If you’re like most folks, the thought of saving $20-30,000—or more—is daunting. So daunting, perhaps, that you’ve never seriously thought about it. Yet a lot of common major purchases, like a down payment on a house, a wedding, a car, or a college education cost around that amount.
Saving up for these things, especially on a low-to-moderate income, is hard. And so, many folks delay their goals, go into debt and take a long time to pay it off, or simply write off the possibility. It doesn’t have to be that way. These steps can help you save up for a life-changing purchase. (And if you’ve already gone into debt, the same strategies apply. Paying off debt quickly and responsibly is saving for your future.)
You’ll still need patience and persistence, but we’ve got some tips for making a strong, strategic plan that’ll help you save more quickly. Plus, using tools like Goals to measure your progress and stay on track will keep you motivated over time.
Find your pace
It takes time to save a large sum like this. How much time depends on your income and your savings rate. If you’re very frugal and you’re lucky enough to have a decent income plus low living expenses, you can save a large sum within a year. Will P. was able to reply $24,000 in debt in just 9 months. Those circumstances are rare, though. It’s likely that you’ll spend a few years.
Saving a large sum is rarely a linear process; it requires constant recalibration. The process doesn’t fit neatly into a step-by-step list. After you determine how much you’d like to save and when you’d like to be done, you’ll need to calculate a realistic savings rate and potentially revisit the timeline you set. As you’re saving, you’ll need to constantly measure your progress and then figure out when and where to adjust.
Goals can help with the constant measuring and adjustment. Set a Goal for a certain amount and a certain date, and it’ll calculate how much you need to save per day. If you don’t have a specific date in mind, punch in the total amount you’d like to save and your daily savings rate, and we’ll calculate the completion date.
Once you’ve made a Goal, money will be incrementally set aside so you’re not tempted to spend it. If you need to change your savings rate or the date you you’ll be done saving, the Goal will automatically recalculate. Plus, you can view your progress every time you log in to your Simple account. Automating these steps saves time and energy for the tricky personal decisions that determine how quickly you can save.
Maximizing your savings rate
There are just a few components to the savings equation:
- Spend less
- Earn more
- Don’t touch unexpected income
- Look for programs that can help
To save a large sum quickly, explore all of them and look for ways to layer and combine them.
1. Spending less
Yes, that does sound glib and easy. It isn’t, but it’s straightforward and crucial. If you’re trying to save a lot quickly, your expenses must be substantially less than your income. There are two ways to make that happen (we’ll be covering #2, earning more, in the next step).
The choices you make to cut expenses will be unique. They depend on your situation, your priorities, and how quickly you want to complete your savings goal. But we’re looking to make a drastic impact, so get creative and embrace change.
Start by making a budget. Once you have a good idea of how much you’re spending, look critically at your largest expenses. For most folks, housing, transportation, food, utilities, and entertainment top the list—eating up thousands of dollars each year. Then, find ways to trim those costs or even eliminate them.
Move into a smaller place. Find a less expensive neighborhood. Get a roommate or two. Get rid of your car and take the bus—better yet, ride a bike. Shop around for cheaper insurance, internet, or phone plans. Cook more, eat out less. Set a firm entertainment budget, and pick your indulgences carefully. And the list goes on.
You don’t have to give up everything; just keep finding places where you’re willing to cut back until you find a savings rate that works.
2. Earning more
This might mean a side job, some freelancing work, getting a raise, or moving into a more lucrative field. Take a little time to research the options, by read a few of the countless articles online, talking to friends, or doing a little professional networking.
Since you’re going to be saving for several years, make sure to choose something that’s sustainable for you. If you don’t want to work more hours, focus on increasing your wage. If you’re willing to work extra occasionally, look into one-time gigs, small freelancing projects, or seasonal jobs.
If you don’t see a way to earn more right now, don’t sweat it. You can focus on other factors, like spending less or finding programs that can help (check out step 4, below). Do keep an eye out for earning opportunities, though. They can pop up over time as the economy changes, your schedule shifts, or you gain experience and become eligible for new opportunities.
3. Don’t touch unexpected income
This is as close as saving comes to effortless. Since you’re already spending less and living below your means, you can instantly save any unexpected windfalls or occasional bonuses.
Common sources of unexpected or erratic income include tax refunds, cash gifts, and bonuses at work. If you don’t expect any of those, ask yourself “When and how do I end up with extra money?” For example: when I was a restaurant server, I’d usually get one busy shift a week, two average ones, and one slow one—with corresponding tips. Sometimes, though, I’d cover for a coworker and get an extra shift or busier shifts. The extra tips I earned went straight into savings. Your extra money might be overtime pay, commissions, tax savings, or selling something you don’t need anymore.
Unexpected savings fall under this category—if you were expecting to spend $500 to fly home for the holidays, but were able to get tickets using frequent flyer miles, go ahead and slip that $500 in savings. A good budget will help you notice and take advantage of these opportunities.
4. Look for tools and programs that can help
There are some non-profit and government programs that offer grants, subsidized loans, and other services to people who are saving towards a life-changing goal such as a house, education, or a small business. These programs are often targeted for savers with lower incomes, and you’ll need to fit specific criteria to qualify.
Many states have IDA (individual development account) programs that offer savings matches plus financial education. Depending on the program, the IDA may be used for housing, education, or starting a business.
If your goal is to pay for education, explore grants, scholarships, and other forms of financial aid, and check out loan forgiveness programs. The Federal Student Aid website has lots of useful details. There are also many programs available to first-time homebuyers, including discounts on interest rates and downpayment assistance grants.
These programs aren’t applicable to every situation, but when they’re available, they make a huge difference.
We’re here to help
Saving up for something life-changing is a formidable challenge, and it takes time. Tools and strategy are key. The biggest factor, though, is perspective. If you believe you can do it, and you keep trying until you do, odds are you’ll make it.
We’re here to cheer you on. Saving for something? We’d love to hear it. Got ideas for ways we can make saving easier? Let us know! And when you accomplish your goal, please share your story so we can celebrate with you.
Great! We're happy to hear that!
Do you have any feedback to pass along?
We've saved your response. Thank you for your feedback.
Please let us know how we can do better next time.
Thank you! We appreciate the feedback!
Disclaimer: Hey! Welcome to our disclaimer. Here’s what you need to know to safely consume this blog post: Any outbound links in this post will take you away from Simple.com, to external sites in the wilds of the internet; neither Simple nor our partner banks, The Bancorp Bank and BBVA Compass, endorse any linked-to websites; and we didn’t pay/barter with/bribe anyone to appear in this post. And as much as we wish we could control the cost of things, any prices in this article are just estimates. Actual prices are up to retailers, manufacturers, and other people who’ve been granted magical powers over digits and dollar signs.