Fact checked by Yarilet Perez
Financial stability and planning can help you pay unexpected bills, fund your retirement, and maintain your lifestyle. Financial goals can help you look toward the future and keep your saving efforts in check. The more money you save, either from reduced expenses or increased income, the faster you can move toward accumulating your first $100,000. Here are ten tips to help you get there.
Key Takeaways
- Savings levels, time periods, and investment returns are key variables in determining how long it will take you to accumulate $100,000.
- Adopting the right mindset is important for getting started.
- Reducing your personal expenses will free up money for saving.
- Being strategic with your taxes is a step in the right direction.
- Picking up a second job will help you get there faster.
1. Have the Right Mindset
Saving a large amount of money is a long-term goal that requires discipline. You may want to stash away $100,000 for one or more of several reasons, but you have to train your mind to get there. Keeping your particular goal in mind can help, but you should also understand how to achieve your goal with a plan.
If you’re the kind of person who rarely budgets or takes note of expenses, now would be the time to start. Budgeting will help your mindset. Build a budget that’s geared toward achieving your goal. Keep in mind that little things can add up.
Orienting your mind and budget will help you discover ways that can potentially create a lot of extra funds. The going will be smoother if you understand that these are minor sacrifices on the path toward your goal.
2. Keep Costs Low
The things you spend money on make up a major part of your budget. There are always things you can do to keep your costs down. Consider some of these options.
- Making more dinners at home
- Walking short distances when possible rather than taking the car
- Taking your kids to the park rather than to the local mall
- Buying your groceries in bulk for the month rather than making small purchases frequently
- Giving up smoking or other costly habits
- Taking your lunch to work
- Using your car until it can’t be used anymore
- Buying or renting a less expensive home
Moving to a smaller house or driving a more economical car can make all the difference for some people. Move smaller to save if you’re renting a large place.
Becoming more energy-conscious can also help. Recycle and reuse items as much as possible before buying new ones.
3. Reduce Your Interest Burden
Reducing your interest burden is another powerful way to lower your expenses and make more money available for savings. Many people want it all: the home, car, garage, home theater system, dishwasher, and double-door fridge. It can be possible with a few easy keystrokes online, but instant gratification often comes with a hefty price tag that can take years to repay.
Prioritizing debt is the first critical step to saving. Make it a priority to pay off your student loan debt. Take a look at all of your loans and calculate how long it will take you to whittle them down. Think of using that work bonus, tax refund, or an earned dividend to prepay debts and reduce your interest burden.
Talk to your credit card lender and try to negotiate a lower interest rate if you have a lot of credit card debt. Check on debt transfer offers that can come with 0% introductory rates. You might be able to get a debt consolidation loan with one monthly payment and a low interest rate if you have money steadily flowing in and you’ve kept your credit score up.
4. Invest in Savvy Vehicles and Products
You’ll want to make sure your funds are invested efficiently. Working with a financial professional or delving deeper into resources that help you do the investing yourself can be a good idea. A robo-advisor is also an option.
5. Save on Taxes
Tax shelters can be right under your nose in the form of your employer’s benefit offerings. Benefit plans include all kinds of options, with many offering tax advantages.
The traditional 401(k) allows you to invest pre-tax dollars, reducing your taxable income by the amount of your contributions. You’ll eventually pay taxes on that money in retirement rather than at your current rate. (With a Roth account, there’s no upfront tax break, but qualified withdrawals in retirement are tax-free.) Other tax-sheltered options include a traditional individual retirement account (IRA) and municipal bonds.
Note
You can withdraw your contributions penalty- and tax-free at any time with a Roth IRA. However, you may be subject to penalties and taxes if the distribution isn’t qualified and you touch your earnings.
6. Manage Your Risks
Risk will undoubtedly be a factor in your trek to save $100,000. High-risk investments might bring higher returns, but they also might bring the opposite. Up-and-coming penny stocks, initial public offerings (IPOs), and trending sectors can pay off big in short amounts of time. On the other hand, lower-risk, high-grade corporate bonds can bring in more modest, but more steady, returns.
7. Know the Math
Mapping out the present value and future value of your money will be helpful in the process of budgeting and building a financial plan.
For example, say you start with $10,000 and add $12,000 annually. If you invest with an annual rate of return of 8%, you’ll have $103,900 after six years.
8. Maximize Other Employee Benefits
Make full use of matching contributions if your employer offers them. Take advantage of the free money. These funds can be added to your tax-sheltered 401(k) for an even greater benefit.
Avail yourself of any other benefits your employer may provide as well, such as special discounts at stores, museums, and health clubs. Use a health savings account if one is available to save a little on health care costs. If your employer provides assistance for skill upgrading or “back to school” programs, take advantage of these discounted opportunities as well.
9. Create Short-Term Saving Goals
The path to $100,000 can be somewhat overwhelming. Making and meeting short-term goals can be very helpful to your morale and mindset. Break your long-term saving goals into short-term goals to stay motivated.
If you want to match the example above, which sets aside $12,000 a year, break it down into smaller, more manageable pieces. $12,000 a year is $1,000 a month. Since there are 4.33 weeks in a month, that’s about $231 a week. Or about $33 a day.
10. Generate Additional Income
Income is the other key component of your personal budget. Finding ways to generate more revenue will help you reach your $100,000 goal faster.
Do you sew, pursue some other craft, or teach? These are some hobbies that can help you raise some extra money. You could tutor children for a few hours a week. You could sell your crafts at the weekend market or online. You might also seek out freelance projects or handy work. Don’t let any of your skills or talents go to waste. Your spare time can also be very valuable.
What Do Americans Spend the Most Money on?
Housing is the most significant expense for consumers, according to the U.S. Bureau of Labor Statistics. After housing is transportation, then food.
How Much Debt Do Most Americans Carry?
The Federal Reserve Bank of New York has reported that household debt in the U.S. reached $17.94 trillion in the third quarter of 2024. Mortgage balances made up the bulk of that debt. Credit card balances accounted for $1.17 trillion.
Can I Control How Much I Spend on Taxes?
Yes. Consider spending a little to have a professional prepare your tax return. They’re aware of all large and small tweaks and changes that the Internal Revenue Service (IRS) makes annually.
Contributing to a traditional retirement account can also get you a tax break. As for investments, you’ll want to hold them for at least one year and one day before selling, because this will mean you’ll pay the long-term capital gains tax rate. The long-term rate can be significantly lower than the short-term rate, which is the rate at which all your other income is taxed. You also don’t want your gains to push your regular income into a higher tax bracket.
The Bottom Line
There are many considerations when it comes to accumulating $100,000. You’ll want to think about your expected time frame, the investment options you have available to you, and the risks you’re willing to take.
Keeping to a monthly budget—or creating one if you haven’t done so—will help you get on track. Being disciplined in your mindset and sticking to your plan will also be key. The dollars and cents will add up. You might be able to reach your $100,000 goal in as little as six years—which would allow you to move on to saving the next $100,000 that much sooner.