Saving thousands of dollars every month is hard. In fact, most people struggle to save anything at all. Even though most people should strive to save 20% of their income, on average, people save only 5%.
Anyways, enough ranting. Here’s the short answer:
Yes, saving $2000 per month is good. Given an average 7% return per year, saving two thousand dollars per month for 20 years will end up being $1,000,000. However, with other strategies, you might reach over 3 Million USD in 20 years, saving only $2000 per month.
For people earning $100K a year or more, saving $2K a month is easy. In fact, they should save much more (read this to learn how much: Is $100K a Year Good? (For Single People and Families of 4)
However, $2K a month is a real challenge for people earning less than that. I hope this article will motivate you to reach it!
If you’re trying to figure out how much money you’re “supposed” to save, you should instead read this article: How Much Should YOU Save Per Year? (Examples and Charts)
To begin with, let’s take a look at a few significant benefits that one can realize from savings:
Freedom to Follow your Dream Vocation
We often find people stuck in jobs they wished they never saw themselves, caused by a lack of financial freedom to leave such jobs at will. On the contrary, if they had sufficient savings, they would have already had quitted such jobs for a more fulfilling vocation. Savings play a crucial role in helping individuals pursue their dreams, professions, careers, and every other thing would please.
Suggested reading: Is Saving $10k Per Year Good?
Predicting the future is unachievable by any living being today. For this reason, saving is an excellent idea to help individuals realize their future dreams. Savings are crucial in helping provide security during times of uncertainties like the ones realized with the Covid-19 Pandemic.
Another uncertainty is inflation. At the time of writing inflation is rising every month. Saving and investing in times like these is essential. To figure out if you should focus on saving or investing under inflation, read this article.
Leaving a Financial Security for Your Beloved
Savings help someone plan on the kind of state they would like to leave behind for their beloved; whether their beloved would inherit debts or fortunes is all dependent on the plans that one makes today.
Suggested reading: Why You Should Invest During Inflation
Savings Minimize Financial Risk
Someone with more money is likely to be in limited financial situations. Assuming that person has $100000 in their name and takes $50000 to venture into a business, then such a person risked 50 % of their wealth. On the other hand, if someone saves and invests till their money is about a million dollars and spends $50000, they have only risked 5 % of the net worth.
Suggested reading: Is Saving 40% Of Your Income Good?
In addition, when someone invests 5 % of their net worth, they will likely make up for that in their interests in the following year.
Above are some of the benefits that one can realize by saving $2000 per month. Saving $2000 is significant. Assuming that one will be saving with a body that offers a return of 7% p.a for a period of 20 years, the amount will have accumulated to $1 000, 000 which is a huge milestone and a challenge everyone should strive to achieve.
suggested reading: Is Saving $500 Per Month Good?
Would saving $2000 per Month Make You Rich?
With such a saving target in mind, getting rich is almost a sure thing. Practically, becoming wealthy depends on factors such as the meaning an individual attaches to wealth and the time factor. Let’s define “rich” as having a forecasted figure of $1,000,000 within a 25-year time factor.
A person can realize this by saving in a particular investment vehicle like Passive Index Fund since saving through such a vehicle means investing your money with a less risky return. Such a saving avenue then becomes a preferable means for investors at our levels. (source)
The tabulated figures show that one can save up to 1,000,000 dollars in approximately 20yrs with $2000 as a defined goal. We realize that the returns on savings surpass the saved amount even before the target period, which results from compounded interest.
Generally, investment avenues that compound the interests of the investors are the best to help the investor realize such huge milestones as saving $2000 every other month.
suggested reading: Is Saving $300 Per Month Good?
Saving $2000 per Month with $100,000 as the Starting Amount
What if you already have some money, let’s say $100K, and start saving $2000 per month for 25 years? Where will you be in the future?
By the same assumptions as in the calculation above (7% annual returns from passive index funds) this will be the result:
As you can see, before 25 years have gone, you’ll have over two million dollars (given our assumptions).
Is it Possible to save $2000 per month?
The question may sound impossible to the ears of the masses, not because they don’t have the capacity or the money, but their lifestyles. Anyone who comes up with a saving goal will agree that their first step is to check their lifestyle. The check exposes areas where money is being spent unnecessarily.
If you want a complete guide on saving more money, check out this article instead: The 4 Steps To Save A Lot Of Money Fast
Tips to Help You Save $2000 Per Month
1. Regularly tracking spending Habits: Regular track of the spending pattern will reveal where you spend your money. This step will be vital in knowing where you can make changes to realize the saving objective.
2. Differentiate Needs from Wants: Food, housing, and clothing are basic needs. However, someone doesn’t have to purchase a screen the size of the movie theatre ones for household use. Moreover, other luxuries are unnecessary that can be evaded. A straightforward check that sees an individual a life that meets the needs but checks excesses on wants will undoubtedly place the individual in a position where they are left with sufficient to save $2000.
3. Desist from using credit to pay the bills: Using credit to pay for today’s services is a sure way to burden the future since, at a given time, credit takes a significant amount of the earnings making saving difficult.
4. Stick to your Saving Objective: Saving $2000 per Month would be impossible without a clear objective. Money will always find a reason it can be spent on. The best way to ensure you live within the saving goal is to save regularly throughout the Month and make saving a priority.
Note: The number one consumer of every individual earnings is housing, the other being commuting expenses. No longer are the two expenses a hindrance to saving. Many people have already realized that moving closer to the place of work, in a smaller house, cuts both costs simultaneously. Will you consider doing so? Well, it could be the only obstacle to realizing your saving objective.
Lots of people struggle to save money due to high bills. If you’re one of them, like I used to be, you need to check out this article: Can’t Save Money Because of Bills? Here’s What I Did
You’ll get everything you need to know, in detail, and my personal journey from living paycheck to paycheck to saving 80% of my income.
If you don’t think it is realistic, you can also lower your goal and build up over time. Saving $1,500 a month is also great.
suggested reading: Is Saving $500 Per Month Good?
The Best Way to Save $2000 per Month (Investing)
Investing is the best way to save $2000 per month, but this is how. First and foremost, one must avoid saving by banking their money. Do you know why? Banks are subject to being affected by inflation, and so is the money saved with them. Such an occurrence would see the investor earn a negative return on their savings.
It is also true that some of us want to get rich at an enhanced pace. This is where the diversity of other investment avenues comes into play. In the present day, cryptocurrencies cannot go unmentioned when talking about investments. There are a bunch of crypto coins, but Bitcoin and Ethereum have passed the test of time. Growing at enormous rates, these two are the “blue-chip” crypto coins in the crypto market.
Assuming I had a Goal to save $2000 and still needed to Diversify, this is how I would go about it:
- Passive Index Funds: $1400/month at a 7 % yearly return.
- Bitcoin: $400/month at a 20 % return per year.
- Ethereum: $200/month at a 30 % return per year.
With such a diversified portfolio and the said returns, the time it will take to “become rich” will be drastically shortened. Money will work for me as I stick to my saving objective.
This is what the graph looks like, given the numbers above:
Once more, the returns assumed in this example are as follows:
- Passive Index fund: 7% per year
- Bitcoin: 20% per year (which is highly conservative. Historically, it’s 200% per year…)
- Ethereum: 30% per year (which is conservative as well, as ETH in general offers even higher returns than Bitcoin, historically speaking)
Suggested reading: Two Great Reasons to Save Money During Inflation
A Perspective on Other Investment Vehicles:
While we seek to address “whether saving $2000 per month is good?” we must look at varied ways to ensure to reap from our savings. By reaping, we mean getting the best-assured market returns. Here are some of the most popular investment vehicles:
- Real Estate: This means saving by purchasing physical properties either through the institutions a person is saving through or individually. The land is the best representative of real estate investment properties.
- Shares/Equities: These are company stocks that have the characteristic of growing as time passes by. Investors with a long-term goal, such as a retirement plan, are known to save by investing in stocks and shares.
- Bonds: This refers to a loan that an individual may give to a government, company, or institution. They are assured and secure, but their returns are relatively minimal.
- Bitcoin: High risk, but crazy high returns (historically speaking). This is not for the faint-hearted, as the volatility is 10-20x that of stocks.
- Altcoins: “Alternative coins”, meaning other cryptocurrencies than Bitcoin. These are even riskier than Bitcoin, but if you pick the right ones you’re in for some of the craziest returns you’ll ever witness.
There are various categories and classes within the different investment vehicles, but the most preferred by investors are Bond, Mutual funds, ETFs and Index Funds, and Individual Stocks.
The Final Verdict
A closer look at the information contained herein reveals that the answer to the question, “is saving $2000 good?” is a bold “yes.” Everyone who develops a saving objective must look at the big picture and the possible riches. Saving will not be easy; there will be sacrifices that the individual must make. Sticking to the goal right from the start is the way to go.
Saving $2000 per month will eventually make you a millionaire if the money is invested properly, and the time frame is long enough.
Although some people find it hard, it is far from unrealistic. The key is to cut down on housing and commuting expenses, not to cut out the small stuff like Netflix and Starbucks.
Calculator used: https://www.calculator.net/investment-calculator.html