How to Save Your First $100,000

Financial stability and financial goals are two key reasons for saving. Financial stability and planning helps provide confidence in your abilities to pay unexpected bills, fund your own retirement, and maintain a desired lifestyle.

Goals can also help to look toward the future and keep saving efforts in check. The more money you have to save, either from reduced expenses or increased income, the faster you can move toward accumulating your first $100,000 for any goal you may have in mind. And once you do that, the way to the next $100,000 becomes easier.

Key Takeaways

  • Savings levels, time periods, and investment returns are key variables in determining how long it will take to accumulate $100,000.
  • Adopting the right mindset is important for getting started towards the goal.
  • Assessing ways to increase revenue and reduce your personal budgeting expenses will help to create dollars you can put away.

The Right Mindset

For many people, saving your first $100,000 is not necessarily a short-term goal but rather a longer-term goal that requires some discipline. There can be many different reasons you are trying to stash away $100,000. To get there you need to train your mind. Keeping your particular goal in mind can help, but you also need to understand how to achieve your goal with a plan. 

If you are 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 is oriented towards achieving your goal. Keep in mind that little things can add up.

Reducing that daily Starbucks habit or taking public transportation to work instead of driving a few days a week will provide extra funds to be saved. Orienting your mind and budget, in general, will help you to discover ways that can potentially create all kinds of extra funds. If you understand that these are minor sacrifices on the path toward your goal, the going will be smoother.


How to Save Your First $100,000

Keep Costs Low

A major part of a budget includes the things you spend money on. There are always things you can do to keep your costs down. Some more examples include the following: 

  • Making more home dinners
  • Walking short distances when possible rather than taking the car
  • Taking your kids to the park or zoo 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 lunch to work
  • Using your car until it can't be used anymore
  • Buying a less expensive house

For some people, moving to a smaller house or driving a more economical car can make all the difference. If you are renting a large place then move smaller to save. If your fitness expenses are high then build a home gym.

Becoming more energy conscious can also be a big help. Recycle and reuse items as much as possible before buying new. Also, use alternative energy to light and heat your home. On a large-scale downsizing can create hundreds or even thousands of dollars to put towards your savings goals while still living very comfortably.

Reduce Your Interest Burden

Reducing your interest burden is another powerful way to lower your expenses and create more funds available for savings. Many people want it all: the home, car, garage, home theater system, dishwasher, and the double-door fridge. With a few easy keystrokes online, it can be possible. But it turns out that instant gratification often comes with a hefty price that can take years to repay and even years off your life.

Prioritizing debt and reducing it is the first critical step to saving. If you are just out of college or graduate school with student loan debt, make it a priority to pay off before you up your lifestyle. For others, take a look at all of your loans and see how long it will take you to whittle them down. If you do have savings or fixed deposits, you can liquidate some to reduce your debt burden. If you get a bonus or a dividend, think of prepaying debts to reduce your interest burden.

In the case of credit card debt, talk to your credit card company, and negotiate a lower interest rate if possible. Check on debt transfer offers, which can come with 0% introductory rates. Also, look into consolidation. If your funds are steadily flowing in and you’ve kept your credit score up, you might be able to get a debt consolidation loan with one monthly payment and a low interest rate.

If you are taking out a new loan, potentially for an investment, make sure your return exceeds your interest payments. You may also be able to look into margin accounts that help you invest more with higher returns.

Invest in Savvy Vehicles and Products

When you’ve found a few ways to save a little more and made a budgeting commitment on how much you plan to save, you’ll want to make sure those funds are invested efficiently. Working with a financial professional or delving deeper into resources that help you do the investing yourself can be good ideas.

Save on Taxes

One of the first places many larger investors look is tax shelters. These can be right under your nose through your employer’s benefit offerings. Benefit plans include all kinds of options, with a majority offering tax advantages. The traditional 401k allows you to invest pre-tax dollars with the advantage of paying your retirement tax rate rather than your current one on withdrawals. Other tax-sheltered options can include a traditional individual retirement account (IRA) or municipal bonds.

With a Roth IRA, you can withdraw your contribution penalty-and-tax-free at any time. However, if you touch your earnings, you may be subject to penalty-and taxes if the distribution is not qualified.

Appropriately Manage Your Risks

Like all investing, risk will be a factor in your trek to $100,000. Higher risk investments should bring in higher returns but risk-reward can also be key. Up and coming penny stocks, initial public offerings (IPOs), and trending sectors like technology can pay off big in short amounts of time. On the other end of the spectrum, high-grade corporate bonds can also bring in some steady and hearty returns.

Know the Math

In the process of budgeting and building out a financial plan, mapping out the present value and future value math will also be helpful.

Scenario 1: Start with $10,000. Add $12,000 annually. Invest with an annual rate of return of 8%. After six years you will have $103,900.

Scenario 2: Start from $1,000. Add $12,000 annually. Invest with an annual rate of return of 12.5%. After six years you will have $100,647.

Maximize Employee Benefits

Employee benefits may have more to offer than you realize. When it comes to matching contributions, max out what your employer offers to take advantage of the free funds. These funds can be added to your tax-sheltered 401k for an even greater benefit.

Also, avail yourself of any other benefits your employer may provide, such as special discounts at stores, museums, and health clubs. Also, use a health savings accounts 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 those discounted opportunities as well.

Create Short-Term Saving Goals

The path to $100,000 is inevitably longer than the path to $10,000. This can at times be somewhat overwhelming so short-term goals can be very helpful.

It's all very well to imagine yourself in a new country home post-retirement, but that distant vision may not get you going today. To really stay motivated, break your long-term saving goals into short-term goals.

For example, a man who ran a dry-cleaning service decided he would take some small change every day and put it into his daughter's college fund. He started from when she was five years old and continued until she reached 18. Setting aside a little change didn't hinder his business or day-to-day life, but it did mean that he had a tidy sum saved by the time his daughter was ready to go to college.

Moreover, consider the math. Knowing that a $1,000 savings per month can get you to $100,000 in six years can be very motivating. This motivation can help to make sure you stick to your budget and skip over the new BMW.

Generate Additional Income

Incoming revenue is the other key component of your personal budget. Finding ways to generate more revenue will also help you reach a $100,000 goal faster.

Do you sew, do some other craft, or teach? These are some hobbies that can help rake in some extra money. You could tutor children for a few hours a week or sell your crafts at the weekend market. You could 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. These things can help you earn some more money that you can put towards your $100,000 goal.

Saving Your First 100K
 Nusha Ashjaee {Copyright} Investopedia, 2019. 

The Bottom Line

There are many considerations when it comes to accumulating $100,000. You will want to think about your expected time frame, the investment options you have available to you, and the risks you are willing to take for your returns.

Objectively looking at your monthly budget or creating one if you haven’t already will help you get on track. Being disciplined in your mindset and your plan will also be key. If you devise and stick to a tailored plan, the dollars and cents will add up. Realistically, many people can reach this goal in as short as six years, which allows you to move on to the next $100,000 much faster and even puts you on the path toward a million.

Article Sources
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  1. Internal Revenue Service. "Traditional IRAs."

  2. Internal Revenue Service. "Publication 590-B (2020), Distributions From Individual Retirement Arrangements (IRAs): Roth IRA."