If you think saving large amounts of money is only for the wealthy, think again. Meet the Millers, a middle-class family who set out on a mission to save $50,000 in 5 years. And guess what? They did it—and not by cutting out their morning coffee or living frugally. Here’s how they did it.
The Goal
In 2015, Sam and Lucy Miller (both in their 30s) had a combined income of $90,000. They had two young children, a mortgage, car payments, and student loans. While they were comfortable, they realized they weren’t saving as much as they should. Their ultimate goal? To save $50,000 by 2020 for a down payment on a second home and an emergency fund.
Step 1: Creating a Realistic Budget
The Millers knew that to achieve their goal, they needed a budget. However, they didn’t just create any budget—they created a zero-based budget. This means every dollar of their income was assigned a specific job, whether for savings, bills, or discretionary spending.
- Income: $90,000/year
- Expenses: $70,000/year (including mortgage, groceries, and utilities)
- Target Savings: $20,000/year
They focused on allocating $20,000 each year towards their savings goal, ensuring they didn’t overspend in any area.
Step 2: Cutting Unnecessary Expenses
While the Millers didn’t want to live an extreme lifestyle, they made some key adjustments:
- Cook at home more: They reduced dining out by 50%, saving $200/month.
- Eliminate subscriptions: They cancelled unused subscriptions like streaming services and gym memberships, saving $100/month.
- Refinanced their mortgage: This move saved them $300/month on their monthly mortgage payment, which they redirected towards savings.
These small changes added up to about $7,200/year in savings, putting them ahead of their target.
Step 3: Setting Up Automatic Savings
One of the most important steps Sam and Lucy took was to automate their savings. They set up automatic transfers to their savings account the moment their paycheck came in. This was critical for two reasons:
- They couldn’t spend the money if it wasn’t in their checking account.
- It helped them stay on track and consistently hit their savings goal.
By automating their savings, they were able to steadily build their wealth without the temptation of spending.
Step 4: Extra Income and Smart Investments
To boost their savings even more, Sam and Lucy took on side jobs during busy months (like freelancing and renting out part of their home on Airbnb). This added an extra $6,000/year to their savings.
Additionally, they started investing their savings in low-cost index funds to take advantage of compound interest, growing their savings faster than a regular savings account.
The Result
By 2020, Sam and Lucy hit their goal: they saved $50,000! They were able to buy a second home and still maintain a healthy emergency fund. Their success didn’t come from sacrificing every luxury, but from smart, consistent budgeting, saving, and a bit of extra hustle.
Key Takeaways: How You Can Do It Too
- Create a realistic budget: Make sure every dollar is assigned a purpose.
- Cut out unnecessary expenses: Small sacrifices can lead to big savings.
- Automate your savings: Make saving a habit.
- Find ways to increase income: Side jobs or investments can help boost your savings.
By following a disciplined budgeting and saving strategy, you too can achieve your financial goals—just like the Millers did.