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It is good practice to have a money-saving goal. Everyone should practice putting money aside that can be used for a rainy day or big purchases. Saving $10K a year is a solid plan towards financial stability.
The average US household income is $78,635 per year which is around $67,224 after taxes. An Average American saves approximately $6,000 each year. This also shows that the average saving is less than 10% of the average annual income. (The Motley Fool).
Saving money is everyone’s financial goal. Everybody wants to have extra cash at the end of the year that s/he can use. Not everyone is successful in achieving this goal and some of it has to do with our attitude towards money. Our mindset toward saving money will affect our plan to save $10k in a year fast.
In this post, I’ll discuss how it takes only 5 steps to save $10K in your bank account within a year.
What can you do with 10000 dollars?
Before I discuss how you can save up to $10K in a year, let’s see what you can do with 10000 dollars in your bank account. $10k may not be a lot for some but it is a considerable amount of money that you can put to good use. The following are some of the wise ways to use 10000 dollars:
- Use it for a down payment for the house
- Pay off your auto loan, credit card loan, or student loan
- Invest it in business, stocks, mutual funds, or real estate
- Spend it on yourself for training, certification, and gaining expertise
- Fund your family vacation
Ultimate 52-week money challenge to $10K
There are 52 weeks in a year. Thus, you’d need to save almost $200 every week to save up to $10K in a year.
Most companies pay their employee on a bi-weekly basis. If we calculate bi-weekly savings, you’d need to save almost $400 to get to $10k in a year.
If you prefer to view it as a monthly saving goal, you need to deposit at least $834 every month to save up $10K in a year.
The ultimate 52-week money-saving challenge to $10K in a year can be broken down in any way based on one’s preference. The following are the 5 simple steps that one can follow to save 10,000 dollars in a year.
1. Increase your income
First thing first – you cannot legally save 10k in a year if your income is less than that. Your income must be substantially more than $10K. Therefore, the first thing on a $10K journey is to increase your income.
If you are already earning more than $60k, then you are in good share. You can save 10k in a year with the current income. However, it is always better to bring more income. Additional income will bring extra funds to ramp up your savings.
Increasing your income is the best way to save 10000 in a year.
How to bring extra income?
The following are some of the ways to get additional income.
Ask for a raise
Your current job is the first place to look for additional income. If you are already good at what you do, it’s better to find ways to become valuable at work and negotiate higher pay. It never hurts to ask, and you’ll never receive it if you don’t try.
Build a side hustle
If you have a hobby or knowledge of something, you can build a side hustle. The side hustle can be something in addition to your full-time job. It can be as simple as becoming an Uber driver, food/ grocery delivery, a social media manager or influencer.
The side hustle will earn extra money that can fund your 10k journey. The side hustle can be turned into a full business or can remain side hustle to earn extra cash when needed.
Start a business
Starting a business is a step towards becoming an entrepreneur. I have a guide on starting your own business that you can read. If you’ve built a side hustle, that can ultimately be converted into a business. You should enjoy all the benefits of a business that saves money.
Learn new skills
Anybody can learn new skills easily nowadays. The internet has everything available at your fingertip. All you need is a desire to learn. Read my article on how to get certified training with no money to brush up on your skills. With YouTube, Udemy, Skillshare, and all the online learning platforms, learning a new skill is only a click away. New skills can bring in passive income.
2. Save a portion of what you earn
Saving a portion of what you earn will help develop a saving habit. It is popular by the term pay yourself first. We are always diligent in paying our bills, credit cards, and creditors on time. We also need to make “paying self-first” a habit. Paying yourself first does not mean spending money on the things you want.
The concept is saving a portion of your earn income for building wealth. The famous book “The Richest Man in Babylon” discusses the concept of paying yourself first in great detail. When you start saving a portion of your income, it will help you live within your means on remaining funds. This will require to have a monthly budget and stick with it.
3. Reduce or eliminate unnecessary expenses
Take a moment and investigate your spending habit to figure out unnecessary expenses. We buy into so many things that we probably don’t need. This is called wasteful spending. Analysis your credit card purchase history and find the changes that you could have eliminated.
Take care of those subscriptions that you no longer want/need. This could be Gym membership, a Netflix, Hulu, or amazon prime subscription, that you stopped using. You can subscribe to these programs when you need them anyway.
Negotiate and try to reduce your reoccurring bills. Internet Bills, TV bills including electric bills can all be negotiated. Never settle with the first company that you found over the internet or your friend told you about. Try to compare and analyze the offer.
Evaluate your insurance needs and signup only for the things you need. Insurance agents will try to add every new item to the list. You probably don’t need to carry full auto insurance if your car is old and does not have much salvage value. You don’t need to buy additional insurance on your rental vehicle if you already have auto insurance. You can ditch your Home Warranty and try a different approach instead.
Buy premium items only if you need them not because you want them or impress your buddy, neighbor, or relative. Some things are okay buying out of the box if cheaper.
Don’t buy an additional warranty or maintenance plan on any items. Check into your credit card, they may already have an extended warranty at no cost to you. Also, if you must buy an extended warranty, you probably can’t afford that item. Yes, I’m talking about your $1,299 iPhones.
Cutting expenses help you save additional money that would have been spend otherwise.
4. Make your money work for you
This is probably the best way of increasing income. Making your money work as a slave for you and reap the gains through investments. Through the power of investing, you can realize the capital gains and compound interest to accelerate your financial independence journey. Every money saved uninvested (except your emergency funds) is money wasted through depreciation.
Read my Grow Money guide to start investing your money.
Learn about investing money in stocks, options, bonds, and real estate. You can also contribute to tax advantage accounts like 401k, IRA, or 457b plans and let them grow tax-free. Also, Look into Health Savings Account (HAS) and Flexible Spending Account (FSA) if they are beneficial to you.
5. Automate the process
Above all, it’s been proven that automating your investment and saving is highly effective. With so many things affecting our lives daily, the most important things must be set to autopilot. The benefit of automation is that it happens effortlessly. There is zero probability of you forgetting to pay yourself first or investing your money if the whole process is automatic.
$10K in 12 months goal achieved
If you follow all these steps, you’ll have $10k or possibly more in your account by the end of the year. Saving $10K a year is an achievable goal, and everyone should try it. Of course it is not enough money! It does not require you to cut down on things that make you happy. Instead, the ultimate 52-week money challenge to save $10k will help change money behavior and provide financial literacy.
Don’t forget to track your progress every month to see where you stand and where you’re heading.
Now that you have $10K in your account, don’t spend it because you’ve worked for it for the whole year. Make them work for you and let them accumulate more wealth. I wish you all the best in your financial journey.