Want to save $10K this year? Here’s how to do it

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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.

Saving $10,000 in a year doesn’t have to be as daunting and scary as it sounds.

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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
– Interest
– Principal
– Insurance
Monthly Consumer Debt – Cash advances
– Credit card debt
Total Monthly Debt – Car loan payments
– Mortgage payments
– Credit card payments
– Student loan obligations
Retirement & Savings – IRA accounts
– 401k accounts
– Savings accounts
– Roth IRA accounts

For me, the largest ticket expense in my budget is my housing debt – and that’s typically the case for most people.

Pro Tip:If you’re struggling to get by, you may want to consider looking for a roommate to help you pay for monthly living expenses.

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.

For help with your personal finances, consider working with a fiduciary financial advisor. Find an advisor who serves your area today (Sponsored).

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.

Pro Tip:If you want to be a successful saver and investor, you’ll want to focus on automating your investments. When it’s out of sight, it’s out of mind.

And if you want to save $10,000 in a year, you need to start making automatic investments as well.

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
Fees $0
Commissions $0
Minimum to open account $0
Minimum investment for regular accounts $100
Minimum investment for retirement accounts $500

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.

Pro Tip:Because spending diets don’t exactly allow you to indulge, I’d recommend sticking to a spending diet 1x or 2x per year – no more, so you don’t burn out.

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?

Can I save $10,000 in 100 days?

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.

Need help managing your finances?

Learn how you can start saving money right now.

Additionally, a financial advisor can help you work out the details of your personal finances. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.(Sponsored)

 

This article originally appeared on TheMillennialMoneyWoman.com and was syndicated by MediaFeed.org.

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The smartest ways to save for retirement

 

Saving for retirement is one of the most important financial goals there is, but it isn’t always easy. Even with the best intentions, it can be difficult to discipline yourself to put money away for a nebulous “someday,” especially when you’re busy trying to make ends meet now.

 

But there are plenty of ways to save for retirement more efficiently, making every dollar go a little bit further toward a well-deserved rest in your golden years.

 

A lot of the “getting started” part is becoming educated on how different retirement plans work and what your options might be depending on your financial situation.

 

Related: 401(k) tax rules on withdrawals and contributions

 

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If your company offers a 401(k), it’s usually a good idea to contribute to it at least a little bit. The contributions will be automatically deducted from your paycheck and may also be made from pre-tax money, which will lower your taxable income.

 

 

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If your employer offers a 401(k) match, there is even more incentive to contribute. A match is about as close as it comes to free money and is considered part of an employee benefits package. Your company may have a vesting schedule, meaning you don’t obtain full ownership of its contributions until you’ve been working at the company for a certain amount of time. You’ll always maintain full ownership over the money your contributions, however.

 

 

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Thanks to the power of compound interest, the earlier you start saving for retirement, the more you’ll likely make over time. It’s never too early to start, so get cracking!

 

Related:When to Start Saving for Retirement

 

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Making regular contributions is one of the best ways to grow your retirement funds. With a company-sponsored retirement fund like a 401(k), the money comes out of your paycheck each period. But if you’re DIYing your retirement with an IRA, for instance, you’re in charge of making sure money’s going in.

 

 

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Even if you are actively investing in a 401(k), you may be able to boost your retirement savings even more by also opening an IRA. If you’re self-employed or working at a job that doesn’t offer retirement benefits, an IRA might be the very best choice available for you. IRAs are easy to open and available to almost anyone, so long as you earn an income.

 

 

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The contribution maximum for IRAs is relatively low, compared to 401(k). For 2022, you can contribute up to $6,000 per year to your IRA, or $7,000 if you’re aged 50 or over and eligible for catch-up contributions. Maxing out your IRA each year can help set the foundation for a successful retirement and also help you save money on taxes during the year the funds are contributed if you’re eligible.

 

Related:How Much Can You Put in an IRA This Year?

 

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A Roth IRA works a little differently than traditional IRAs and 401(k)s. Rather than getting a tax break now, you’ll get it later when you take the funds out during your retirement years. If you’re eligible for a Roth account, you may be able to have some tax-free income in retirement.

 

 

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If you earn more than $129,000 as a single person or $204,000 as a couple (for 2022), your eligibility to contribute to a Roth is reduced, and if you earn much more than that, you may be ineligible entirely. However, you can still transfer the funds in a traditional IRA into a Roth account, provided you pay income taxes when you do so. This can help you score those tax-free earnings, even if you earn too much to directly contribute.

 

 

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Contributing to your 401(k), or any retirement account, is just the start. In order to get that money growing, you need to make sure it’s allocated into investment categories like stocks, bonds, and cash. How your investments are allocated is likely to change over time, depending on your risk tolerance and the length of time before you plan to retire.

 

(If you have specific investment questions, we always recommend chatting with a qualified financial planner or other investing professional.)

 

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Allocation and diversification go together like peanut butter and jelly. Maintaining a diverse portfolio helps you avoid having all of your investment eggs in one basket. If one company (or even one segment of the market) starts to falter, you have other investments to fall back on.

 

 

 

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Even if you’re diligent in looking at how to maximize your retirement savings, maintenance and trading fees can quickly eat into your funds. These fees do vary depending on what financial institution manages your account. It’s worth shopping around for an account that has reasonable 401(k) fees.

 

 

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An HSA, or Health Savings Account, isn’t a retirement vehicle in its own right, but it can help you boost your retirement savings if it is treated as a retirement account. To qualify for an HSA, you must have a High Deductible Health Plan, among other requirements. HSAs are portable, so you can take them with you if you change employers or retire. Distributions taken for qualified medical expenses are tax-free, but non-medical distributions are taxable and may be subject to an additional 20% penalty.

 

 

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These days, few people stay at the same job for their whole careers. If you’ve been accruing retirement savings in a 401(k), it could be tempting to cash it out and treat it as a windfall when you change employers. But early withdrawal comes with a 10% penalty tax from the IRS, not to mention the regular income taxes you’ll have to pay on the money. It’s probably a way better idea to roll it into a new 401(k) or IRA and keep it growing.

 

 

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After you’ve taken the steps to start saving for retirement and have a solid plan in place, it’s a good idea to make sure you are contributing as much as you can during your prime working years.

 

 

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This one might cause a little stress, but it can pay off with an income increase just with a single conversation. Gather the specifics about why you’re an awesome employee and put on your negotiating hat. If you’re feeling bold, you might also ask for a retirement-specific benefit as part of the deliberations, like an increased 401(k) match!

 

 

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Budgeting is the key to so many personal finance matters, and saving for retirement is no different. By seeing where the money is coming in and going out, you might find some places to cut back and find more money to stash away for the future. If you haven’t spent some time with your budget in a while, sit down and get to know it.

 

 

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The amount you’re able to set aside for retirement will depend on your current earnings, cost of living, and many other factors. While an oft-cited rule of thumb suggests saving 15% of your income, that may not be feasible for you.

 

However, it’s still worthwhile to sit down and set a specific monthly retirement savings goal and commit to putting that much away. Focusing on how to increase your savings rate when your income or other life factors change will likely keep your retirement goals in sight.

 

Related: How to Make a Monthly Budget

 

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When you’re budgeting your income and expenses, it can be easy to leave savings as the last line item. By committing to saving first (setting money aside as soon as you get it), you’ll ensure you’re actually contributing to your retirement fund on a regular basis, helping it continue to grow as effectively as possible over time.

 

 

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One easy way to ensure you don’t fall behind: Automate your retirement savings. Most brokerages and platforms have an option to allow you to automatically invest a certain amount on a regular basis. Again, just be sure you’re actually allocating the funds once they hit your account.

 

 

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We’ve all got to eat, which means we all spend money on food. But how much money we spend is another matter entirely. According to the latest data from the USDA, a household of two might spend as little as $410.60 on a month’s worth of groceries or as much as $815.60, a wide range. There are plenty of suggestions online for saving money on a grocery budget, so paying attention to expenditures here and getting creative with meals will probably net some savings to add to a retirement account.

 

 

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You can only make so many budget cuts, but you can almost always find ways to make extra money. Whether it’s freelance writing or selling your crafts on Etsy, a side-hustle might be a great way to increase the amount of cash you have on hand to put toward retirement.

 

 

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Regular interest-bearing checking and savings accounts are still out there. Even though the interest earned might be minimal compared to investment accounts, it’s still better than not earning interest on those accounts at all.

 

 

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If you’re getting a tax return, it may be tempting to spend the money on fun things, but when calculating how to maximize your retirement savings, it’s worth considering funneling some or all of it into your investment account. Saving instead of spending this money could add up to major nest egg increases.

 

 

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Aside from housing, car ownership can be one of the most expensive parts of day-to-day living for many people. It’s not just the cost of the vehicle itself, but also insurance, maintenance, and fuel. If you live in the kind of city where you could rely on public transit or take your bike to work, doing so might be a great way to make some substantial monthly savings.

 

 

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Assessing your true housing needs is likely a major decision within a household, but if you live in a house that’s bigger than you need or in a pricey part of town, for example, it could be worth it to look at alternatives. Paying less monthly rent, lower taxes or even saving on transportation costs by moving closer to work could lead to substantial savings each month and help maximize your retirement savings.

 

 

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Renting can be a good option for certain needs, lifestyles, or periods of your life. But homeowners do tend to accrue more wealth over time. Buying and selling often tends to cost money in closing and moving costs, so if owning a home is something you want to do, buying a home and staying there for a number of years is typically a better way to handle an investment like this.

 

 

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While any kind of debt can put an anchor on your retirement goals (and other financial goals, for that matter), credit card debt can be particularly egregious thanks to high-interest rates and compounding, which means you can end up paying interest on the interest you’ve already been charged. By tackling credit card debt and other high-interest debts, you’ll have the opportunity to save more money to put toward retirement.

 

 

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This relates indirectly to boosting your retirement savings, but since paying for a child’s college costs can quickly derail a parent’s retirement plan, thinking about this major expense ahead of time can be a wise financial move. Many experts suggest making sure you’ve funded your own retirement accounts before you fund education accounts for your children. Each state operates its own 529 plan, and the terms vary from state to state. The plans are not tax-deductible on a federal tax return, but a 529 plan can offer some tax advantages on the state level depending on the state.

 

 

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Any amount you save for retirement will still be a finite amount, which means it’s important to plan ahead of time how you’ll budget for it. Consider the costs of everything, including food, medical care, housing, transportation, and entertainment. Try to envision ways to keep your cost of living low so each dollar goes further once you get there.

 

 

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No matter how much you’re able to save for retirement, the money will go a lot further if you retire somewhere with a lower cost of living. If you have decades before your retirement date, it may be difficult to predict what the cost of living will look like in different places, but start to think about which locations might offer all the lifestyle factors you want while also being affordable.

 

Related: Cost of Living per State (2022)

 

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Once you reach age 50, the contribution caps on your IRA and 401(k) go up substantially, by $1,000 for IRAs and $6,500 for 401(k)s, in 2022. Maxing out these larger retirement caps can help you increase retirement savings you’ve fallen behind on or rebuild retirement savings you cashed out for something else.

 

Related: Important Retirement Contribution Limits

 

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For many of us, this step might not be coming up anytime soon. But once you’re eligible for Social Security retirement benefits, delaying it might give you a larger monthly benefit during retirement.

 

 

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Saving for retirement might be challenging, but it’s not impossible. Stretching every dollar as far as you can will make it a lot more doable. Like so many other financial goals, it all starts with your budget, and budgeting is a lot easier to do when you have a bird’s-eye view of your finances.

 

Learn More:

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