In this article, we’re going to dig in deep and go over how to save $100,000 in 3 years. That’s right, reaching six figures in savings is possible in 3 years. You may have to push yourself hard to move from where you currently are. However, if you do, then you’ll look back in a few years and thank yourself for working hard to catapult your finances!
1. Create A Budget And Stick To It
First off, I’ve talked about budgeting before, especially for beginners. I’ve even written a complete guide that can help you from start to finish. I understand that it can seem like a daunting task at first, but budgeting isn’t that hard – especially if you keep it simple. The main thing you need to focus on is spending less than you make. Once you have that down, everything else will become much easier!
So, if you don’t already have a budget, get to it. A good budget will make your life much easier and all of your financial goals that much easier to reach. It’s an absolute must if you want to get ahead financially and save a lot of money.
Zero-Based Budgeting
With zero-based budgeting, you’re basically making sure that every single dollar you make has a specific function. No, that doesn’t mean you’ll be spending more money, but it means you’ll have a much more detailed focus on what you’re using all of your money for. All of your money will be assigned to mandatory expenses, discretionary expenses, savings, investments, and debt repayment. In short, your income minus your expenses (including investments) should always be 0. If that sounds complicated or daunting, then zero-based budgeting may not be for you. If you like the sound of a more structured approach to budgeting, I’d give it a try.
When you first start out, if you miss the mark and have unassigned cash at the end, put it in savings or investments. Since it is a bit more complex it may take a while to get just right, but once you have it down it shouldn’t change much. With salary increases, just invest or save more. There should only be major updates to your budget with significant life events.
2. Cut Major Expenses
Okay, now you’ve made a budget, set aside the time to track expenses, and put those expenses into a spreadsheet. With all that done, you should be actively reviewing your overall spending and seeing what you need to fix. To give you an idea, many people can cut a significant part of their budget by focusing on housing, transportation, and food costs.
Housing
If your rent or mortgage costs too much, downsize. A lot of people spend more on housing than they should, and it’s usually the easiest way to cut a huge chunk of your expenses down.
Transportation
People also like to go a little crazy on cars. While buying new comes with perks, if you’re financially savvy you will want to buy used. Better yet, keep the number of cars in your household to a minimum. Each car you have adds a lot of expenses because of maintenance and insurance.
Food
Eating out constantly will be a massive drain on your finances. Get it in check. If you do meal planning, you can create healthy budget-friendly meals that will be a much better use of your cash.
Unnecessary Spending
Beyond those three things, if you have any unnecessary shopping or spending it may be time to cut that down a bit. Shopping sprees at the mall can be fun, but they’re just a drain in the end.
3. Meet Your 401(k) Match
A 401(k) is a type of tax-advantaged investment account. There is a cap on how much you can contribute annually, but usually your focus is simply on reaching the amount your employer will match. It’s almost like free money (well, it’s part of your compensation package), so you should take advantage – it can help you speed up how much you’re able to invest.
4. Max Out Your Roth IRA
While a Roth IRA doesn’t offer matching like an employer’s 401(k), it is another tax-advantaged account. It’s honestly one of the best. If you can, you should max out your Roth IRA investments each year. Put as much of your investments into it as possible – it will pay off in the long run.
5. Push To Save 40-60% Of Your Income
To be fair, I’m well aware that investing 40-60% of your income isn’t feasible for most households. With that being said, once you start investing more than 20% if your income, you’ll start seeing absolutely astounding returns. If you’re able to invest 40% of your income or more, then you’re actually well on the road to retiring early! This puts you way ahead of schedule and gives you a lot more flexibility with what you want to do with your future. Again, I know this isn’t feasible for everyone, but it’s a worthwhile goal to try to achieve, especially if you want to retire early.
6. Start A Side Hustle If You Need More Money
Side hustles are a great way to augment your income if you need it. It’s wise to have multiple sources of income, to help you be more diversified and stable. Beyond that, it can help you reach your investing and financial goals much faster.
You Have Options
If you don’t know where to start, check out my list of lucrative side hustles. It isn’t an exhaustive list, but it should give you an idea of where you can start!
7. Don’t Play The Comparison Game
I hate having to mention this, but it’s a must. Playing the comparison game will inevitably end with you feeling bitter. Obviously, we want to go from bitter to richer, not just get or stay bitter. Comparison is truly the thief of all joy, so if you have to compare yourself to somebody, compare yourself to your past self. That’s honestly your only real competition. As long as you’re making progress, that should be something to encourage you and help spur you on to a brighter future!
8. Let’s Go Over The Math
Okay, $100,000 in 3 years is a lot to save in a relatively short time frame. It means you’ll have to save almost $2800 each month! I know not everyone even makes that much each month, so it can seem intimidating. If that’s the case for you, or for whatever reason $2800 per month is way out of reach, then focus on investing in yourself and your career. Try some side hustles, start a business, or delve into higher paying job.
3 Vs 5 Year Timeline
If you have to increase your income before you can save that much, shift your goal to a 5 year timeline instead. That’s less than $1700 per month and a much more reasonable goal. A 5 year timeline is much easier, but not as aggressive as many would like. That’s fine. Get started with the 5 year timeline, and when you start making more money, ramp up how much you’re saving!
Conclusion
If you have any tips of your own, let us know in the comments. For an easier savings goal, check out my $1200 savings challenge to help you get started. For more content like this, and a free budgeting template and financial goals worksheet, be sure to sign up for the Bitter to Richer newsletter.
