How To Save 20,000 In A Year (And Still Have Fun!)

How to save 20,000 in a year and still have fun

They said we would never put a man on the moon. That nobody could break a 4-minute mile. That we could never achieve flight.

But we’ve been there. Done that.

So, if you think saving $20,000 in a year is impossible… Think again.

Like any worthwhile goal, it requires strategy and determination. But that’s exactly what this guide provides.

Read on to discover exactly how to save 20,000 in a year. Then, stop thinking about it and start doing it! This journey, like those that defied the odds before, begins with a single step forward.

Is It Possible To Save $20,000 In A Year?

Does $20,000 in savings look as out of reach as Mount Everest? Instead of shooting for the summit on Day 1, try breaking it down — one step at a time.

To accumulate $20,000 in a year, your savings plan would look like this:

  • $1,666.67 per month
  • $384.62 per week
  • $54.80 each day

It doesn’t seem so unreasonable when you break it down like this, right? With just a few tricks and a little extra daily income — yes, it is possible to save $20,000 in a year!

What Could You Do With An Extra $20,000?

Before we dive into the how, let’s understand the why. After all, $20,00 isn’t chump change — it could be a life-changing amount of money in many circumstances. 

Here is what these savings could do for you:

  1. Down Payment On A New Home: Put a 10% down payment on a $200,000 home or a 5% down payment on a $400,000 property.
  2. Wedding: Cover all the expenses for your special day without taking on any debt.
  3. Retirement Boost: Sock it into a retirement account and watch as this amount grows to $134,000 in 20 years or $349,000 in 30 years (assuming a 10% annual return).

So take a moment to consider why you want to save twenty grand. Then write it down and put it somewhere you can refer back to often — a post-it on the fridge, next to the mirror, or even your phone’s background photo. 

This will be the inspiration that guides your decision-making and keeps you focused through thick and thin. 

How To Save 20,000 In A Year: 17 Best Strategies

Saving $20,000 is like climbing a financial mountain. It requires planning, strategy, and the right equipment. 

Although the ascent may be challenging, the view from the summit is worth every step. Let’s explore 17 strategies that will help you make this climb with confidence.

1) Budget and Track Expenses

First, look at your current savings rate (or lack thereof). Next, look at where it needs to be. Lastly, map out a plan to bridge the gap. This process is crucial if you want to reach a lofty financial goal. 

So, begin with the $20,000 savings goal and work backward toward your monthly target of $1,667. Then, add in expenses up until you reach your income level.

This way, you are forced to cut expenses, not compromise on your goals.

2) Try A Budget Challenge

No one said that budgeting has to be dull. A budget challenge can add excitement and novelty to your savings strategy.

Here are a couple of creative ideas to consider:

  1. No-Spend Days: Pick a day of the week and don’t spend a single dime on that day — just like it sounds. If your daily spending averages ~$50, cutting out just one day a week could net you $2,500 by the end of the year!
  2. Nickel-A-Day Challenge: Start by saving just one nickel on day one. Then, increase it by a nickel a day. So you save 5 nickles on day 5, and 200 nickels on day 200. This challenge gets progressively tougher throughout the year, but keep it up, and you would save a whopping $3,339.75 by day 365.
  3. 52-Week Challenge: This next one is a challenge anyone can achieve. Start by transferring $52 from your checking account to a high-yield savings account in week one. Then, $51 in week two, and so on. Not only does this challenge get easier every week, but you will have saved $1,378 by the end of the year.

And of course, you can always adjust these challenges to make them more or less difficult. If you’re feeling ambitious, do two No-Spend Days per week, make your own Dime-A-Day challenge, or kick off the 52-week challenge with $104 instead of $52.

For even more innovative ways to spice up your savings, check out my post on 13 Fun Budget Challenges.

3) Invest In Treasuries

Don’t park your money in a savings account – most are paying less than a 0.57% interest rate.

Instead, invest in U.S. Treasuries, where short term yields are north of 5 percent! Plus, they’re backed by the U.S. government. This makes them a powerful yet risk-free way to move toward your goals.

4) Take Advantage of Employer 401K Matching

One of the simplest yet most effective ways to boost your savings is by taking full advantage of your employer’s 401(k) matching program. 

Here’s how it works. When you contribute to your 401(k), your employer may match a portion of your contribution. Usually, this policy is in effect up to a certain percentage of your salary. 

For example, let’s say you earn $50,000 a year. Your employer offers a 100% match up to 6% of your salary.

So you decide to max out the benefit and put 6% of your paycheck into your 401(k). That means you will add $3,000 per year to the account, and your employer will add $3,000 as well.

You effectively doubled your savings and netted an extra $3,000 per year without any extra effort on your part!

By not taking advantage of this match, you are essentially turning down free money. In fact, the matching benefit is an important part of your compensation package. So, check your employer’s policy and make sure you are getting everything you deserve. 

5) Save Your Tax Refund

Your tax refund can be a painless way to boost your savings.

According to the IRS, the average refund for 2023 was over $2,800. If you commit this amount to your savings goal, you are already more than 10% there!

To optimize this strategy, file your taxes as early as possible. Then, once you receive your refund, immediately transfer it to a High-Yield Savings Account (HYSA).

Not only does this eliminate the temptation to splurge, but it also allows you to start earning a return on your money sooner.

6) Pay Off High-Interest Rate Debt

According to Wallethub, the average credit card balance per household is $10,170. Factor in an average interest rate of 21%, and that’s over $2,100 per year just in interest payments!

Eliminating any and all high-interest debt is critical to saving more and reaching your why.

There are two effective ways to do this.

One is to prioritize paying off your highest interest rate debt first. Known as the avalanche method, this strategy minimizes the amount of interest you pay over time. Once the highest interest rate debt is paid off, move on to the next highest, and so on.

Another strategy is to take advantage of 0% interest credit card offers. Many credit cards offer a promotional no-interest period for balance transfers. This period often lasts from 12 to 24 months.

By transferring your high-interest balance, you can save on interest and retire your debt faster. Just be sure you can pay off the amount you transfer before the introductory period is up. At that point, the card will revert to a traditional high-interest debt.

7) Geographic Arbitrage

If you love travel or adventure and want to put a big dent in your savings goals, consider geographic arbitrage. 

This strategy calls for moving to a lower-cost area while maintaining the same (or higher) income. 

For example, you could move to the suburbs from the city center. By reducing your living expenses by just 10%, namely on rent and taxes, you could easily save thousands per year.

Or, if you really want to crush your goals, consider moving overseas. There are countless countries like Mexico and Vietnam with a significantly lower cost of living.

Depending on the location, you may be able to slash your expenses by more than half. Not only could this one strategy net you the full $20,000, but you may even be able to work less while doing so!

Keep in mind that geoarbitrage doesn’t have to be a permanent lifestyle change. You may find that you love living abroad. Or, you can simply use it to accelerate your savings and enjoy a temporary stay!

8) Put Your Savings On Autopilot

Don’t leave your savings up to chance.

Before you allocate any money to expenses, dedicate a portion of your income to your savings goal. Set up an automatic transfer so a fixed amount of your paycheck is consistently moved to a high-yield savings account.

These transfers ensure that you make steady progress toward your goal. And since the money is moved out of sight, you can avoid spending it on impulsive purchases.

This shifts the focus of your finances from what you can spend to what you can save

9) Slash Non-Essential Expenses

Non-essential expenses can sabotage even the best-laid financial plans. But with a few tweaks and more mindful spending, you can unlock significant savings without drastically changing your lifestyle. 

The following tips can help you trim the fat from your budget:

  • Cancel Unused Subscriptions: Cancel any subscriptions you don’t frequently use or look for more affordable options. This could be anything from streaming services to magazines to gym memberships.
  • Go Generic: Generics are just as good as brand names but easier on the wallet. A recent CNET study shows that you could save 40% on your grocery bill by switching to the store brand instead of brand-name products.
  • Delay Impulse Buys: Implement a 24 to 48-hour waiting period before completing any discretionary online purchases. 
  • Buy Second-Hand: Consider slightly used items instead of buying new. It’s kinder to your budget and the planet.
  • Hold Off on Tech Upgrades: Wait another year before getting a new phone or upgrading to the latest high-definition TV. That extra year can make a significant difference in the price and your savings.

10) Avoid Lifestyle Creep

Be aware of lifestyle creep – those gradual, often unnoticed, increases in spending as your income increases. This might look like more dining out, pricier vacations, or splurging on luxury items.

When you receive extra income, a good rule of thumb is to allocate no more than 10% to fun or discretionary spending. The rest should go straight to savings and investments. That way, you can avoid the trap of golden handcuffs.

11) Make More Money

If you’ve trimmed your expenses to the bone and still find your $20,000 goal out of reach, generating extra income could help you bridge the gap. 

Here are easy ways to boost your earnings in your spare time:

  • Side Hustles: 93% of working Americans have some form of side hustle. On average, this second gig pulls in $483 per month. Consider driving for a ride-share service or becoming a virtual assistant. Just 10 hours per week could net you an extra $600 to $1,000 per month.
  • Part-Time Jobs: Look for evening or weekend roles in retail or hospitality. Working 15 hours a week at $15 per hour could add $900 to your monthly income. That’s about halfway to your goal without making any spending cuts!
  • Ask for a Raise: If it’s been a year or more since your last salary increase, schedule a meeting with your supervisor. Just a 4% raise on a $50,000 salary adds an extra $2,000 to your annual income.
  • Online Businesses: Launch an Etsy shop selling handmade goods or create a blog that generates ad revenue. Successful online ventures can bring in several hundred to several thousand dollars per month.

12) Negotiate For Better Rates

One often overlooked strategy for saving money is negotiating better rates on your regular expenses. After all, a little haggling can go a long way.

Many times you can get a better deal simply by asking. Reach out to your service providers and inquire about any ongoing promotions or discounts you may be eligible for.

And if you don’t like negotiating yourself, apps like Trim and Billshark can do it for you. They typically work on a commission basis, by taking a percentage of the annual savings they bring in.

Another way to lower your expenses is by bundling services. Many insurance and technology providers offer discounts when you combine multiple packages. Review your current needs and see if bundling could reduce your overall costs.

Finally, if you are considering canceling a service, always speak to the retention department first. They often have the authority to offer exclusive discounts (to keep you as a customer) that sales and customer service don’t have access to. 

13) Cook at Home

If you are like most Americans, you probably dine out several times a week. In fact, according to a recent BLS study, Americans spend an average of $3,600 per year eating out.

If you can cut that in half, you would save an extra $1,800 toward your goal! 

Here are two fun ways to make cooking at home a special event:

  1. Theme Nights: Spice up your weekly meals with specially themed nights – think ‘Mexican Fiesta’, ‘Italian Cuisine’, or ‘Backyard BBQ’. It’s a simple way to explore new recipes and make mealtime exciting.
  2. Family Cook-Off Challenges: Have family members team up to create dishes under a certain budget or with specific ingredients. This creates quality time together, teaches new cooking skills, and saves money all at once.

14) Quit One Expensive Habit

Whether it’s smoking, indulging in snacks, or constantly updating your wardrobe, your goal to save $20,000 in a year could be the motivation you need to quit an expensive habit.

Cutting out just one can significantly boost your savings.

Although it may not be the easiest option on this list, here are 3 specific strategies you can take to successfully ditch an expensive habit:

  1. Track Your Triggers: Identify what prompts your bad habit. Is it stress, social settings, or boredom? Understanding your triggers can help you avoid situations where you might fall off the wagon. This is especially important when first starting to quit.
  2. Find Healthier Alternatives: Swap a bad habit for something beneficial. Replace smoking with chewing gum, switch alcoholic drinks for flavored water, or find joy in cooking healthy snacks at home instead of loading up on Doritos.
  3. Don’t Do It Alone: Partner with a friend who has a similar goal or join a local Facebook support group. Mutual support often makes the difference between wanting to quit and actually quitting.

15) Do An Insurance Once Over

Don’t overlook the potential savings hidden in your insurance bills. A thorough review and a few strategic adjustments to your policies can free up hundreds (or even thousands) per year.

Eliminate Unnecessary Coverages: Scrutinize each policy to make sure you are not paying for more coverage than you need. If there are unnecessary coverages, consider removing them to lower your premiums.

Bundle Policies: Many insurance companies offer discounts when you bundle multiple policies, such as auto and home or renters insurance. These discounts can reduce your overall insurance costs.

Opt for Higher Deductibles: If you’re generally healthy, consider choosing a health insurance plan with a higher deductible. This can significantly reduce your monthly premiums. However, make sure you have enough saved in your emergency fund or HSA to cover any surprises.

Shop Around: Don’t settle for the first quote you receive. Explore and compare rates from different providers to ensure you’re getting the best deal. Sometimes, just mentioning a competitor’s lower rate can land you a discount.

16) Mindful Shopping

The average American drops about $300 per month on impulse buys — those unplanned, spur-of-the-moment purchases. These can range from a fancy coffee drink on the way to work, to a trendy pair of shoes spotted in a store window, to that ‘limited-time better click now’ offer online.

To combat these temptations and shop more mindfully, consider these 6 simple strategies:

  1. Use A Shopping List: Before heading to the store or browsing online, make a list of what you need. Then stick to it to avoid unnecessary spending.
  2. Use Cash for Discretionary Purchases: Limiting yourself to cash for non-essential spending can make you more mindful of each purchase. As you see your physical cash budget depleting, you are reminded of your limits — curbing the urge to spend frivolously.
  3. The 30-Second Rule: When you’re tempted to buy something spontaneously, hold it in your hand (or if online, hold off putting it in your cart) for at least thirty seconds. During this time, ask yourself if you really need it. This little pause can help you avoid making budget-busting impulsive decisions.
  4. The 24-Hour Rule: For larger expenses, like electronics, furniture, or vehicles, implement a 24-hour ‘think it over’ period. This gives you the time to consider the importance of the purchase and its impact on your budget.
  5. Capitalize on Sales and Discounts: Plan your purchases around sales, especially for big-ticket items. Capitalize on events like Black Friday, Cyber Monday, and after-holiday sales to get the best deals.
  6. Find Alternatives To Retail Therapy: Recognize when you’re shopping out of boredom or stress. Instead, explore healthier and more cost-effective alternatives like exercise, reading, or a hobby.

17) Seek Inspiration To Stay The Path

Don’t let the inevitable bumps and occasional setbacks deter you from reaching that $20,000 milestone. It’s in these moments that a dose of inspiration can make all the difference between giving up and pushing forward.

Finding sources of encouragement and support is your lifeline to success.

Follow Financial Experts: Subscribe to FIRE blogs, podcasts, and social media accounts of reputable financial experts. Their advice, success stories, and tips can provide valuable insights and keep you motivated.

Join Online Communities: Join Facebook groups or online forums focused on saving, budgeting, and personal finance. Peer support and shared experiences can help you stay the course.

Find Like-Minded Individuals: You are the average of the five people you spend the most time with. So surround yourself with people who have similar financial goals and mindsets. Their habits and attitudes can positively influence your own.

Revisit Your ‘Why’: Regularly remind yourself why you’re saving $20,000. Whether it’s for a new home or financial security, keep that goal front and center.

Staying motivated is the key to maintaining momentum. With the right inspiration and network, you can keep pushing forward toward your goal even when things get tough.

Final Thoughts

Nobody said it would be easy, but you can save $20,000 in a year.

Start with a clear monthly target, implement a few of these strategies, and stay committed. It’s not necessarily about making big sacrifices but rather about building habits that lead to big results.

Once you have learned how to save $20,000 in a year, you can do it over and over. This becomes your blueprint for financial success

Just don’t be hard on yourself if you stumble along the way. Pick yourself up, dust yourself off, and resume your journey.

Because a year from now, you could have a whole new mindset about saving money. (Not to mention a big pile of cash.)

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