Financial worries and can create a lot of stress, but saving can also feel difficult and especially boring. It's a battle between quality of life and money - it's hard to get together simply!
In this post, we'll look at how long it can take to save $100,000, tips on different ways you can save, and how you can make it more fun!
Best way to save money
When you're going to save up a buffer, the whole idea is for the money pile to grow. To do so effectively, one should choose between saving their money on the stock exchange or opening a savings account with interest. It's a way to create a passive income based on the money you have - you get money by saving money! Genius, isn't it?
Savings account with interest
One savings account is a kind of bank account where you can get interest on your savings. If you deposit SEK 100,000 into a savings account with an interest rate of 10%, you will receive SEK 10,000 in return for one year. Now 10% is an unreasonable figure, especially as we live in a time of negative interest rates.
How long does it take to save $100,000 in a savings account?
Let's take a slightly more reasonable example and assume instead that you have a savings account that provides a 1% annual return and you deposit $1,000 a month. It will then take you about 8 years and 4 months to reach the goal. Now 8 years may feel like an eternity, but we must not forget that it is an almost risk-free way to save. Read more about interest on the interest rate effect and get more counting examples.
Savings on the stock exchange
On the stock exchange, however, there are other buns. The returns are generally higher, but so is the risk. It's a faster savings rate, provided it goes well. The stock market goes up and down and if you need money for a certain occasion, say for a wedding, it might be wise to choose a savings account instead.
How long does it take to save $100,000 on the stock exchange?
If you invest $1,000 each month with an annual return of 7% (historical figure without recession), it will take you 6.5 years to reach your goal. Better than the example above, but 6.5 years is still quite a long time.
If we say that you get better at saving and instead invest 5,000 SEK each month, with the same return of 7%, the rate increases drastically! Then it will only take 1.5 years. Pretty good improvement, isn't it?
When choosing between a savings account and the stock exchange, you have to weigh yourself between the risk you want to take and think about what to use the money for, everyone's situation looks different. The possibility of combining both is always there. The saying “All eggs in the same basket” is apt here. Spreading your savings between variable and fixed savings accounts can also be a good idea.
Tips on saving money
It can be difficult to save. Many are in a situation where they don't have much left at the end of the month. Reducing the cost of $5,000 may seem impossible, how should you handle it?
Of course, the obvious answer is to draw in on its costs, but it is also the most boring. Try to make small compromises, instead of eating out 5 days a week you can do it 3 times, bike to work instead of riding a car and the like. Many creeks small!
Another way is to run periods - for example, 3 months of substantial savings, and then return to normal.
However, remember that you also have to live. Depending on your income, $5,000 can be a lot of money. If saving causes you to be too stingy with yourself and feel bad about it, it might be worth setting yourself up for long-term savings instead.
Make saving fun
By setting a concrete savings goal, it often becomes more fun and easier to reach it. If you find it difficult to motivate yourself, you can try something called gamification, a savings contest! One competes against oneself by making a game of saving. Doesn't that sound a little more fun?
It goes to like this! Say that you usually save $1,000 a month but want to reach up to $5,000 - that figure that feels like an impossibility. Continue as usual, deposit $1,000 into your savings account or the stock exchange, just as you usually do. Then divide the remaining $4,000 per day for the rest of the month.
- Goal: 5,000SEK/month
- Month = 30 days
- 1 000 kr on the first day
- 4,000 kr in the remaining 29 days
- 4,000/29 ≈ 138
You only need to save 138 kr per day! Feels more reasonable, doesn't it?
Some days, of course, it is difficult, or even impossible, to get it together. If you have no expenses on a certain day, there is of course no cost to deduct - you can make deductions when you can simply. The point behind the method is to challenge oneself in a fun way, while increasing one's savings. You set the goal of $5,000 to have something to aim for. If you do not reach all the way but manage to save 2,000 SEK more than the previous month, you have still made progress and are in a better situation than before!
I know that saving can be overwhelming and boring, but remind yourself that a buffer can lead to less stress and that in this way you get more out of life in the long run.
Give saving a try, you can do this!