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Even though most people understand the value of saving, many of them struggle to meet their savings goals. Only 43 percent of U.S. adults feel comfortable with their level of savings, Bankrate’s annual emergency savings report found, highlighting a need for improved financial security.
If you’re looking to boost your savings — and give yourself a challenge — saving $10,000 in a year is feasible with careful planning and dedication, even if you aren’t a high-income earner. Here’s a guide to saving $10,000 in one year and making yourself more financially secure in the long run.
Breaking down the savings goal
A savings goal of $10,000 a year might initially seem overwhelming. To make this goal more manageable and less intimidating, it can be helpful to break it down into smaller chunks. That approach lets you measure your progress along the way and helps create more-tangible goals.
You might choose to break down this goal differently depending on your circumstances and income. For example, someone who gets paid weekly may find it beneficial to contribute a set amount to their savings every week, subtracting it from each paycheck.
Here’s (roughly) the amount you’d need to save at different intervals to reach the $10,000 savings target:
- Monthly: $833
- Bi-weekly: $385
- Weekly: $192
- Daily: $28
You can use one of these smaller numbers when establishing your budget or making a savings plan.
6 steps to save $10,000 in a year
1. Evaluate income and expenses
To make room for saving, you’ll need a meticulous budget that outlines all your sources of income and all your expenditures. You can use various digital tools, such as a budget calculator or budgeting apps, to help track expenses, organize your budget categories and even get personalized recommendations on where to cut back on spending. Once you have a clear picture of how you spend money, you can begin to pinpoint areas for saving.
2. Make an actionable savings plan
A savings plan is a personalized roadmap that outlines how much money you will save regularly, where this money will be stored and how it will grow over time. The goal of having a structured savings plan is to make saving money an integrated part of your daily finances, guiding your financial decisions.
You’ll want to determine how frequently you’ll be adding savings to an account. It’s also important to have a savings account where your money can grow at a high interest rate while being safely stashed away.
Once you’ve established how often and where you’ll be making savings contributions, consider setting up automatic transfers, so that you can stick to your savings plan without the added legwork of making manual transfers. Most banks offer the option to automate your savings, either by selecting a specified amount to be transferred at regular intervals or a certain percentage to be transferred into savings from your paychecks.
3. Cut unnecessary expenses
To save more, you’ll have to be more strict about your spending. As you regularly revisit your budget, determine how much more you need to save each month than you already are. These extra savings will have to come from cutting expenses and boosting earnings.
Ask some of the following questions to see where your spending could be reduced:
- Are there meals you could prepare at home rather than eating out?
- Are there any recurring subscriptions, like a streaming service you no longer use, that you could forego?
- Could you opt for public transportation instead of ride-hailing services occasionally?
- Are there any bills you can negotiate to get them lower?
4. Increase your income
If reducing expenses isn’t producing the savings you need, it might be time to explore avenues for increasing your income. This could involve freelance work, side gigs or selling unused items on an online marketplace. In some cases, you might also consider negotiating a salary raise or even a job switch to a higher-paying role.
5. Avoid new debt
As you work toward the $10,000 savings goal, it’s critically important to avoid accruing new debt. Any debt, especially high-interest ones like a credit card, can turn into longer-term financial burdens, with an additional expense to factor in for meeting monthly payments, and can impede your savings progress.
6. Invest wisely
Investing can be a helpful step in achieving your savings goals. While it does entail risk, you could consider instruments like stocks or mutual funds that can provide high returns.
Even if you’re not well-acquainted with the world of investing, though, you can boost your earnings through very low-risk investments. High-yield savings accounts and certificates of deposit (CDs) are offering attractive rates of return in the current economic climate — you just have to do a bit of research to find the best accounts that offer high yields.
Common mistakes to avoid when saving
Successfully navigating around common obstacles while saving can be the difference between reaching your financial goals and falling short. Here are some frequent mistakes and how you can avoid them:
- Not accounting for variable expenses: Irregular, but inevitable, expenses are easy to overlook. They can include things like car maintenance, quarterly insurance payments or holiday spending. To avoid this mistake, make a list of these expenses ahead of time and include a monthly portion in your budget to account for them.
- Not setting financial goals: Even though saving $10,000 in a year might be your overall goal, it’s important to have an idea of what you’re saving for specifically so you don’t lose focus and motivation. Establish what you want that $10,000 to go toward — maybe part of it will help pad your emergency fund, while part goes to retirement and the rest can help pay for an upcoming vacation.
- Becoming excessively cautious in spending: While frugality can be a good habit for saving, there’s a point at which it can become counterproductive, leading to stress and reduced quality of life. You don’t need to eliminate all entertainment or self-care expenses. Instead, allocate a reasonable amount for personal enjoyment, with an eye toward making sure it fits within your budget.
- Giving in to impulse purchases: Impulse buying — making unplanned purchases based on spur-of-the-moment temptation — can seriously derail your savings plan. One way to avoid impulse purchases is to adopt the 24-hour rule. When you see something you’re tempted to buy, wait 24 hours before purchasing. Often, you’ll find the impulsive desire to buy has passed.
- Not adjusting your budget over time: As your life changes, so too should your budget. Maybe you’ve received a raise at work, or your rent has increased. Regularly revisit and revise your budget to account for these changes and ensure you’re maximizing your income distribution.
While saving $10,000 in a year may seem daunting, it’s achievable with a structured plan, a bit of self-restraint and a goal-focused mindset. More than likely, you’ll make some mistakes along the way — but a successful savings strategy should allow for learning from mistakes, rather than shaming yourself over them. Stay diligent, adjust your budget as necessary and keep your eyes on the prize.