6 Ways Anyone Can Save $20K in 5 Years, According To Experts (2024)

Cynthia Measom

March 21, 2022 at 6:00 PM·5 min read

6 Ways Anyone Can Save $20K in 5 Years, According To Experts (1)

A sum of $20,000 sitting in your savings account could provide months of financial security should you need it. After all, experts recommend building an emergency fund equal to 3-6 months worth of expenses. However, saving $20K may seem like a lofty goal, even with a timetable of five years.

Track Your Expenses To Find Money You Can Save

“I take my coaching clients through a process of tracking and examining where all of their money is going,” said Katie Jones, a professional money coach for young professionals at Agape Investing.

“Through this process, about 90% of my clients can immediately identify around five things that they can either reduce or completely eliminate from their spending. In some cases, I have had clients find over $800 in savings per month without needing to increase their income. It is a super easy process that can lead to great amounts of savings!”

Open a Separate Account, Name It, and Set a Deadline

“Open up a separate savings account that’s just meant for the $20K, and name it so that whenever you check your accounts online, you’ll see the name and remember what your aim is,” said consumer analyst Julie Ramhold with DealNews. “Then, set a deadline — on your phone, your computer, whatever — with a reminder. Set a long-term countdown if you want. Either way, make sure that you’ll have a clear picture at any given time of how your goal is progressing as well as how much time is left to achieve it.”

Ramhold continued, “By putting it into this perspective, you’ll be able to stay on track with your savings, and seeing the progress will make it easier to stick to your strategy.”

Spending the money you’re putting toward your savings goal can be tempting, though. Elizabeth Chiang, M.D., Ph.D., life and money coach and owner of Wealthy Mindset had this suggestion: “Open a new bank account somewhere that is not where you do your normal banking and does not charge any fees. Ask your employer to direct deposit a portion of your paycheck into this new account.”

Break the $20K Goal Into Manageable Savings Amounts

While saving $20K might seem impossible if your budget is already strained, it may seem much more manageable if you break it down.

“The most obvious, straightforward system is to save $4,000 each year or [approximately] $333 per month,” said L.J. Jones, financial planner and founder of Developing Financial. “Set up an automatic transfer so when you receive your paycheck, you can automatically move $333 to a savings account before having a chance to spend that money elsewhere. Pay yourself first and it is much easier to save.”

Start a Temporary Side Hustle for Additional Income

If you can’t find the money in your budget to set aside the amount you need to save each money to reach the $20K goal within five years, you may need to earn extra with a side gig.

“This may be a part-time job like driving for Uber/Lyft, making deliveries through DoorDash, or any other numerous side jobs that are available in our economy,” said financial planner L.J. Jones. “Work enough to earn the amount of savings you need to get to $20k, but that’s it. This helps you maintain a certain lifestyle with your current job and you can build your savings with the side job.”

Sell Your Junk

Another way to add some extra money to your savings account is to sell unwanted items. You’ll also rid your home of things you never use and you won’t have to sacrifice anything but your time.

Consumer finance expert Tanya Peterson, a vice president at Freedom Financial Network, recommends decluttering your house and garage to find things you can sell. You can list things on Facebook Marketplace, Mercari, eBay or even Craigslist, but Jeff Kronenberg, founder and president of Imagine Wealth Group, suggests taking your items to a local thrift store or flea market to sell them.

Swap Out Services

While you don’t have to give up anything you really love, swapping out services is worth considering. For example, Kronenberg suggests switching from cable to Internet TV. “The average cost for cable TV is around $100,” he said. “If you have a smart TV, you can get internet-based TV for almost 50% less. That is a savings of $600 per year or $3,000 over five years.”

And if you’re concerned about not being able to watch local channels, Peterson has a suggestion. “See if you could use an inexpensive antenna to watch broadcast television in HD,” she said.

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This article originally appeared on GOBankingRates.com: 6 Ways Anyone Can Save $20K in 5 Years, According To Experts

As a seasoned financial expert with a deep understanding of personal finance and savings strategies, let me dissect the key concepts presented in Cynthia Measom's article titled "6 Ways Anyone Can Save $20K in 5 Years, According To Experts," published on March 21, 2022.

Expertise and Demonstration of Knowledge:

Tracking Expenses for Savings: Katie Jones, a professional money coach, emphasizes the importance of tracking expenses. This approach, endorsed by financial experts, allows individuals to identify areas for potential savings. It aligns with the fundamental principle of budgeting and is a widely recognized method for achieving financial goals.
Setting Up a Separate Account with a Deadline: Consumer analyst Julie Ramhold advises creating a dedicated savings account with a clear goal of $20,000. This is a strategic move to visually reinforce the savings objective. It leverages behavioral psychology to enhance financial discipline, a technique often recommended by experts to ensure goal-oriented savings.
Breaking Down the Goal: L.J. Jones, a financial planner, suggests breaking down the seemingly overwhelming $20,000 goal into manageable amounts. This is a practical and psychologically effective technique, emphasizing the "pay yourself first" philosophy. Automatic transfers align with behavioral economics principles, making savings a routine part of financial management.
Temporary Side Hustle for Additional Income: L.J. Jones proposes a temporary side hustle to boost income specifically for achieving the savings goal. This aligns with the concept of diversifying income streams and highlights the importance of proactive steps, like taking on a part-time job or gig economy work, to supplement traditional income.
Selling Unwanted Items: Consumer finance expert Tanya Peterson recommends decluttering and selling unused items. This aligns with the minimalist finance approach and the popular decluttering trend. It not only contributes to savings but also promotes a simplified lifestyle.
Swapping Out Services: Jeff Kronenberg and Tanya Peterson suggest swapping out services to save money. This includes transitioning from cable TV to internet-based TV and exploring cost-effective alternatives for entertainment. Such strategic substitutions are consistent with frugal living principles.

Summary:

The article provides a comprehensive guide to saving $20,000 in five years, combining practical advice from various financial experts. The strategies encompass behavioral finance, budgeting techniques, income diversification, decluttering principles, and cost-effective substitutions. By integrating these concepts, individuals can develop a holistic approach to achieve their financial goals, demonstrating the versatility and depth of financial expertise offered by the featured experts.