Saving two thousand bucks in one year takes work. There are lots of ways to do it, and today I’ll share what I personally did to start saving $2,000 (and more) every single year.
Here’s the short answer:
To save $2,000 in one year, spend $166 less than you make every month. The most effective way is to cut down on your most significant fixed expenses like housing, and transportation.
I actually used to live paycheck to paycheck. Moving out I only made roughly $1,200 a month. I barely got by! If you’re thinking about moving out, read this article: How Much To Save Before Moving Out
After increasing my income a bit, and learning some “insider secrets” about personal finance, I was soon able to save thousands of dollars a year.
In this article, I’ll tell you what I learned, and show you how to save at least $2,000 a year.
Oh, and if you want to figure out how much money you should save, read one of these articles instead:
– How Much Should You Save Per Year?
– How Much Money Should You Save Per Day?
Let’s get into it!
How To Save $2,000 In One Year:
First of all, let us break it down to a monthly time frame:
Saving $2,000 in one year = saving $166 per month for twelve months.
Let us, therefore, rephrase the task of saving $2,000 in one year into saving $166 per month.
Some people might think saving less than $200 a month is trivial. But actually, saving as little as $100 a month can make you wealthy!
In the rest of the article, I’ll break saving $2K in one year into three concrete steps to make this easy to follow.
The steps take some “good ol’ work” to get through, but they’re not complicated, and I’ll give you examples in each of them.
Suggested reading: How to Save $30,000 In One Year
#1: Calculate Your Expenses
Getting an overview of your expenses is the first step in all my guides on how to save a lot of money quickly.
Calculating your expenses is almost the same as making a budget.
The main difference is that budgeting is “planning future expenses”, which is not our current goal.
Our current goal is to calculate current expenses e.i how much you’re currently spending every month, and what you’re spending your money on.
To figure out how much money you’re using, you need to do this:
- Get a list of your expenses for the last three months. We’ll take the average of three months because it varies a bit from month to month.
- Sort all the expenses into “categories”. By categories I mean stuff like “housing”, “transportation”, “food”, etc.
- Add all the expenses in each category together. For example, if you had 10 different expenses of $14 each on the “transportation” category in the last three months, add it all together and write “$140” as your total expense for transportation.
- Divide all the “total expenses” for each category by three. Remember, we got the expenses from the last three months. We need to divide it by three to get the average monthly expense.
- Add it all together. This will get you your average total monthly expenses from the last three months.
If you do the five steps listed above, you’ll know the following:
- How much money you spend on each of the categories.
- How much money you spend in total every month (on average).
Basically, we’ve made a “current budget”. Here’s an example of what you should make (with random numbers):
| Items | Expenses |
|---|---|
| Housing (rent, electricity, water, etc.) | $500 |
| Transportation (Car, bus, Uber, etc.) | $200 |
| Food (Groceries, eating out, beer, etc.) | $250 |
| Insurance (Health insurance, life insurance, etc.) | $200 |
| Clothes (Pants, jackets, shirts, etc.) | $75 |
| Personal care (Gym, makeup, supplements, etc. | $80 |
| Subscriptions (Netflix, Spotify, Disney+, phone subscription, etc.) | $40 |
| Hobbies (Guitar strings, wheels to longboard, books, etc.) | $50 |
| Entertainment (TV packs, bowling, football games, etc.) | $100 |
| Miscellaneous (Birthday parties, Christmas gifts, and “other stuff”) | $35 |
| Total | $1,535 |
If you’re expenses as a single person are above $3,000 a month, you should read one of these articles:
- Living On $1,800 A Month: Budget, Lifestyle And More
- Yes, You Can Live On $2,000 A Month! Here’s How & Where:
Alright, now that you know how much money you spend every month, and how you spend that money, let’s move on to the next step:
#2: Calculate Your Income
Income can come in many forms. For this purpose, all money that comes into your account counts as “income”.
For example, here’s a breakdown of my income when I was a student:
| Source | Income (monthly average) |
|---|---|
| Part-Time Job (A normal salary) | $850 |
| This Website (From ads and my newsletter) | $450 |
| Student loans (Norwegian students get money (loan+stipend) every month) | $800 |
| Gifts Christmas and Birthday gifts combined divided by 12) | $25 |
| TOTAL INCOME: | $2,125 |
One way to figure out all your income sources is to look at your bank account history and filter for “incoming” (or whatever your bank calls it). Figure out what amount of money comes from what sources, and calculate the monthly average.
Suggested reading: Is Saving 20% Of Your Income Enough?
Once you’ve made something similar to the table above, you’re ready for the final step!
#3: Make A Budget
Now that you know your monthly expenses and income, you’re ready to make a budget.
The budget we’re going to make now will ensure you’ll save $2,000 within one year.
Here’s how to do it:
- Take your monthly average income and subtract your monthly average expenses. This tells you how much money you have left (or overspend) every month on average.
- Make a budget such that your total expenses are $166 lower than your total income. Do this by manipulating the different expenses in the list of expenses you made in step #2 when calculating your monthly expenses.
- Follow that budget as if your life depended on it! If you follow the budget for 12 months, you’re guaranteed to save $2,000 in one year!
To summarize, this is what you need to do:
Make a budget that is $166 below your monthly income and follow that budget like a slave for 12 months.
Here’s an example of a budget of that sort:
| Source (Income and Expenses) | Amount |
|---|---|
| Housing | $500 |
| Transportation | $200 |
| Food | $250 |
| Insurance | $200 |
| Clothes | $75 |
| Personal care | $80 |
| Subscriptions | $39 |
| Hobbies | $50 |
| Entertainment | $100 |
| Miscellaneous | $35 |
| Total Expenses | $1,534 |
| Monthly Salary | $1,275 |
| Side Hustle | $400 |
| Gifts | $25 |
| Total Income | $1,700 |
| Income – Expenses | $166 |
If you find saving $@K a year “too easy”, you can consider trying to save $8K per year.
If you’re struggling to find the extra $166 when making the budget, here is the number one “insert secrets” to personal finance I’ve learned:
The Best Tip Ever For Saving $2,000 In One Year:
Most people trying to start saving money go after the “low hanging fruit”. They start cutting out luxuries like Netflix and Spotify, or the occasional coffee + bagel at Starbucks.
That’s totally backward!
Cutting out the small things makes a small impact on your budget.
The best way to go about it, in my humble opinion, is like this:
- Figure out the three items/categories, in order, you spend the most on. Usually, it’s housing, transportation and food, in that order.
- Cut down on the biggest things, in a permanent manner. For example, moving into a cheaper apartment makes you save lots of money (because housing is a huge expense), and you’ll save the money EVERY MONTH without having to do any more work.
- Do NOT spend the saved money on other things. Put it instantly and automatically into saving as soon as you get it into your bank account.
This strategy made a HUGE difference to me. Here’s exactly what I did:
I saved 40% of my income by moving into a cheaper apartment closer to work.
The apartment was only 20% cheaper, but since housing was such a huge expense, 20% amounted to hundreds of dollars.
In addition, living closer to work made transportation much cheaper (almost free) because I didn’t have to drive to work and back every day!
Another benefit of this move is that it’s hard to undo. It takes a lot of work to move back to the old apartment, or something similar. For this reason, I saved 40% of my income EVERY SINGLE MONTH without having to put in any more work, stay disciplined month after month, or even think about it.
To summarize, here’s the basic philosophy you need to adopt to save $2,000 in one year:
Make frugal decisions regarding the “big things” that are hard to undo.
To get more details on this, read my article about saving money despite paying high bills.
Conclusion: How To Save $2,000 In One Year
To save $2,000 in one year, you need to limit your expenses to $166 less than your monthly average income. The easiest way to achieve this is to make frugal decisions on your largest fixed expenses.
The concrete steps to follow are:
- Calculate your monthly expenses.
- Calculate your average monthly income.
- Make a budget with total expenses $166 below your average monthly income.
- Stick to the budget.
I hope you found this helpful!
– Oskar