How to Save $10000 in a Year

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Are you wondering how you can start saving money? Well, the following tips on how to save $10000 in a year might be just what you need.

Is saving $10000 your personal finance goal this year? If yes, then you’re in the right place. And if you thought it couldn’t be done with your low level of income, you certainly need to read on to discover just how possible it is.  

I know the sound of $10000 savings in one year might seem unattainable to many, considering the tough economic times and increased cost of living. However, with the right strategies and tools, figuring out how to save $10000 in a year is easy.

That’s why we are here. This article will disclose all the necessary steps you need to achieve this goal, right from changing your spending habits, increasing your income streams, and cutting down your expenses.

So, let’s dive in!

piggy bank, savings

Best Ways How to Save $10000 in a Year

Before you even start saving, you need to establish why you need the money. Maybe you are saving for a car, an emergency fund, vacation, or a house down payment. Whichever the reason, it must be important, and you also need to have a plan.

Hitting that $10k mark isn’t easy without a plan and determination. The following steps show you exactly how to save $10000 in a year.

1. Budgeting

Saving is hard, especially if you don’t have a plan on how to spend your money. Budgeting thus becomes a crucial step in ensuring that you don’t spend your money unnecessarily. Creating a budget helps you figure out exactly how much income you get each month and what your expenses for the month are.

This way, you can decide how much money will go to which expense or bill, and which ones can be foregone or postponed. It is the best way to track your finances and ensure nothing goes to waste.

Therefore, when trying to figure out how to save $10000 in a year, budgeting is the first step to your success. In fact, almost all subsequent strategies might not work without a well-formulated budget.

How to Budget Money on Low Income

The truth is you can still budget and accomplish your savings goals even with low income. All you need is to have the right tools and strategy.

First, you must prioritize your expenses into needs and wants. Needs are those expenses or bills that must be met, like electricity, food, housing, heating and cooling, transport, etc.

On the other hand, wants are those things that make your life comfortable but can be foregone or postponed. These include holidays, weekly dinners in a nice restaurant, club memberships, etc.

Figuring out what comes first is the first step in learning how to save $10k in a year. 

Budgeting with Irregular Income

Someone might ask. “Is it possible to budget with an irregular income stream?” And the answer is yes! If you don’t have a stable monthly income, here is how to budget with irregular income.

  • Calculate your average monthly income by adding several months’ income and dividing it by the number of months.
  • Establish your total monthly expenses
  • Create a budget based on your average income and expected expenses.
  • Establish an emergency fund – Since your monthly income fluctuates, having at least three months’ worth of emergency funds is crucial.
  • Use zero-sum budgeting – Here, budgeting is done for every month or period, regardless of the previous month’s budget. This means that expenses are allocated money accordingly depending on that period. Your monthly income minus your expenses (including savings, debt payment, and investments) should always be zero.
  • Create a flexible budget – This type of budget allows for changes and adjustments. It is mostly adjusted based on the level of income.

Creating a Flexible Budget

how to create a budget

A flexible budget is an incredible tool in growing your savings. This is because it gives you room to adjust your expenses in case of an emergency or change in income level.

Instead of allocating a specific amount of money for a specific expense category, you set a broader spending goal. For instance, you can use percentage funding instead of fixed amounts of money for certain expense categories.

Therefore, you are free to reduce funding for a certain expense category and increase that of another, as long as you stay within your spending limits.

So, do you know how to calculate a flexible budget? Here are some incredible tips:

  • Track your spending: Establish all your expenses either manually or through budgeting apps like YNAB.
  • Track your income: Know exactly how much money you are budgeting for. Personal finance apps like Personal Capital will come in handy.
  • Establish your spending targets: You should determine what percentage of your income goes to which expense. For instance, you can follow the 50/30/20 rule. 50% goes to essential expenses, 30% to flexible expenses, and 20% to savings.
  • Trim any excess spending: After identifying where your money goes, you can easily decide which expenses should be reduced to increase your savings.

With these tips, you now know exactly how to prepare a cash budget to help grow your chances of hitting that $10k savings target.

2. Reducing Your Monthly Expenses

Overspending will make it hard to achieve your savings target. If you have a way of cutting down on your expenses, it can go a long way in helping you hit your saving goals.

When trying to reduce your monthly expenditure, you must identify bills that you can adjust, those that you cannot, and those you can do away with completely. For instance, lowering some bills is as easy as calling the provider and negotiating for better terms.

Generally, there are three main categories of expenses, including fixed, variable, and irregular ones.

Fixed Expenses

These are expenses that don’t usually change with change in periods. They are constant and include rent/ mortgage, auto payment, insurance, loan payments, and utility bills (water, electricity, internet, cellphone). However, this doesn’t mean that they cannot be reduced.

While it might not be easy, you can still reduce them following these steps:

  • Shifting to a cheaper apartment to reduce rent
  • Merging your loans to get better interest rates
  • Using solar power to reduce electricity bills
  • Selling your house and shifting to an apartment to settle the mortgage
  • Using smart, energy-friendly devices in your home

But why are fixed expenses difficult to reduce? Well, mainly it’s because they are predetermined and constant month after month.  For instance, you can try to refinance a loan to seek lower interest rates, but it isn’t easy.

Also, shifting to a cheaper house or getting a roommate to reduce rent can be a bigger hassle than you might think.

Imagine the hassle of browsing for a new insurance policy or health provider. These will take a significant amount of your time and effort to accomplish.

All these make adjusting fixed expenses hard, although still doable.

Variable Expenses

When it comes to variable expenses, these include all those expenses that change every month. That is, they are not fixed. And, while they are necessary, you have the power to adjust them or decide how much money you’ll spend on them.

Variable expenses include things like gas/transport costs, groceries, entertainment, etc. Adjusting these expenses to favor your savings is much easier than altering the fixed ones. For instance, you can easily opt to use ride-sharing services or stop eating out to save money.

Therefore, in figuring out how to save $10000 in a year, variable expenses are the easiest to work with.

Irregular Expenses

With irregular expenses category, you don’t expect them to happen every month. However, they will certainly come up within the year and should be planned for.  These include things like car maintenance, HVAC maintenance, health expenses, gifts, etc.

The good thing with periodic expenses is that you can save for them in advance to avoid inconveniences or overspending.

What is not True about Unexpected Expenses?

  • They shouldn’t appear in your budget.
  • The expenses can negatively impact your budget.
  • They can affect one’s ability to pay monthly bills

While trimming your expense isn’t a straightforward thing, it’s also not impossible. Luckily, there are even online tools that can help you manage and reduce your monthly expenses.

For example, apps like Truebill helps to lower your expenses by canceling unnecessary subscriptions and finding better credit cards for you. Others like the Trim app will even negotiate better subscription rates for you.

How to Save Money on Rent

how to save on rent

If you are wondering what your options are when it comes to saving on rent, here you go:

  • Shift to a smaller or cheaper apartment
  • Get a roommate to share the rent
  • Renegotiate for better terms during lease renewal
  • Avoid paid parking slots
  • Pay upfront for a discount
  • Sign a longer lease for better terms
  • Move to a cheaper location
  • Consider private rentals

All these options give you a chance to enjoy a lower rent amount. And, while some might require a lot of effort and sacrifice, your savings end goal might be worth it.

3. Get Secondary Income Streams

Cutting down your expenses and budgeting is crucial in helping you achieve your savings goals. However, it might not be enough, especially when your target is as high as $10k in a year.

Finding extra ways to earn more money is the perfect solution to your “how to save $10000 in a year,” question. But how do you find new income streams? Well, you can either find a good side gig, ask for a pay rise, or invest with online apps. 

With side gigs, you have more than enough money-making options. For instance:

  • You can become a Ride-share driver
  • Deliver food via UberEats
  • Become a freelance writer with Fiverr
  • Sell items online
  • Create online courses with Udemy

When it comes to investing, you don’t even need to move a step from your house. With just a smartphone, the following apps allow you to invest online and make passive income.

  • Acorns: Best online investment platform for people looking to save
  • Invstr: If you want to learn how to save $10000 in a year, this is your best app.
  • Robinhood app – Best app for easy trading
  • Webull app: Ideal for beginners and low-cost trading

Using one or a few of these online investment apps will ensure that you have a steady flow of passive income. From here, achieving your $10k target won’t be so hard.

See related: 9 Best Online Side Hustles You Can Do Anywhere

4. Automate Savings and Investments

With ads and marketing messages everywhere, the temptation to spend more and more is always there. This makes saving quite challenging. However, you can beat this and achieve your savings targets by automating your savings and investments.

Automating these two functions means that you can save and invest, even before you start your spending spree.

But how do you achieve this?

  • Save from Your Paycheck

This involves deducting your savings money before you receive your pay. That money can be deposited directly into your retirement or savings account as per your plan.

If your employer offers a tax-advantaged retirement plan, enrolling in it is a perfect way of automating your savings. And if they don’t, you can also set up an IRA (individual retirement account).

Most banks will also allow you to set up a standing order to your savings account from your checking account. This way, the amount you plan to save each month is deducted automatically.

  • Use Savings and Investment Tools

Currently, there are multiple apps that enable you to save and invest automatically without even having to think about it. An app like Acorns and other roundup apps helps you to save from your purchases. Every purchase you make, these apps round up the amount to the nearest whole figure. The apps later invest the difference for you.

Some of these apps, including Acorns and Stash, will also offer multiple other financial solutions to help you reach your short or long-term saving and investing goals.

5. Avoid the Credit Card Debt Trap

avoid credit cards trap

Last on our list of how to save $10000 in a year is to avoid falling into the credit card debt cycle. Credit cards are convenient, I know! But have you ever thought about how costly they are?

Well, while the average 15.91% APR might seem small, and you might even get 10%, with a good credit score, the long-term effects on your finances are detrimental. If you use your credit card to make even the basic purchases like groceries, as most people do, the interest rates will seriously harm your finances.

At the end of the year, these interest rates will have eaten up so much of your money, which would have gone to savings. Therefore, if you want to achieve your savings goals and streamline your finances, avoid credit cards as much as possible.

Here is how to avoid this debt trap:

  • Doing away with credit cards completely
  • Having just a few cards
  • Avoid always having your credit card in your wallet
  • Maintain low credit card balances
  • Always clear the balances on time
  • Have an emergency fund

By doing this, you’ll have more money to spare and channel to your savings account.

What to do with $10k?

Now that you’ve learned how to save $10000 in a year and have actually done it, how do you spend the money? Well there are numerous things you can do with the money, such as:

  • Accomplishing your plan: You might have been saving to buy a car, pay off a loan, or pay for a house down payment.
  • Invest: If you haven’t thought much about your savings, you can look for good investment opportunities to help grow your money even more. Platforms like Fundrise or Realty Mogul can help you with this.
  • Clear some debts: This might be your way out of debts, including credit card debts or auto loans.
  • Create an emergency fund: Things will not always be good. And, having that cushion might come in handy.
  • Holidays: You can use some of this money to go for a vacation to appreciate yourself for the effort and sacrifice.

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