Are you struggling to save money? Feel like you’re constantly short on cash? It’s a lot easier than you might think to save as much as $20,000 in one year.
The key to saving money is just making a few simple lifestyle changes.
This post will tell you all about ways you can save without sacrificing the things you love. Before you know it, you’ll have saved $20,000 in a year — and be better prepared for a financially independent future.
Just read on for some tips on saving and budgeting, then read our 10 super simple steps to save $20,000 in a year.
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When should you start saving?
Why is it that we tend to look at saving money as an “adult” thing to do?
A lot of people living on a tight budget, including college students, teenagers, newlyweds and young professionals, feel like it’s too early for them to start saving.
The reality is, you don’t need to be settled down or “adulting” to start saving money. Even if you can only afford to save $1 a week, the sooner you start, the more your savings will grow.
Starting to save young is one of the most common habits of financially successful people.
Experts say that the first step toward becoming financially independent and being able to retire young is putting as much money aside each month as possible. Just $25 per paycheck will add up surprisingly fast.
So, to answer the question: you should start saving as soon as possible. It’s not about how much you can save — it’s about starting early, and keeping up with it.
Savings, not sacrifice
One of the main reasons people don’t start saving young is that they feel like they have to sacrifice some part of their lifestyle to save money. This is especially true with college students.
But that’s not actually true. You’ll be surprised by how little the changes you need to make to save money are. Once you start saving, you’ll hardly even notice any difference.
In fact, some experts say that a lifestyle that saves you money is actually better for your health, both mentally and physically.
People who save aren’t just better prepared for the future — they’re healthier, and happier!
With that in mind, there’s pretty much no reason not to start saving, right?
What does $20,000 really look like?
Before we get into the best ways to save $20,000 dollars in a year, let’s talk about what that amount of money actually looks like.
No, I don’t mean a physical stack of $20,000. I mean in terms of your budget and day-to-day lifestyle.
To put that amount of money into a more realistic perspective, I broke down $20,000 into things we all spend money on within the span of a year.
So, here’s what $20,000 in one year really looks like:
- $780 — A trip to a nationally recognized coffee house, 5 days a week, for one year.
- $3,000 — The cost an average American spends on meals out in one year.
- $700 — Cost of a new iPhone 11.
- $2,000 — A year of new clothes, spending around $161 per month.
- $720 — Two domestic flights, bought at the average cost.
- $1,500 — Standard cost for a new laptop.
- $8,171 — Average gas costs for a medium-sized sedan in one year.
- $700 — One year of a standard gym membership.
- $1,000 — 3 concert/sports games tickets at $100 each, plus one music festival ticket at $700.
- $565 — Average cost for alcoholic drinks in one year.
- $900 — One brand new sofa, bought on clearance.
Altogether, those expenses add up to just over $20,000.
Am I saying you just need to cut all of those things out of your life to save $20,000 in one year? Of course not. This list just goes to show how everyday expenses and costs that seem small at the time can add up over the course of a year.
By changing small habits and cutting down on unnecessary expenses, you can easily save much more than you expect.
How to save $20,000 in one year
With all that in mind, let’s talk about the practicalities. How can you actually go about saving as much as $20,000 in one year?
Honestly, it’s a lot easier than you might think. Once you start saving, you’ll be surprised by how simple it is.
Of course, saving money will look different to everyone. We all have different habits, incomes, and expenses to focus on. There is definitely no universal money-saving tactic that will work the same way for everyone.
That said, there are general things that everyone can do to try to cut down their annual spending.
Here are 10 really easy examples, in no particular order of importance.
1. Set (and stick to) spending budgets
One of the easiest ways to start saving money is to set spending budgets for yourself.
It’s really easy to overspend if you’re not keeping track of your spending habits. When you keep all your money in a single checking account, you can easily just keep swiping that debit card without really realizing how much money you’re losing.
That’s where specialized budgets can help! Set aside a certain amount of money for each expense every month, and you won’t need to worry about going over.
You can do this through budgeting apps (highly recommended for someone who uses their phone a lot), or with the cash envelope method.
With the cash envelope method, you can physically keep track of your spending by setting aside a small amount of cash in multiple envelopes. You can have an envelope for groceries, one for nights out, one for coffee and snacks, etc. As soon as the envelope is empty, you’re out of money for that expense that month!
Whatever method you choose for setting your budgets, just make them reasonable, and stick to them. Before you know it, you’ll be saving thousands every month.
2. Limit your monthly subscriptions
These days, pretty much everything is done online. It’s so easy to sign up for a subscription — whether it’s to a streaming service, a membership club, a magazine, or anything else.
Most of those subscriptions seem pretty small. $5-$10 a month may not seem like a big deal at the time. But the more subscriptions you sign up for, the more you are going to spend.
Even worse, most of those monthly fees are automatically taken out of your bank account each month — so you might not even notice you’re losing money!
As an easy step toward saving, take a second look at all of your subscriptions. If it’s not absolutely necessary, cancel it. You’ll be surprised how much you save without those monthly charges.
Love your streaming services too much to let them go? Consider sharing a plan. A lot of services allow multiple people to use one account, so you can share those costs with your friends, partner, or family.
3. Don’t buy any new clothes
As a nation, Americans spend way too much money on new clothes.
The list earlier showed the average amount an American will spend on new clothes every month: around $161. But a lot of people spend much, much more than that.
Setting a budget for your clothes spending every month is a great way to save money. But if you want to take it a step further, why not try to buy no new clothes at all, for a whole year?
It’s easier than you might think. There are tons of places to shop for used and second-hand clothes, at a fraction of a price and just as much (if not more) of the fashion.
Check out your local thrift stores, garage and yard sales, second-hand shops, and online flea markets.
It takes a little more effort to find what you’re looking for second-hand than it does in a mall, but the savings are definitely worth it. Plus, limiting yourself to used clothes only will help you curate a style that’s unique to you — instead of wearing all the same name-brand stuff that everyone else has.
On top of that, buying clothes second hand is much better for the environment. The shipping and production of new clothes produces tons of pollution! You can go green and save money at the same time by changing your shopping habits.
4. Take another look at your insurance plans
This is a big one.
We all need car, health, and life insurance, there’s no denying that. But are you paying more than you need to for your plans?
With the help of a financial advisor (or a trusted financially-savvy relative or friend), take another look at your insurance plans. There may be cheaper options available to you.
When it comes to health insurance, for example, you might have access to an employer-sponsored health plan that you don’t know about. Even part-time employees have access to insurance benefits through some companies — ask your employer if as health plan is available for you.
With an employer-sponsored health plan, you could save thousands on your health insurance.
You might also want to consider health sharing plans as a money-saving alternative, to help you prepare for emergency medical costs.
For car insurance, make sure you shop around with multiple companies to find the best quote. Also, remember to take advantage of any discounts that apply to you: accident-free, student discounts, bundling home and auto insurance, etc. Ask your insurer about any discounts you might qualify for.
The point is, insurance is a necessary cost, but it’s not a cost that has to be consistently high. Look into all the ways you can save on your insurance plans, instead of blindly paying your monthly fees.
5. Avoid spending traps
What makes saving so hard??
Well, part of it has to do with the fact that we live in a culture that encourages us to spend money on things we don’t need. The pressure to spend money is constant, and it’s pretty easy to give in.
Remember, saving money is all about making small changes to your lifestyle. One of those changes is avoiding spending traps.
What is a spending trap, exactly?
A spending trap can be defined as any situation where you are encouraged to spend money. For example, when a store has a big sale: you might not need a new TV, but when you see a new TV marked down to 75% its original cost, it’s pretty hard to resist, right?
Don’t get sucked into those scenarios where you’re pressured to spend unnecessary amounts of money. You can avoid spending traps by not going to the mall or big shopping centers — especially not around the holidays or Black Friday.
You can also resist temptation by spending less time online. Targetted ads on social media are silent budget killers — the more time you spend logged off, the less likely you are to see them!
Picking up a budget-friendly hobby like art, music, hiking, or surfing will help you to stay offline and out of the malls. Instead of being tempted to shop, spend your time doing something you love!
6. Plan your meals ahead of time
Remember that $3,000 a year the average American spends on meals out? Yeah, that’s a lot.
But it doesn’t seem like a lot while you’re doing it. Taco night with friends, a quick sandwich on your lunch break, a drive-through meal on your way home from work… over time, those meals add up.
You don’t need to quit eating out entirely to save money — that would be no fun. But you can reduce the amount you spend on food by planning your meals ahead of time and going out more often.
Just take a little time at the start of every week to make a plan. If you’re busy during the weekdays, cook a few meals ahead of time that you can box up and take to work with you, or have ready to go when you get home at the end of the day. Plan out a few easy breakfasts that you can make every morning.
Meal planning apps can be a huge help with this, as can a regular food delivery service.
And yes, occasional meals out with friends or family can totally be a part of your plan. It just comes down to limiting spending on food — when you have enough to eat at home, you won’t be paying as much for delivery, fast food, and midday lunches and snacks. You’ll see those savings start to add up right away!
7. Have parties at home
Let’s be honest: clubs, bars, and restaurants are overrated. They’re loud, crowded, and above all else, expensive.
Next time you’re planning on getting together with friends or family, consider doing it at home instead. You can save tons of money by cooking and celebrating at home, instead of going out. Plus, it’s a more intimate, quiet, and all-around more pleasant experience.
Did you know that Millennials have totally revolutionized the traditional dinner party?
While dinner parties used to be all about cooking fancy, expensive dishes and showing off your wealth, these days they’re just about spending time with people you love. Millennials throw dinner parties today, not because they want to show off, but because they don’t want to spend so much at restaurants and bars.
Here’s a little cost comparison:
A standard-quality bottle of wine might cost $40 in a restaurant, or $10-$20 per glass. That same bottle could cost as little as $15 in the grocery store — that’s less than $4 per glass!
The same goes for food. Like I talked about earlier, the average American spends thousands every year on meals out, when they could be spending hundreds cooking at home.
So, if you’re looking for ways to save money without sacrificing that time with your friends and loved ones, ditch the night out for the night in.
8. Find new ways to work out
The last thing you should sacrifice to save money is your health. And the good news is, you don’t have to.
A healthy lifestyle doesn’t need to be expensive. The truth is, gyms, health food companies, and influencers make ridiculous amounts of money selling healthy habits that people can get for free.
Paying $50 per month for a gym membership? That might be a necessary expense — if you’re really dedicated.
But let’s face it, guys: a lot of us just use our gym memberships to stretch, lift a few weights, and run on the treadmill. That’s totally fine (no exercise shaming here), but you don’t need to be paying $50 a month to do it!
Consider building your own home gym. You really don’t need much: a jump rope, a few free weights, maybe a yoga mat or exercise ball — whatever works for your routine. You can get a great workout at home, without spending too much.
Need a personal trainer to tell you what to do? You can find tons of free exercise courses and videos online. There are also plenty of apps out there to help you perfect your workout routine and maintain a healthy weight.
Again, if you love your gym membership and use it all the time, there’s no need to quit. But if you think you can get the same workout for free, why not save that money?
While we’re on the topic of health: remember to be cautious of diet or health plans. You don’t need to pay for monthly meals, diet pills, or supplements to lose weight or stay in shape. Those unnecessary costs can get really high.
Just get regular exercise and eat a balanced diet — it’s healthy, easy, and free.
9. Quit one expensive habit
Want to challenge yourself, and save money?
Try to quit one expensive habit for at least one year.
We all have habits that cost us. Whether it’s smoking, drinking a lot of soda or coffee, buying too many shoes, or a certain fast food you just can’t stay away from — try quitting that habit for one year, and see how much money you save.
Obviously, quitting a bad habit is a lot easier said than done. Here are a few tips to help you stay on track:
- Change your daily routine. If there’s a certain time of day when you run for coffee, for example, take that time slot out of your day. Take the long way home, spend that time reading or exercising instead, etc.
- Swap it for a new habit. Try trading out your habit for a new, less expensive one. Are you a chronic shopper? Try browsing thrift stores to get that same thrill, instead. Addicted to soda? Try sparkling water.
- Track your savings as you go. If you see how much you’re saving by avoiding your habit, you’ll be more motivated to stick with it. Calculate the monthly or weekly costs of whatever your bad habit is, and add those costs up after you quit. You can see how much you’ve saved!
After a year without that habit, you’ll be surprised by how much money you’ve saved. Not only that, but you’ll realize how easy it actually is to go without it!
Quitting bad habits is always a good decision, for your health, happiness, and budget.
10. Set up automatic transfers into your savings account
Saving $20,000 a year comes down to a little over $1,600 a month.
If you really think you can save that amount every month, why not commit to it?
Setting up automatic transfers into your savings account will help you to stick to your budget and avoid overspending. If you use online banking, you can easily set up an automatic transfer on your own. It’s especially helpful if you get your paychecks through direct deposit!
As soon as money comes into your account, you can have a portion of it automatically transferred into savings. That way, you don’t even have to worry about budgeting and saving for the month — it’s already done.
Of course, your monthly savings should be beyond your essential monthly fees. In other words, only set up an automatic transfer for an amount of money that won’t be spent on rent, gas, bills, groceries, and other essentials that month. You can also change your monthly transfer amount as your budget changes.
You don’t necessarily have to set aside $1600 every month to save $20,000 in a year. But transferring as much as you can into savings on a regular basis will help you to avoid overspending and stick to your long-term plans.
Plus, it’s free — you don’t need to work with a financial advisor, or even set foot in a bank to get it set up.
Bonus tip: make long-term plans for the future
The best way to keep saving money is to know what you’re saving for!
Setting realistic goals and long-term plans for your future will help you to stick to your budget, and keep up with your savings. Remember, saving money isn’t just about being more secure. It’s a way of investing in a happier, more successful future.
Whatever your goals are — whether it’s retiring young, being able to travel and see the world, or buying a nice house — write them down, and make plans to achieve them!
Budgeting apps can be a big help when it comes to planning for the future. It’s like having a free, personalized financial advisor with you all the time.
Where to save your money
So, you’re planning on setting aside at least $1000 a month or more to save $20,000 in a year. That’s awesome — but where should you put that money?
There are a few options, depending on what you’re saving for.
One of the easiest places to save your money is in a savings account. Savings accounts are easy to open at most banks or credit unions, and perfectly safe.
Not only is a savings account a safe place to store your money without spending or losing it, but it’s also a way of earning interest. Interest rates vary depending on the bank, but pretty much all savings accounts will let you earn interest on your money over time.
Plus, setting up an automatic monthly transfer from your checking account into your savings account is one of the easiest ways to save money and avoid spending over your budget.
Another option for saving and collecting interest is a retirement account. Again, the policies will vary depending on the institution, but many retirement accounts collect interest over the years.
The main benefit of putting money into a retirement account is that, unlike with a savings account, you can’t pull money out of it until you reach retirement age. So everything you save is super secure!
Speaking of retirement accounts: do you have access to an employer-matched 401k plan through your company? If so, you should be taking advantage of it. Investing money into a 401k can double, even triple your retirement savings.
Saving vs. investing: which is better?
Since we’re talking about safe places to store your savings, it’s worth mentioning investment, too.
Should you be investing some of the money you saved?
The answer is, yes — if you have some money to invest. But you shouldn’t neglect your savings for investment opportunities.
As a general rule of thumb, it is always safer to put your money into savings than to invest it, especially if it’s a high-risk investment.
However, investing will help you grow your wealth and become financially stable. It’s one of the best ways to start earning passive income.
If you’re just starting your journey toward financial stability, my advice is to prioritize savings. Once you’ve saved $20,000 in a year, you can consider investing some of that money into a source of passive income to grow your wealth.
To put it another way, you can look at your savings as an investment in yourself. The more you invest, the better off you’ll be in the long run.
Looking for more savings tips?
Remember, saving money will look different for everyone.
If you’re a student, a new parent, a digital nomad, or someone just starting out in a new career, you might be struggling to figure out the best ways to save money. But don’t worry — there are plenty of resources out there to help you!
My advice? Learn as much as you can from your peers. There are tons of helpful blogs and websites out there written by people just like you, for people just like you.
Want to >save money while you’re traveling? Or, looking for ways to spend less as a new mom? What about sticking to a budget in college?
There is tons of great advice out there — all you need to do is start looking for it.
While you’re at it, talk to your friends, parents, family members, etc. about saving and budgeting. Using all the resources and advice available to you will help you to get inspired and start saving toward those long-term goals!
Get inspired, make a plan, and start saving
Saving up to $20,000 in a year is seriously easier than you might think.
You don’t need to have a ton of money to start saving, and you don’t need to make any major sacrifices. All it takes is some dedication and a few simple changes to your lifestyle and habits.
To sum it up, here are the steps you need to take to start saving as much as $20,000 in a year:
- Make a plan: figure out what your long-term goals are, and set your budget to make them possible.
- Get inspired: once you realize how easy it is to start saving money, you’ll be even more motivated to keep going, and achieve your goals.
- Put your savings somewhere safe: open a savings account or retirement account. Don’t let your savings sit in your checking account where you can spend them, and definitely don’t store a bunch of cash under your mattress (trust me, it’s just not safe).
- Watch your progress: keep track of how much you’ve saved, and keep it up!
Once you start saving, you’re on the road to financial stability. It’s easy — and the sooner you get started, the better!
If you have any other tips or tricks on how to save $20,000 in a year, let us know in the comments below.