People tend to thrive most when they have identifiable goals. One of the most common goals among those looking to improve their finances is to save a lump sum of money before a given deadline. For example, you may want to figure out how to save $10,000 in six months.
There are three broad ways to achieve a specific savings goal like saving $10,000 in six months. You can:
- Lower your spending
- Boost your income
- Increase your investment returns
Let’s take a look at the numbers behind a few examples to demonstrate how you might go about saving so much so quickly using each strategy.
Save More by Spending a Lot Less
Cutting your spending over six months by $10,000 is no easy feat unless you’re a pretty big spender. Of course, we Americans can be… well, pretty big spenders.
The average American shells out $38,266 every year. That works out to $3,189 per month, with the following amounts going to these categories:
- $1,219 monthly or $14,622 annually on lodging
- $474 monthly or $5,683 annually on transportation
- $388 monthly or $4,659 annually on food
- $216 monthly $2,590 annually on utilities
- $141 monthly $1,693 annually on entertainment
- $89 monthly or $1,066 annually on clothes
Even on this average American budget, there’s plenty of room for savings.
Earn Some Extra Income
There’s only so much you can do to reduce your spending before you compromise your lifestyle beyond what you’re willing to tolerate. For example, maybe you can’t stand having a roommate anymore. I get it. Living alone is an expensive luxury, but who really wants to have a roommate in their 30s?
Fortunately, your earning power has no such limits. If you want to know how to save $10,000 in six months without compromising your lifestyle, making some extra income is your best bet. You’ll have taxes working against you, so you’ll have to earn more than $10,000 to reach your goal.
📕 Want some practical ways to start making some extra money? Take a look at our favorite suggestions: How to Start Making Extra Income.
Invest in Income-Producing Assets
Spending less and earning more are effective at rapidly increasing your savings, but chasing quick results with investing is usually a fool’s errand. Compound interest takes a long time to take effect: it’s just the nature of the beast.
So don’t fall for some get-rich-quick scheme that guarantees you $10,000 in six months using some secret investment strategy. It’s all but guaranteed to be a scam.
If you want to generate $10,000 in savings with nothing but your investments, there’s only one reliable way: Have a large enough investment portfolio. With enough savings in income-producing assets, you can generate significant amounts of money quickly and without intolerable risk.
Of course, high-yield investments like the stock market are volatile, and there’s no guarantee that they’ll generate their average return in any given year. That’s why investing is rarely a safe way to make money in the short term. You may know someone who has earned (or claims to have earned) a fast fortune on meme stocks or cryptocurrencies, but there are very real risks involved in these investments, especially if you’re putting most of your capital in risky investment instruments.
📕 Want to get started with investing? You can’t build serious wealth without it, so take a look at our introduction to the topic: Investing 101: Investing For Beginners.
The Balanced Approach: Use All Three
You’ve doubtless realized by now that trying to save $10,000 in six months using only one of the strategies above would be difficult. Most people are much better off spreading their efforts among all three strategies.
As you can see, saving $10,000 in six months is much easier if you leverage all three strategies. Don’t be afraid to try your hand at each of them.
📕 Tax-deferred accounts are a powerful tool for reducing your tax liability and saving more money. Take a look at the options out there to find which ones might make sense for you: An Introduction to Tax-Advantaged Retirement Accounts.
Consider Investment Returns Icing on the Cake
Investing is a risky way to get rich quickly, but it’s the best way to get rich slowly. Remember, wealth multiplies wealth. It’s easier to save $10,000 in six months when you already have $250,000 saved because your money will do the heavy lifting for you, but it’ll take time to save that much in the first place.
Of course, if you want to spend your money at the end of your six-month journey (or even the next few years), you probably shouldn’t rely on investment returns. You don’t want to risk the possibility of your savings not being there when you need to withdraw them.
For short-term goals, you’d be better off putting your money in something liquid, like a savings account. The money would be safe, but any returns would be negligible. In these cases, focus on earning more and spending less. Let any investment returns you get be icing on the cake.
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There are three ways to increase your monthly savings: Spend less, earn more, or raise your investment returns. Above are three ways to save $10,000 in six months using each strategy, both alone and in conjunction.
About $2,000, before taxes.
If you split your efforts between spending less, earning more, and investing wisely, you’ll save much more efficiently.