How to Save $26,000 in 5 Years or Less

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A penny saved is a penny that can be earning investment returns in a well-diversified investment portfolio. At least, that's what I think one of the late, great founders of our nation once said.

It's hard to find ways to put money aside, but here are a few creative options that are often overlooked. Check out the strategies below, and you could have $26,000 (or more!) stashed away in just five years.

Shop Homeowner and Auto Policies

It's easy to become complacent about recurring-but-necessary bills like home and auto insurance policies. "Most people sign up with a carrier and stay with them for 10 to 20 years," says Patricia Nelson, founder of the community outreach program Wise Women Workshop. "Today though, there are no savings for loyalty. When a client switches carriers I see them save, on average, $600 to $800 per year."

Annual Savings: Up to $800

Negotiate With Cell Phone and Utility Carriers

It's a little known fact that cell phone rates are negotiable, but even less known is that you can also haggle with your utility providers. "Most of these companies will figure out a way to knock $20, $30, $40 per month off of your bill because they want to keep your business," says Nelson. "But, they're not going to call you and tell you ways to save money on your existing services with them." If you have success with just one utility bill and your cell phone provider, you could cut about $60 off your monthly expenses.

Annual Savings: $720 or more

Forego Cable TV

Most people think that the only way to get network TV stations at home is to pay for at least a basic cable TV package. That's just not true. Similar to the analog days, you can put a digital antenna on your roof and watch network TV for free (it's 100% legit and the shows come through in HD quality). (See also: How Everyone Can Cut Cable and Still Watch What They Love)

Expanded cable TV packages average between $60 and $75 per month, and costs are on the rise. If you can't make it without your shows, there are plenty of cheaper options like Netflix or Hulu Plus, and you can play them on your TV thanks to all of the streaming boxes now available. In my house we gave up cable TV 10 years ago (except for the occasional, infrequently used introductory package after moving), and I was surprised to find I barely missed it. (Cable Internet, though? Like bread or water. Must have.)

Annual Savings: Up to $900

Shop Around for Prescription Drugs

Surprising but true, the cost of prescription drugs are not fixed. "You could be purchasing your medication at the wrong store," says Nelson, who adds that Walmart offers a list of over 1100 drugs at $4 each for a month's supply, substantially lower than most co-pays. "If you're taking two medications and paying a $15 co-pay for each," she says, "you could be saving $22 per month." No prescription plan required.

Annual Savings: $264 (more or less, depending on your prescription needs)

Bank Your Annual Raise

The millionnaires next doorare notorious for maintaining a consistent lifestyle, despite rising incomes over the years. The average raise is expected to be 3% this year. If you make $50,000 now, that's a $1500 increase. Why not add that extra cash to your bank account instead of using it to trade up to a grander lifestyle? (See also: 5 New Income Streams Anyone Can Create)

Annual Savings: $1500 on average

Brown Bag It

Bankrate.com estimates you can save $70 per month by packing your own lunch (more if you live in a high-cost area).

Annual Savings: $840 (or more)

Cook Dinner at Home One Extra Night a Month

A recent study estimated the cost of a home cooked meal (per person) is $5.93 on average, compared to an average $12.28 to eat out. Skip family pizza night just once per month for your family of four, and the savings add up.

Annual Savings: $304.80

(BIG) BONUS: Ditch the Car

According to AAA, the average annual cost of owning a car is $8,876 per year. If you live in a walkable area or in a city with a good transportation system, you could forego the cost. Of course, not everyone lives in a walkable area or can get by without their own transportation, so this is a bonus option.

Add up the savings (minus the car) to see how quickly a few small changes can add up.

Over five years, all that savings adds up to $26,644 ($71,024 if you're lucky enough to not need a car!). The results could get even better if you invest the money in a well-diversified investment portfolio.

• At a 3% average annual return over five years: $29,140.06.
• At a 5% average annual return over five years: $30,917.23.
• At an 8% average annual return over five years: $33,762.90.

(Please note that investment returns cannot be predicted, and you should talk to an investment professional before selecting your investment portfolio.)

Of course, the key to this and any other cost cutting plan is to remember to bank the savings you find. Otherwise, you're just shuffling money from one spending category to another, and not actually saving and getting ahead.

What is the most effective way you've found to cut costs and boost wealth? Let us know in the comments!

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