5 Tips for Building Good Money Habits: How I Saved $20,000 in Less Than 5 Months
I recently shared my journey of saving $20,000 in less than five months on social media, and it was well received. This experience has taught me a lot about financial discipline and the importance of good habits. While I had a significant amount of extra money come in this year, such as back pay from work, I realized that it was still my habits that got me to this point. Here’s a detailed look at the habits that helped me achieve this milestone.
1. Keep Minimal Debt
One of the most significant factors that contributed to my ability to save was keeping my debt minimal. Although I am not entirely consumer debt-free, I do not carry any debt that urgently needs to be paid off. My student loans are at 0% interest, and my car loan is now less than $3,000 at an interest rate of less than 2%. This strategic approach to managing my debt allowed me to focus on putting any extra income into savings or investments, rather than paying off high-interest debts.
2. Set Clear Goals
Setting clear and achievable goals was another crucial habit. I set a clear goal of saving $20,000 and worked backwards to figure out how much I needed to save regularly. This meant saving a minimum of $770 from each bi-weekly paycheque to complete my goal by the end of the year. Breaking it down into smaller, manageable amounts made the goal seem less daunting and more achievable. This method also kept me motivated, as I could see my progress with each paycheck.
3. Automate Your Savings
Automating my savings was a game-changer. I set up automatic transfers for my emergency fund, 'yolo' account, and investments. This automation made saving effortless and consistent because the money was moved to savings and investment accounts without me having to think about it. It removed the temptation to spend the money and ensured that my savings grew steadily over time.
4. Save Extra Income
Any extra income I made or received went straight into savings or investments. This included bonuses, tax refunds, and any other unexpected windfalls. This habit was probably the most significant factor in achieving my target quicker than expected. Instead of spending this extra money, I treated it as an opportunity to boost my savings and investments further.
5. Pursue Side Hustles
Generating extra income through side hustles significantly boosted my savings. Whether it was freelancing, selling items I no longer needed, or taking on small projects, these side hustles provided additional funds that went directly into my savings. This habit not only increased my income but also diversified my revenue streams, making me less dependent on my primary job for financial stability.
Conclusion
These five habits made a huge difference in reaching my $20,000 savings goal ahead of time. Reflecting on this journey, I realized the importance of disciplined saving and smart financial management. While having extra income helped, it was the consistent application of these habits that truly made the difference.
P.S. It’s not too late to join the #JusticeForYourWallet challenge.