five-figure goal of $25,000. House hacking is an effective way to wipe out housing expenses. This includes buying a property with additional bedrooms, such as a house, accessory dwelling unit (ADU) or duplex with another unit, and renting spare bedrooms, units or floors .
- Transportation: Try to live as close to your workplace as possible to eliminate this expense and use more affordable transportation options like public transit, cycling, and walking. If you absolutely need a car, Trench recommends getting around with an inexpensive used economy vehicle.
Practice stacking coupons
Saving extra money on essentials like groceries means using coupons and getting into the practice of coupon stacking.
Coupon stacking means shoppers can combine non-identical coupons like a manufacturer coupon and a store coupon when purchasing a single item. The end result means saving more money (which can be invested in your “$25,000 in five years” fund) and the ability to stock up on non-perishable food for less. Make sure you know the coupon redemption policies of your local supermarket, pharmacy or retail store.
Work a side gig
If you find it too difficult to save $14 a day, working on the side may be the answer to getting that extra income.
Explore popular options like driving a carpool, delivering food, or freelancing as a writer or graphic designer. You can also look into higher-paying activities, including childcare, language translations, and tutoring, which give you the flexibility to determine higher rates yourself.
Making this kind of financial change, even if it costs $14 a day for five years, doesn’t happen overnight. Trench said this type of big move actively lowers the cost of your lifestyle for a period of time.
A little patience and planning is required to adapt accordingly to the changes. When implemented for a few years, you will find that these changes can have the effect of propelling your wealth forward and triggering a snowball of accumulation that accumulates year after year to reach your savings goal.
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