How to Save Your First $100K
Working towards saving your first $100,000 can seem like a daunting goal, but it doesn’t have to be. If you are motivated and determined to start saving so you can have financial stability, there are a few things you can do that will help you stay on track without feeling overwhelmed or like you’re missing out on life.
1) Mindset
Having the right mindset when tackling this goal is key. If you don’t think you can save $100,000, then you won’t. It’s as simple as that. But how do you get into that mindset? Write it. Yep, write it out. You need to make a plan of how you plan on saving $100,000. Your plan should include a budget detailing all of your income and expenses and how you’re allocating your funds. Once you see your budget written out, you’ll know where you can easily cut back on certain expenses and how you can reallocate those funds towards savings. This leads us to point 2.
2) Budget
Keep your expenses low and live below your means. As part of your budget, you’re able to see everything you’re spending money on, from utilities and necessities to those extra coffee runs. Here are a few ways that you can keep your expenses low:
Make more home-cooked dinners
Take lunch to work
Bring your own coffee to work
Buy used cars
Find local free activities to do on the weekends in your community
Live in a less expensive house or apartment
Use coupons
Buy your groceries in bulk or grow your own food
Cut cable or other monthly subscription services
3) Say Bye-Bye to Credit Card Debt
Credit card debt is one of the easiest ways to throw you off track from reaching your goal of saving $100,000. While yes, having credit cards is good for helping you build credit for possible future purposes, it makes it all the easier to buy that dress or pair of shoes you’ve been eyeing that maybe you can’t really afford. If possible, try making all of your purchases with cash. It will resonate when you’re actually handing the store clerk cold-hard cash how much you are actually spending, and whether those items are worth it.
Now, if you’re already in credit card debt, there are a few things you can do. You can see if you are eligible to do a 0% interest balance transfer to another credit card you may have. While this isn’t ideal, it’s better than paying a high-interest rate on the debt you’re already carrying. Just remember, there are fees that apply to balance transfers, so do your research before you do this.
Also, you may be eligible to negotiate with your current credit card company about lowering your interest rate. You can also look into credit card consolidation as another option. But again, do your research and see what option is best for you before signing next to the dotted line.
4) Contribute to a Retirement Account
If you are eligible to contribute to a 401(k), you need to be doing so. The contribution limits are high, and most employers offer some sort of match, aka FREE MONEY.
If you aren’t eligible to contribute to a 401(k) account, then contribute to a Roth or Traditional IRA. While you won’t be getting a match, you'll still be able to take advantage of compound interest. Compound interest is when you earn interest on your savings, and then that interest earns interest on itself and this amount compounds monthly and grows. So it's just returns on your returns.
5) Continue to Save
Just because you’re contributing to a retirement account, doesn’t mean you shouldn’t also be putting money away into a high yield savings account in case of a rainy day, or to help you further achieve your goals. Your retirement account is supposed to be just for that - when you retire. So for your shorter-term goals, having money that is accessible that won’t impede your future plans is a must. So, as part of your budget that was mentioned earlier, you need to have a line item for money that you plan to put aside into a savings account. And while it may not earn as much interest or return as a retirement account, it still will help you reach your goal of saving $100,000.
6) Increase Your Income
Now, this one isn’t necessarily as easy as some of the other ways that you can save to reach your goal of $100,000, but that doesn’t mean it isn’t doable. As you continue to grow and learn in your industry, it’s not unrealistic to be compensated more. And with this additional compensation, you can start saving and reaching your goal of $100,000 even sooner. And if you’re already capped out at your current position, you can always start a side hustle.