How To Save $100,000 in 5 Years

How To Save $100,000 in 5 Years

How to save $100,000

There’s no better feeling then seeing your net worth reach the $100,000 mark for the first time. For me, this happened a few months ago, 5 years after I graduated and got my first job out of school. I think it’s important as a new blogger to inform people about my past financial decisions, which can help you make your own (I hope!). How to Save $100,000 is a pretty common inquiry. Here’s how I did it!

INCOME

My income varied A LOT over the past 5 years. I started off making $45,000 a year, then eventually $85,000 and then back down and then back up. Needless to say, my income was like a roller coaster! I summarized all of my tax assessments and found that my average taxable income over the past 5 years was $70,600. Being in Ontario Canada, I have to pay provincial and federal income tax as well as contribute to employment insurance and the Canadian Pension Plan. On average, my deductions were about $15,000 a year. Additionally, I received an annual average tax return of $3,742 through RRSP contributions (lowering my tax bracket). You might be thinking… How to save $100,000? I only make $40,000 a year! Yes, this might be tough and you might have to adjust your targets or timelines, but the principles remain the same.

EXPENSES

My biggest expense was my living costs. As soon as I graduated University, I moved to the city since my parents lived too far away from where all the jobs were. Being frugal, I lived in my sisters basement in 2013 and 2014 and only had to pay $400 a month in rent, voluntarily. This is when I was able to pay back my $12,500 in student loans (OSAP) before the interest period started. Once my OSAP was paid off, my savings went into fifth gear! Eventually I moved out of my sisters into a fancy condo when she had her first child. For 15 months of rent, I paid $23,625 plus utilities. Looking back on this, I just want to slap myself! Eventually I smartened up  and moved into a new rental with a roommate. This saved me SO MUCH money from 2016-2018. I saved $23,800 over 28 months! Find out how having a roommate can help you save here. My living (rent + utility) costs over these 5 years totaled between $65,000 and $70,000. Of course there are many more expenses (food, clothing, car, gas, etc…. aka life), but this was the biggest of them all.

INVESTMENTS

When I first started making money I didn’t have a lot of knowledge on investing. I simply went to my bank and opened up a TFSA and RRSP account. Within these accounts an ‘expert/adviser’ would manage my mutual funds… and take a huge chunk of my money! After a few years, I basically had 0% returns after fees and I got fed up. That’s when I discovered WealthSimple. I moved ALL my investments over there and then my returns really started to pile in. I’m going to do a separate review on WealthSimple, but I can tell you I’ve had a great experience with them so far. My annual returns with them definitely added thousands of dollars to my total net worth.

How To Save $100,000 in 5 Years

  1. Pay off all debt before interest kicks in
  2. Save, save, save!
  3. Invest

Seriously, that’s what I did. With my income I was able to set my automatic savings plans at $600 bi-weekly. I also started making my own damn coffee (and applied the principle). This resulted in close to $16,000 in automated savings per year. Then, when I could, I’d also transfer any extra money I had into my TFSA as long as I had contribution room.

I put in around $27,000 into my RRSP over those 5 years, knowing I’d get the tax returns and could take $25,000 out to buy a home (Home Buyers Plan).  I also have my current employer contributing money to RRSPs and a company pension now. You can see their status at My Wealth.

It’s a lot of numbers. A decent amount of income and quite a few expenses, but I am proud that I saved $100,000 in 5 years. Purchasing a house of course put a dent on these numbers, but it’s time to get back on the horse and reach 6 figures in my accounts again! I hope all of you reach your goals too!

Mr. WW

2 Replies to “How To Save $100,000 in 5 Years”

  1. This, thank you for this very inspiring post!

    I can relate to what you said about variable income. My freelancing income is what makes up most of my income, so it obviously varies a lot! And I also agree with investing. I have an emergency fund (with 3-months-worth of expenses) and a savings account, but the rest of my extra money, I just put towards investments. It’s never good to keep most of your money in a bank and have it sit there anyway, doing nothing.

    Congratulations for the achievement and please, keep it up!