How I Saved $20K In One Year

I’d like to preface this post by saying I wasn’t fortunate enough to be raised in a financial literate household.  Growing up my parents never spoke to me about money management because as first generation migrants they didn’t have the proper resources or knowledge to do so. Through my studies and personal experiences (both good and bad) I’ve amassed valuable knowledge which I’ve used to help me make better decisions regarding my personal finances.  I know so many people who have similar backstories as mine and who didn’t grow up in financial literate homes.  My hope is that by sharing my personal stories I’m able to find that girl (or boy) who was just like me and help him/her achieve her goals.

In my first ‘Finance’ related post I’m sharing how I was able to drastically increase my savings in just one year.  To clarify, I didn’t write this with the expectation that any person could have the same experience as me by following the same exact steps that I did.  I am fully aware that there are many variables and moving parts in everyone’s lives which affects their financial freedom.  These posts are to simply share my experiences and hope they invoke financial literacy.

I opened an online savings account

I opened an online savings account with Barclays because at the time they offered the best APY. While it was a measly 1% at the time (it’s since gone up to 1.20%), it was 100% more interest than I was receiving from my checking account.  As a rule, if the money you’re saving has a definite purpose and needs to be reached within a specific time frame, you shouldn’t save it in risk-type investment vehicles (stocks, real estate investment trusts, etc).  Instead, you should save your money in super-safe vehicles like a boring old savings account or a certificate of deposit.

I took my year-end bonus and put it into my savings account: $5,000

As soon as I opened my savings account, I immediately deposited my year-end bonus into it. I always encourage friends who are in the beginning stages of implementing a savings plan to use windfall payments (bonus checks, tax refunds, etc) as a catalyst to jump start their momentum.  By depositing these funds into your savings account, you fast-forward the process of saving money to buy your future home, car, or  next big investment.

I put my tax return into savings: $3,000

I know so many people who use their tax returns to indulge in luxury purchases or instantly book a vacation and I can’t stress enough how those are such terrible habits to acquire! If you absolutely must indulge in order to sleep better at night I’m an advocate of allocating at least 80% of your refund to savings and using the rest for personal pleasure.  Honestly, if you depend solely on your tax refund to be able to go on a vacation, you probably shouldn’t be going on vacation. Put it away and thank yourself later!  While this option isn’t as glamorous as purchasing a flat-screen TV or cruising to Hawaii, giving yourself the kind of financial security that lets you breathe easy will provide you with a cool composure that never goes out of style.

I moved back home: $1,025 per month savings

Tommy and I previously lived in a 3BR/2BA duplex and it was way more space than we would ever need but I loved it!  We thought long and hard about the decision to move in with Tommy’s parents but ultimately, we knew it would help us expedite the process of saving for our first home, which was our goal at the time.  I’m sure you’ve all heard it before – people who “move back home to save because they’re going to buy a house in a year” and 12 years later they’re still living in their parent’s basement.  I can fully understand why it’s so easy to fall out of disciplinary saving habits living with your parents, but I sure as heck was not going to let that happen to me. We gave ourselves a time frame of ONE YEAR and we stuck to it.

I put my rent deposit into savings: $1,025

30 days after I moved out of our duplex, I received my rent deposit back and immediately put it into my savings account.

I set up reoccurring payments into my savings account: $1000/month = $12,000

It should come as no surprise that the #1 thing you need to practice when developing saving habits is discipline. Set a goal each month and stick to it.  I’m not going to lie and say $1000 wasn’t a lot of money for me to put aside a month because it absolutely was!  I didn’t have a large salary and I was a student, but I wanted to practice paying a monthly mortgage every month so I decided on this amount because it challenged me to practice discipline.

I created and followed a strict budget

The two most important things through out this entire process were my strict savings and spending practices.  Creating a budget helped me have such a better grasp on my spending habits and it also prevented me from making unnecessary purchases.  Other things that helped me from being “lured” into frivolous spending were unsubscribing to e-mail advertisements, meal-prepping all my lunches to avoid eating out, and making coffee at work instead of going to Starbucks 3x a week. 

I used supplemental income to pay for leisure

You guys, you can absolutely be frugal and still live very comfortably.  Through out this entire process, Tommy and I were still able to take several trips (including our trip to Macchu Picchu!) and indulge in some nice things for ourselves.  My one stipulation was that anything we did that exceeded our budgets would need to come from supplemental income.  I did a few side hustles that helped fund a few of our trips (AirBNB, bought + sold furniture, sold old clothing) and also saved all monetary gifts we received through out the year (from birthdays, Chinese New Year, Christmas, etc) to put toward leisure.

Year End Savings Amount: $21,025