A single financial decision is not likely to help you save $20,000 in a short period of time. Perhaps you’ve been putting off asking for a raise but now you have the nerve to do so; nevertheless, even if you get the increase you deserve and it adds $500 to your monthly paycheck, it will still take you over three years to reach $20,000.
In other words, there are a number of things you may do to increase the rate at which you accumulate the necessary funds, and the greater your urgency, the greater the number of actions you will need to do.
Initiate With the End in Mind
Ask yourself why you want to save $20,000, as suggested by Jay Zigmont, Ph.D., CFP(r), and creator of Childfree Wealth. If you’re saving for anything particular, like a home or automobile, “be sure you both physically and symbolically have a vision of that objective,” he said. Don’t let your focus wander from that objective. Sound cheesy? Put pictures of it up throughout the home or as your phone background so you always remember what you’re striving towards.
The SMART acronym, which stands for “Specific, Measurable, Attainable, Related, and Timed” goals, was another piece of advice given by Zigmont. In order to save $20,000 in 10 months, for instance, one must set aside $2,000 every month, or $500 per week.
Make a plan for your money and see how much you can save.
According to David Frederick, senior manager of private client tax services at LBMC, “the easiest method to save $20,000 is to construct a monthly budget based on current income and spending.” Frederick said that after making a budget, one should calculate how much extra money can be put away.
Set up a savings account and have money deposited into it regularly.
For example, AP Wealth Management partner Gene McManus, CPA, CFP(r), recommends having the savings contribution automatically drafted into a savings account before the money may be used. According to McManus, it’s true that cutting down on spending might seem like a severe hardship at first, but that things will become better when you get acclimated to the idea.
Look for Savings Opportunities
If you can’t find the money to save from your budget to reach your $20,000 savings target by the deadline you’ve set, you should look for methods to reduce your spending on non-essentials. Take a close look at the parts of your budget where you spend the most money on stuff you don’t really need.