In this article, I’m going to show you how to save $10,000 in a year.
In fact, just 21% of Americans have $10,000+ in savings.
Source: Yahoo
Saving $10,000 in a year doesn’t have to be as daunting and scary as it sounds.
And this 7-step guide helps break down your $10,000 savings goal into easy and actionable steps.
How to Save $10,000 in a Year
Let’s get started.
Step #1: Break it Down
Before you even think about how to start saving $10,000 in a year, the first step you need to take is to break down your $10,000 goal into much, much smaller numbers.
How do you feel when you hear yourself say, “I’m going to save $10,000 in a year?”
Sure, you may feel really good setting such a lofty goal for yourself, but I would feel overwhelmed as well because saving $10,000 in a year doesn’t give me any direction.
Instead, break down the $10,000 a year goal.
Figure out how much you have to save per:
- Day
- Week
- Month
Below is the amount you will need to save for $10,000 in a year:
| Savings Frequency | Savings Goal |
|---|---|
|
Per Day |
$27.40 |
|
Per Week |
$192.30 |
|
Per Month |
$833.33 |
Looking at these numbers, saving $10,000 a year could become a reality.
What sounds more doable:
- Saving $27.40 a day
- Saving $10,000 a year
For me, when I say saving $27.40 a day sounds like a goal I can accomplish!
Now that you know how much money you have to save on a daily basis, it’s time to figure how you can make this goal a reality.
And really, there are 3 steps you can take to start saving $10,000 in a year:
- Increase your earning
- Decrease your spending
- Combination of the two
Let’s keep reading to see how you can optimize your financial situation to save $10,000 in a year.
Step #2: Commit to a Budget
Now that you know how much money per day to save, it’s time to figure out your budget.
Sadly, society has trained us to roll our eyes and sigh at the word “budget.”
A budget should be like your best friend when it comes to your financial picture.
In fact, I don’t even call it budgeting. I call it “millionaire planning.”
Below are some rough budgeting rules of thumb that can help guide you on your budgeting journey:
| Type of Expense | Rule of Thumb |
|---|---|
|
Monthly housing debt |
< 28% gross monthly income |
|
Total monthly consumer debt |
< 20% of net monthly income |
|
Total monthly debt payments |
< 36% of gross monthly income |
|
Retirement & savings |
> 20% of gross monthly income |
If you’re unsure of what each of these expenses mean, I’ve defined them in the chart, below:
| Expense Type | Examples |
|---|---|
|
Housing Debt |
- Taxes |
|
Monthly Consumer Debt |
- Cash advances |
|
Total Monthly Debt |
- Car loan payments |
|
Retirement & Savings |
- IRA accounts |
For me, the largest ticket expense in my budget is my housing debt – and that’s typically the case for most people.
So, if you:
- Are struggling with spending
- Are willing to commit to a budget
- Want the best budgeting app out there
- Know you need to change your financial picture
…Then I suggest you check out YNAB (aka You Need a Budget).
YNAB is one of the best – and most effective – budgeting applications out there.
In fact, YNAB claims that first-time users:
- Save $600 in the first 2 months of using the app
- Save $6,000+ in the first year of using the app
YNAB comes with a 34-day free trial so you can get to know the app and decide if this is the best option for you.
Step #3: Cut Unnecessary Expenses
After creating a budget, the next step to save $10,000 in a year is to review every little expense of yours in absolute detail.
Cut out all unnecessary expenses.
Yes, the word “unnecessary” is subjective, and I’ll give you some examples of what I would consider an “unnecessary” expense:
- Brunch
- Cable TV
- Eating out
- Happy hours
- Going out to bars
- Uber or Lyft rides
If you want to save $10,000 in a year, you’ll have to commit to living frugally.
The only expenses my husband and I afford to save (and invest) more than 70% of our gross annual income include:
- Internet
- Mortgage
- Utility bills
- Food for the dog
- Basic grocery bills
- Basic cell phone bills
- Basic living expenses
If you’re looking for an easy way to cut your expenses, then consider checking out Truebill.
It’s a super-easy way to cancel unwanted subscriptions and lower your bills.
Step #4: Automate your Investments
After you’ve figured out which types of expenses you can cut (and save), it’s time to figure out how you can invest that “saved” money.
You can do this by paying yourself first.
Always pay yourself first.
So what does pay yourself first actually mean?
How to pay yourself first:
- Deposit your paycheck
- Automate investments first
- Anything left over goes to bills
After you’ve invested first, only then you can start spending the “leftover money” on bills, living expenses, etc.
Think about paying yourself first like a 401k contribution.
With a 401k contribution:
- The money you contribute doesn’t even land in your checking account
- The money you contribute to your 401k goes directly into your 401k with every paycheck
You don’t think twice because it’s automatic.
And if you want to save $10,000 in a year, you need to start making automatic investments as well.
You won’t save your way to wealth. Invest your way to wealth.
If you’re ready to start automating your investments, then consider opening an account with M1 Finance.
M1 Finance is a great app that can help you reach your financial goals.
Here are some M1 Finance fast facts:
| M1 Finance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fees |
$0 |
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Commissions |
$0 |
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Minimum to open account |
$0 |
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Minimum investment for regular accounts |
$100 |
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|
Minimum investment for retirement accounts |
$500 |
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Below are some of the account types that M1 Finance offers:
- Trust
- SEP IRA
- Roth IRA
- Rollover IRA
- Traditional IRA
- Joint investment account
- Individual investment account
With M1, you can create your own portfolio allocation or you can choose a portfolio allocation that was already created by M1 Finance for you.
Step #5: Increase your Income
Reducing your income is limiting, while increasing your income is limitless.
Think about it:
- When you increase your income, the sky is virtually your limit
- When you reduce your income, you can only reduce your expenses by so much
So, although it’s important to cut back on unnecessary expenses (like eating out), it’s even more important to consider ways to increase your income.
This is where you may want to consider taking on a side hustle.
The point is this: When you build an extra income stream, you can easily start saving $10,000 in a year.
Step #6: Spending Diet
Trying a spending diet is one of my all-time favorite spending games.
Saving $10,000 in a year is like dieting.
If you want to see results, you have to cut back on spending and you have to stick to that goal.
Here’s how my and husband and I do our spending diet:
- We determine our basic monthly living expenses (all-in, about $1,800 per month)
- We determine how much our monthly spending is equal to per day (about $60)
- We decide that we will not spend more than $55 per day
Basically, we’re trying to cut down our spending as much as possible, even if that means decreasing our spending by $5 a day.
Although it’s not easy to get by on $1,650 per month in Miami, we have a lot of fun.
Ultimately, it’s about making savings fun: You know you’re building a better future by sacrificing a little today.
My husband and I just finished our first spending diet of the year, and we passed with flying colors!
We find the benefits of a spending diet include:
- We simplify our life
- We figure out savvy savings tips
- We take time to enjoy the free things
- We make this is a friendly competition, comparing our results to the previous spending diet month
Any money we saved during our spending diet month, we automatically invest in the stock market using our M1 Finance investment app.
After our spending diet month is over, my husband and I have a newly found sense of appreciation for the little luxuries of life:
- Buying snacks
- Getting take-out
- Buying gasoline for the car
It’s like your senses become awakened after a spending diet.
It’s cleansing and it helps you appreciate the worth of $1 even more.
Step #7: Celebrate the Victories
If you’re well on your way to saving $10,000 in a year, don’t forget to celebrate the little victories!
It’s super easy to get demotivated, frustrated, and possibly bored as you aim to save $10,000 in a year.
That’s why it’s important to:
- Break down your goal into smaller, more actionable goals
- Celebrate when you achieve specific milestones
Yes!
I’m saying that you should reward yourself (with something small, and preferably cost-effective) when you crush a certain milestone.
Below are some examples of how my husband and I treated ourselves as we worked toward our goal of saving $10,000 in a year:
| Milestone | Reward |
|---|---|
|
$500 |
We rented a movie on Amazon Prime and ate home-made pizza (spent about $15) |
|
$1,000 |
We ordered take out (spent no more than $50) |
|
$5,000 |
We went out to eat & ordered a bottle of wine! (spent about $120) |
|
$10,000 |
We had a 1-night Airbnb stay in Key West (spent about $300) as a victory prize |
You won’t win with savings if you don’t make it fun.
Don’t forget to reward yourself along the way – or else giving up becomes a very easy – and very realistic – option.
Just make sure to keep saving and investing your money consistently.
And if you’re crushing saving $10,000 in a year?
Aim higher!
Try to make your next goal saving $20,000 in a year!
FAQs about Saving $10,000 in a Year
Is saving $10,000 a year enough?
To determine whether saving $10,000 a year is enough depends on your lifestyle (how much you spend) and your future goals.
Not only will you want to have an emergency savings fund equal to 3 to 6 months’ worth of your living expenses saved, but you will also want to save for retirement, and experts typically recommend saving between 10% to 20% of your gross annual income for retirement.
What should I do with $10,000 in savings?
Before you decide what to do with $10,000 in savings, you want to first consider how much high-interest debt you have, if any (such as credit card debt).
If you do, you’ll want to pay off your high-interest debt first.
Next, you can consider some additional investing ideas:
- Invest in cryptocurrency
- Investing in the stock market
- Fund an HSA (assuming you’re eligible)
- Increase your emergency fund in a high-yield savings account
Can I save $10,000 in 100 days?
Saving $10,000 in 100 days is a very lofty goal, but it’s certainly doable.
One of the first things you should do, if your goal is to save $10,000 in 100 days is to break down this large goal into a daily goal: You will have to save $100 every day for 100 days to accomplish your goal.
If you feel like your current income can’t afford you to save $100 a day, then you may want to increase your income.
Closing Thoughts
Saving $10,000 isn’t just about saving more money.
Saving $10,000 is about so much more:
- You’re building for your future
- You’re building for your family
- You’re building for your legacy
Always know why you are saving $10,000.
When you know your purpose (the “why” behind your reason to save $10,000), you will find that saving becomes so much easier.
Below would be my reasons to save $10,000 in a year:
- Become financially independent faster
- Max out my retirement funds to retire earlier
- Provide for my family so they don’t worry about money
- Be able to sleep at night because I’m not stressed about money
Believe me, saving $10,000 in a year can be tiring, draining, and overwhelming.
There will likely be times where you will feel like you’re not making any progress toward your goal.
That’s normal.
The trick is to remember why you started and to know that your journey is worth every effort. You are 100% worth it.
To get ahead, you have to put yourself first.
And in this case, putting yourself ahead means putting your goal of saving $10,000 in a year above any other goal. It’s not selfish – it’s necessary to win.
What are your savings goals? Let me know in the comments below!
