$10,000 in 1 year

[naaman]

It has been a little rough starting out since I moved to AZ, but I am now in a position to start building up some savings. My goal is to have $10,000 in the bank on September 12, 2013.

Obviously, dividing 10,000 into 12 will tell me how much money I need to set aside each month to achieve this ($833.33).

However, I'm looking for any tips people have besides just putting money in an account. What are some ways of looking at money that will help me to understand how to make the most of it?

As for "investing," at this point, I'm not looking for any big risk/big return strategies. However, entry level stuff that will allow me access to my money one year from now and/or no risk/low risk options are definitely something I'm interested in. Any other tips would be greatly appreciated as well.

Thanks in advance!

 

[blue_myriddn]

My humble thoughts:

1. Pick some savings bank that automatically pulls money out of wherever you deposit your paycheck.

Basically rather than you pulling $833 out each month manually, you make it automated. An even smarter route is to do it on a weekly basis - pull $200 out each week and after 50 weeks (roughly a year) you will hit your goal. More frequent low number pulls from your account helps to avoid overdrawn accounts,

2. If you don't know much about investing, now is not the time to experiment

If you can't have $5000 untouchable, you are probably better off not sticking your nose in to the stock market if you are unfamiliar with it. The market has great opportunities for gains, but also a good chance to loose as well. Leave it for the experienced pros who have cash to burn and time to spend.

3. Build a budget

Make sure you know where that $833 per month is coming from by knowing where your money is going to. If you have an ipad/iphone there are some great budget apps out there that help you track expenses. I like the mobile ones because right after you pay your groceries, buy drinks, go out to dinner, etc, etc you can immediately enter it in to your budget rather than having to wait until you are back at the computer. Knowing your finances really helps you in your savings goals as you can tweak how much you are auto-pulling from your account in to savings.

Good luck with your goal!

 

[itrsteve]

Mint.com is a pretty incredible tool that will depressingly let you know how you're spending.

 

[flaminio]

You don't mention, but are you saving for a specific goal, or for retirement? If the latter, if your company has a 401(k) that makes it stupid simple to save money, with the big advantage that it is tax deferred, and the big disadvantage that you can't touch it until you're 59 1/2 (which might also be an advantage).

Check if your company allows you to split your paycheck and do direct deposit to multiple banks. Spend only out of the non-saving account. You'll have $10K before you realize it.

 

[HIJACKER]

Years ago, rather than doing that - I made my objective to pay off all debt first. Since, your debt is usually carrying interest rates between 4.9%-21.9% for auto loans and/or credit cards and liquid savings is only drawing about 1% in your favor, you are better off clearing debt first.

So, if you have a car payment - increase that by $800/month and pay it off first, also doing the same with credit cards. After that - THEN start saving heavy.

I automated my savings to draft on the same day as payday, so I would never see it. I started with $500 every two weeks and over the years, continued increasing this as I could afford to save more, with better pay, etc. Before know you know it, you can get yourself up to $1k or even $2k every 2 weeks, then you're banking a TON.

Also, be sure you capitalize on 401K and IRA accounts first, as those are tax deferred. Until you max those contributions out, don't go overboard on liquid savings, since that money is being taxed when you're paid and the interest rates for savings accounts suck. However, at the end of the day, cash is king.

 

[Hard Five]

In the vein of what HIJACKER said, eliminating debt should be a priority.

I just read that the Chase Slate credit card has 0% APR on balance transfers for 15 months and 0 balance transfer fee (usually 3-5%). For anyone with credit card debt or needing debt consolidation this is effectively a 15 month interest free loan.

 

[flaminio]

+1 for HIJACKER. If the OP is carrying any debt (except for a mortgage), pay that off first. Start with any debt owed to friends and family, and then attack it from highest rate to lowest.

 

[HIJACKER]

+1 for HIJACKER. If the OP is carrying any debt (except for a mortgage), pay that off first. Start with any debt owed to friends and family, and then attack it from highest rate to lowest.

Exactly.

 

[PHOEN$X]

I'll assume debt's not an issue here. I've used Compass Bank's Build My Savings account over the past couple of years to put aside some savings, and got a decent return on the side in the form of the match bonus. Everything is automated, from the deposit of a portion of my paycheck into the checking account, to the monthly transfer into the savings account, which automatically grows to the target savings goal in the predetermined period, after which the account converts to a regular savings account. Out of sight, out of mind, easy as pie. Read more here if you're interested. Good luck!

 

[sahtt]

It's going to be difficult (i.e. impossible) to give you good advice with such little information.

I am a (self proclaimed) master at saving money strategy; not that I've necessarily accumulated all that much. You know all those personal finance rules no one actually follows, such as never finance a depreciating asset, etc.? I follow them.

What matters more than what type of account or investments you put the money into (areas I work with all day every day with financial advisers) is the amount.

That sounds intuitive but think about it. Focusing on how you are going to save $10k is a worthy effort. But increasing your income is by far the best and most sustainable way to increase your savings. I'd lay out the basics and then focus on earning more $$$. It is extremely difficult to get wealthy off 40-60k a year even if you are an investing and a finance professional - trust me I tried! It's doable but you end up having to live off ~20k a year which is not too fun.

My last suggestion is unless you are aiming to save at least $1,200 a month, there is almost a 0 probability you manage to save >$800 a month over time.

 

[V.Lats97nsx]

Lifestyle change is 2nd best to increasing income.
Less going out to eat, example I saved $80 dollars a week by making my own lunch instead of going out to lunch.
Getting rid of things like premium cable or getting rid of a land line.
Going to food banks instead of grocery stores
If you smoke weed smoke something cheaper
Rolling your own stoges
If you drink stop taking a cab and drive home
Geico will save you 15% in 20 minutes
Buy stuff on ebay so you don't have to pay sales tax
Screw ma and pa stores go to walmart
Cut your own grass, shovel your driveway in the winter
fill up with 87
Im sure you if you follow these direction you will get to your goal.
Prime you can close the thread.

 

[Miner]

Two words! Lotto tickets.

The key to saving money is spending money on what you really need, and not spending money on what you want.

Miner

 

[nsxtasy]

You don't mention, but are you saving for a specific goal, or for retirement? If the latter, if your company has a 401(k) that makes it stupid simple to save money, with the big advantage that it is tax deferred, and the big disadvantage that you can't touch it until you're 59 1/2 (which might also be an advantage).

That last part isn't entirely true. There are two ways you can withdraw it before age 59.5. You can withdraw it and pay income tax on it as well as a 10 percent penalty for the early withdrawal - not really a smart way, but you can do it if you're strapped. As another alternative, you can start withdrawals any time before age 59.5 if you do them as a series of equal amounts every year, based on your expected lifespan and the interest rate at the time the distributions start (thereby basically turning that 401k into an annuity), and you won't pay any penalty. (Do a search on the IRS site for information about Section 72(t).) But you will if you change the annual distribution amount for any reason.

 

[heySkippy]

That last part isn't entirely true. There are two ways you can withdraw it before age 59.5.

Where I work the 401(k) is untouchable while you're still employed, with the exception that in certain circumstances you can borrow against it.

 

[jond]

>>What are some ways of looking at money that will help me to understand how to make the most of it?

Read 'The millionaire next door'.

 

[Briank]

This is simple but I have to say it, spend less then you make. After that its simple. Don't get stuck on a number.

Everything I make get deposited in my checking account and the statement tells me every month how I am doing. As long as the withdrawal total is less then the deposits total its all good and when the balance gets too big I fund my Roth IRA or add to my Scottrade account or ....

 

[ekhonda87]

increasing your income is by far the best and most sustainable way to increase your savings. I'd lay out the basics and then focus on earning more $$$. It is extremely difficult to get wealthy off 40-60k a year even if you are an investing and a finance professional - trust me I tried!

Great! How do I earn more money?

 

[sahtt]

Great! How do I earn more money?

I worked nights as the manager for a valet company for three years in addition to my day job :smile:. Saved every penny. Put away a year's living expenses and enough to pay for all costs associated with graduate school at a fancy school. Fortunately (or unfortunately now that I think about it) my job allows me to work full time and go to school and I went to UT Austin instead of Rice (4k a semester vs 12k).

 

[Miner]

This is simple but I have to say it, spend less then you make. After that its simple. Don't get stuck on a number.

Everything I make get deposited in my checking account and the statement tells me every month how I am doing. As long as the withdrawal total is less then the deposits total its all good and when the balance gets too big I fund my Roth IRA or add to my Scottrade account or ....

That is just crazy talk. The next thing you'll say is the way to lose weight is to take in less calories than your body expends.:biggrin:

Miner

 

[naaman]

All excellent feedback. Which gives me an idea: for all savings over and above $10000 I will donate 10% to NSXPrime.

 

[itrsteve]

If you drink stop taking a cab and drive home

wait, what?

 

[naaman]

Mint.com is a pretty incredible tool that will depressingly let you know how you're spending.

I'm a little scared to use mint.com...

You don't mention, but are you saving for a specific goal, or for retirement? If the latter, if your company has a 401(k) that makes it stupid simple to save money, with the big advantage that it is tax deferred, and the big disadvantage that you can't touch it until you're 59 1/2 (which might also be an advantage).

Check if your company allows you to split your paycheck and do direct deposit to multiple banks. Spend only out of the non-saving account. You'll have $10K before you realize it.

This is sort of a trial run to see how much I can actually put away (the $10K is the minimum acceptible amount). I'm planning on buing a house ASAP, so I want to start working in that direction.

Years ago, rather than doing that - I made my objective to pay off all debt first. Since, your debt is usually carrying interest rates between 4.9%-21.9% for auto loans and/or credit cards and liquid savings is only drawing about 1% in your favor, you are better off clearing debt first.

So, if you have a car payment - increase that by $800/month and pay it off first, also doing the same with credit cards. After that - THEN start saving heavy.

I automated my savings to draft on the same day as payday, so I would never see it. I started with $500 every two weeks and over the years, continued increasing this as I could afford to save more, with better pay, etc. Before know you know it, you can get yourself up to $1k or even $2k every 2 weeks, then you're banking a TON.

Also, be sure you capitalize on 401K and IRA accounts first, as those are tax deferred. Until you max those contributions out, don't go overboard on liquid savings, since that money is being taxed when you're paid and the interest rates for savings accounts suck. However, at the end of the day, cash is king.

Yes, our debt will be paid off in swift order. My wife and I are quite adept at managing our debt, and we only use credit for emergencies. My car is a few months from being paid off. My wife's car is still about $20K outstanding. I want to save up in addition to throwing more at that car.

I'll assume debt's not an issue here. I've used Compass Bank's Build My Savings account over the past couple of years to put aside some savings, and got a decent return on the side in the form of the match bonus. Everything is automated, from the deposit of a portion of my paycheck into the checking account, to the monthly transfer into the savings account, which automatically grows to the target savings goal in the predetermined period, after which the account converts to a regular savings account. Out of sight, out of mind, easy as pie. Read more here if you're interested. Good luck!

This is interesting. I'll have to see if I can get my wife on board.

It's going to be difficult (i.e. impossible) to give you good advice with such little information.

I am a (self proclaimed) master at saving money strategy; not that I've necessarily accumulated all that much. You know all those personal finance rules no one actually follows, such as never finance a depreciating asset, etc.? I follow them.

What matters more than what type of account or investments you put the money into (areas I work with all day every day with financial advisers) is the amount.

That sounds intuitive but think about it. Focusing on how you are going to save $10k is a worthy effort. But increasing your income is by far the best and most sustainable way to increase your savings. I'd lay out the basics and then focus on earning more $$$. It is extremely difficult to get wealthy off 40-60k a year even if you are an investing and a finance professional - trust me I tried! It's doable but you end up having to live off ~20k a year which is not too fun.

My last suggestion is unless you are aiming to save at least $1,200 a month, there is almost a 0 probability you manage to save >$800 a month over time.

Is this a statistical prediction? 50% over your goal to have a decent chance at success?

This is simple but I have to say it, spend less then you make. After that its simple. Don't get stuck on a number.

Everything I make get deposited in my checking account and the statement tells me every month how I am doing. As long as the withdrawal total is less then the deposits total its all good and when the balance gets too big I fund my Roth IRA or add to my Scottrade account or ....

Right. I agree. We make it a point to live below our means.

 

[HIJACKER]

Yes, our debt will be paid off in swift order. My wife and I are quite adept at managing our debt, and we only use credit for emergencies. My car is a few months from being paid off. My wife's car is still about $20K outstanding. I want to save up in addition to throwing more at that car.

However much you were planning to do in savings per month, push towards the car payment. Once that's paid off, then redirect that entire amount to savings.

For example (using your $10k/year, saving $800/month)

Rather than a $250 car payment and putting $400 every two weeks into savings, pay $1050 towards the car payment with $0 to savings. Once you're done, then do $1050/month to savings. That will reduce your debt and put you above $10k/year once you achieve the car payoff.

After that, anytime you get a pay increase at your employer or change jobs, determine how much more you're making after taxes, then divide that by 12 to determine how much more to increase your savings payment. I do mine every two weeks, so I would also suggest the same.

I got as high as $2500 every two weeks for a while before I did a change of lifestyle and built a new home. I've reset that figure to something a lot lower, but will continue to increase the amount each opportunity that I get. Most important, stay debt free (less mortgage).

Also, something else I do - when I buy something big (like a car), I technically "finance myself". What I mean by this is, if I spend $30k on the car, I determine what the payback amount would be over 4 years. At 0% interest, its $625 month. So, I'll add another $650/month to my savings payment (which is $325 every two weeks) to pay myself back the same amount plus a bit more.

Works like a charm and most of all, I feel financially secure.

 

[blue_myriddn]

However much you were planning to do in savings per month, push towards the car payment.

That's good advice and I tend to agree with it as a general principal, but if the OP is planning on home ownership that may fall in to an exception. With a very large purchase like a house, the more you can put down the better. Banks liked that 20% down payment for a good reason so hitting and/or exceeding that number is a very good thing.

Also with auto loans the rates are SO low that having your money tied up in it isn't as bad as it seems as long as you are keeping your finance term short. For example, take a $15k auto loan over 3 years. PenFed will give you a 1.5% rate (crazy!) which works out to $426/month. $426 x 36 = $15,347.16. Translation it is costing you $347.16 for that finance, which is very cheap and may very well be worth doing to free up capital for the home purchase.

This is new though, when auto loans were in the 5% ballpark you would have paid $1184 for the privilege of borrowing the money from the bank.

Bottom line is that it may be worth some time with pen/paper (or excel) to work out some of the variables and costs based on how much you can put down on the house.

 

[HIJACKER]

That's good advice and I tend to agree with it as a general principal, but if the OP is planning on home ownership that may fall in to an exception. With a very large purchase like a house, the more you can put down the better. Banks liked that 20% down payment for a good reason so hitting and/or exceeding that number is a very good thing.

Also with auto loans the rates are SO low that having your money tied up in it isn't as bad as it seems as long as you are keeping your finance term short. For example, take a $15k auto loan over 3 years. PenFed will give you a 1.5% rate (crazy!) which works out to $426/month. $426 x 36 = $15,347.16. Translation it is costing you $347.16 for that finance, which is very cheap and may very well be worth doing to free up capital for the home purchase.

This is new though, when auto loans were in the 5% ballpark you would have paid $1184 for the privilege of borrowing the money from the bank.

Bottom line is that it may be worth some time with pen/paper (or excel) to work out some of the variables and costs based on how much you can put down on the house.

Agreed. However, with mortgage rates at 3.5%, I would aim to put down as little as possible, finance with FHA only putting down 2.5% and if you're a veteran, use the VA to get 100%. Bonus points if you're disabled and can get the funding fee waived. Obviously, the ultimate goal to financial freedom and retirement is no more mortgage, but with the volatility of today's market, having assets and cash in the bank is your best security.

(I use cash loosely, I'd rather not go into a side discussion about the inflated value of US currency and other topics regarding investing in foreign markets or precious metals.)

I'm in the process of selling my home and financing the next one 100%. I'm able to do this because the VA increased the limits, which almost covers my new home, as the limits are $838500. So, my out of pocket costs are only a few thousand. At 20%, I would be facing a $170,000 down payment. No thanks...