The road to financial success requires good financial management. Maybe it’s hard for you to start saving money? After all, how can you even stop yourself from impulse buying when you are outside. Yet, doing so is easier said than done especially if you want to save a huge amount of money. In this article, we will teach you how to save 20,000 in a year.
Sounds insane right but it is definitely doable!
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How to save $20,000 in a year?
Saving this amount will challenge you in many ways. Firstly, you will have to change your spending habits and the way you see the money. Secondly, avoid unnecessary spending which only causes financial distress later on. Thirdly, focus spending on your necessities. And most importantly, save your money and invest.
To save this much, there is actually no one size fits approach. Here are the different saving methods that work:
Smart Approach: You set your financial goals and you educate yourself to improve your financial literacy.
Practical Approach: You set a certain amount that you want to spend a month or you set up a saving challenge.
Frugal Spending: The emphasis is more on cutting down unnecessary expenses and limiting spending in general.
Hybrid Approach: this is a combination of two or even all these methods.
Given the following methods above, how to save $20,000 a year?
The most effective method is to do the hybrid approach. Here is why?
The hybrid approach takes into consideration not just controlling your spending but also being smart in handling your finances for you to reach your goal. This method gives you a more long term approach in financial management.
The Smart Approach: Setting Your Financial Goal
Setting your target is the very first step that you will have to do. It gives you an idea how much you have to save and in a way, it gives you a direction on why you are saving money in the first place.
Do you need to raise $20,000 to get rid of a payday loan or do you need the money for your upcoming wedding? Some people save money for a house. Every person has their respective reasons so let’s quantify the goal.
Let’s do the quick math. In order to save $20,000 a year, you will have to save $1,666 or to round it off at least $1700 per month.
From the look of it, $1700 per month needless to say is still a huge amount that you have to raise in a month.
The reality is that every month, there are bills to pay and there are expenses incurred.
The Practical Approach
Saving $20,000 a year is possible if you commit yourself. Now that you have finally set your financial goal and you are aware of the amount you need to raise per month, the next step is to set a certain amount that you think you can save per month.
Have you heard about the 20%-80% rule? It means that 20% of your income should be automatically debited to your savings account. Therefore, you deduct 20% off your monthly income and save it. This is actually a good option if you are in the higher income tier if the income is around $8,400.
However, we have to take into consideration this may not apply to everyone. In which case, you actually have two options. First, you can increase your set savings rate. For example, instead of 20%, you can increase it up to 30% or even up to 50% whichever you think fits your budget.
By committing to this savings challenge, you only spend the remaining money after you have finally allocated for your monthly savings target.
The Frugal Approach
Now the question is, what if you do not even have enough monthly income to save this amount?
This is where the importance of frugality comes in.
With a frugal approach, you take a look at your monthly expenses. Dissect which among them you can remove in order to save money.
Here are some frugal tips on how to save $20,000 in a year:
● Reduce your time eating outside. Instead of eating outside or having a takeaway every single time, you can actually save a lot if you will buy fresh produce from the grocery and prepare your meals. Not only are they healthy, but you can also cut down on food expenses as well.
Want to save money on grocery? Read our article here
● Limit your spending on shopping. For some people, shopping is a form of retail therapy. There is nothing wrong with it but if you are truly committed to raising this amount of money, you have to control yourself.
● Go for thrift stores or buy the items online. There are actually cheaper alternatives without compromising quality.
● Make use of coupons and discount deals. Tons of coupons are up for grabs when you want to go eat in a restaurant or when you purchase an item. These coupons might appear minimal but if you combine all of them, you can enjoy great savings.
There are countless ways for you to reduce your spending. It is just a matter of allowing yourself to adjust so you can achieve your savings target.
How to save 20,000 in a year by getting a side hustle
With just one source of income, it is challenging to save $20,000. The cost of living in California is not that cheap so there are cases wherein even if you really want to save money, you just can’t.
How to save $20,000 a year then? You can do a side hustle to help you augment your income. The good news is that if you have the skills, you can actually make use of them.
1. Freelance Writer
Freelance writing is one legit work from home job that will earn you a good stream of income. In this digital age, almost everyone relies on the Internet for information.
The industry is quite diverse so it is essential to narrow down the focus of topics you want to write about. This highly depends on your area of specialization. If you are from a marketing background, you can focus on writing about sales and marketing, online selling, digital marketing, etc.
Starting your freelance writing gig might take some time. How to save 20,000 in a year? Prepare to make an impressive portfolio or be willing to do a reasonable writing test for a start. As you create quality content for your clients, you will eventually pick up the momentum and get a steady stream of projects.
2. Teach Online
With the increasing demand of English teachers from all over the world, there are tons of online vacancies to fill. In fact, there are people who work as a full-time English teacher. Would you believe that there have been a lot of people who are able to pay back their debts with this method?
The potential monthly earning that you can get is around $20-$30.
How to save $20,000 a year as an online teacher? If you can teach other core subjects in English, you can earn way much more. Online Math and Science teachers are earning a lot with their expertise. Of course, these are not the only two subjects. There will always be demand for other subjects across various grade levels that you can explore.
Most online teachers work for big companies but you may also opt to do freelancing. The only downside to do this is you will have to search for students on your own. Nonetheless, with effective marketing and topnotch lessons, you will get students for your classes.
3. Sell Online
Another lucrative side hustle is to sell online. There will always be demand for certain items and if you know how to spot opportunities, you can actually start small. With a small capital, you can buy and sell. Another option is to become a part-time sales agent. For every sale you make, you can definitely get a good sum of commission.
Check out our previous article 8 Legit Work from Home Jobs in California for additional side hustle.
The following steps are but some ways and recommendations to help you succeed and save $20,000. With clear planning and financial discipline, it might appear to be a bit difficult especially if you are not a spendthrift person but the result is definitely rewarding.
On top of succeeding the savings target, you get to educate yourself on how to handle your finances. So, even if let’s say, you no longer need to save this much, you can still apply these tips for you to achieve financial freedom.
As what the saying goes, “When money realizes that it is in good hands, it wants to stay and multiply in those hands.”
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