Saving $25K the “Easy” Way

First, dump your boyfriend. One CPA’s tough-love financial advice for twentysomethings.

Are you living paycheck to paycheck? Do you have enough money in the bank to handle an emergency? Could you come up with a thousand bucks if you needed? Five thousand? If not, then you’re like most Americans. In fact, a new survey released this week found that 76 percent of Americans are living from paycheck to paycheck and that “fewer than one in four Americans have enough money in their savings account to cover at least six months of expenses, enough to help cushion the blow of a job loss, medical emergency or some other unexpected event. Meanwhile, 50 percent of those surveyed have less than a three-month cushion and 27 percent had no savings at all.”

Stop. This isn’t funny at all. This is one instance where you don’t want to be part of the crowd. You cannot be living paycheck to paycheck. You have to build up savings. And it’s not just about having emergency funds, even though that’s the most important reason. Having money in the bank gives you the ability to put a down payment on a house or capital to start a business. At the very least, it gives you a little peace of mind. People are less stressed and make better decisions when they’re not forced into things because of their financial situation. You have to get it together.

And it’s hard to save money, no matter what your salary level is. But you can do it. I had to do it. And I know others who have. It takes a lot of self-discipline. It takes sacrifice. But it’s critically important. Because two years from now you want to sit back and have the pleasure of looking at a pile of cash in the bank. Trust me … it feels great. Want to have $25,000 within two years? Here’s how.

1. That’s right … take two (long) years. Two long, difficult, agonizing, self-sacrificial years. They won’t be fun. They will be austere. But commit to this. Accept the fact that the next two years will suck. You will have no social life. You will be difficult to be around. You will be miserable. Ah, hell … maybe you’re already like this and it will be no big deal. But two years out of a (hopefully) 80-year life is not the end of the world. So do this: Create a two-year savings goal. And stick to it. Because it’s worth it.

2. Cut out daily frivolities. Let’s face it: That single trip to Starbucks every day costs you $15 a week, or $1,560 over two years. Eating lunch out twice a week, even at ten bucks each time, costs you an extra $2,080 over that same period. Do not carry around cash. Put your credit card away. Keep a debit card for essential expenditures. This stuff adds up — we’ve already saved $3,640.

3. Cut out the vices. If you’re like many people and go out and drink three to four beers a week, you’re spending about $1,600 on beer over two years. If you’re an idiot and still smoke even half a pack a day, you’re spending $1,800 during that same period. Cutting this out for your period of austerity will not only improve your health (and your breath) but will also stick another $3,400 in the bank.

4. Get your bank involved. Call your bank and create a savings account. Don’t get annoyed at the .001 percent interest they’ll be paying you. It’s not the point. Setup an automatic transfer each week for $20. Just twenty bucks. That’s all. You can afford that. After two years you’ll see $2,080 in your savings account. Every Friday go online and sweep any extra money over, say a hundred bucks, into your savings account too. That’s the money you’re saving from following these tips. Above all do not … under penalty of death … touch the money in your savings account. Look at it frequently. But don’t touch it.

5. Have an accountant call your mom and dad. They think you’re a fool for living in that dump in town and they’re not crazy about your boyfriend/girlfriend. But they’re your parents and they love you, and they may help if given the right incentive. They’re not going to listen to your pleas of poverty. But they will listen to a smart CPA who tells them they can avoid putting the burden of estate taxes on their children by gifting them up to $14,000 per year. Who knows? Mom and dad may see how financially smart this is and fork over a grand or two for your savings. Let’s assume they step to the plate and give you another $2,000 over two years.

6. Don’t have a boyfriend/girlfriend. They’re way too expensive and will kill your two-year plan. I’m conservatively estimating a savings of $2,500 here.

7. Sell. That’s right, sell. Go through your stuff, pile all the unwanted clothes, CDs (really? CDs?), books, furniture, skis, etc. and sell it all. Do it on eBay. Have a yard sale. Just get rid of it. It’s just clutter and a reminder of your less-disciplined life. I bet you’ll pull in $500. Stick it right into that savings account.

8. No vacations. Sorry, but you’re in a two-year austerity period, remember? Did your great-grandfather take a vacation to Disney while serving in WW2? Did our forefathers take a break from the revolution for a few nights at the Bellagio in Vegas? Of course not. These people were battling the enemy. For them it was the British and the Germans. And they were winners! For you it’s personal bankruptcy and a lifetime of being a financial loser. No vacations! Even a few days away will cost you $2,000. By staying at home for just two short years you’ll easily save $4,000.

9. Eat at home and use coupons. Obvious, but true. Annoying, but valuable. You can get them online or from your Sunday paper. And every time you food shop, make sure you have your coupons with you. You’ll conservatively save about $20 a week by eating more at home, using coupons when you shop and being smart about what you’re buying. Be an avid reader of all those penny-pinching sites and advice blogs by googling “frugal living.” It’s a project. It’s a lifestyle. It sucks. But this tip alone will put at least another $2,100 in the bank after two years.

10. Work more. If you’re living paycheck to paycheck, you must have a job — excellent start. But you’re smart. You have other skills. Find some more work. Maybe working two jobs is asking too much. But how about contracting yourself out on sites like Elance, Guru or oDesk to perform menial tasks that you can do in your spare time — editing, bookkeeping, database, research, proofreading, tech stuff. Can you do that? If you can, you can easily pull in another $5,000 over two years.

So what does this all add up to? I’ve got about $25,000, give or take a few assumptions. Did I do my math right? Am I that out of line? I don’t think so. Will it be a tough couple of years? Oh, I think so. But imagine looking at $25K in your account after that. You won’t be rich. But you’ll be a lot better off than three-quarters of the entire population. And that’s a good goal to have!

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  • Sean Roche

    A female will save $2500 without a boyfriend. Males without a girl? More like $6k. “Chivalry” is expensive.

    In all seriousness, I implemented this same game plan with a then girlfriend and she was able to bank roughly $10k a year.

    Another good tip- See where the money is going on paper. Track every expense on a spreadsheet so you can tangibly see where the aforementioned money in the article is going. Once you see your money and where it’s going on paper, one can adjust necessary spending vs.unnecessary and start to gradually change frivolous habits. ‘I spent how much on coffee and beer last month?! I had no idea! ‘