Having $10,000 in savings can give you a lot of peace of mind, ensuring you have enough cash to cover the majority of emergencies or tackle a financial goal. However, $10,000 is a significant sum, and getting it gathered in a year might seem incredibly difficult. Fortunately, it’s potentially less daunting than it looks on the surface. If you want to figure out how to save $10,000 in a year, here are three keys to making it possible.
1. Break the Amount Down
A figure like $10,000 seems like a lofty target, potentially to the point where it’s hard to wrap your head around it. Fortunately, it’s easier to digest if you break the amount down. For example, if you want to save $10,000 in a year, you essentially need to save a little more than $833 per month, $192 per week, or $27 per day to make it happen.
For many people, the idea of $192 per week or $27 per day feels substantially more manageable. Essentially, it shows that smaller changes to the way you manage your money could allow you to hit the $10,000 target. In some cases, it also highlights how little you may need to boost your income to get that amount of money in the bank, which, again, makes it less intimidating.
By making the idea of saving $10,000 feel accessible, it’s easier to stay motivated and focused. You know precisely how much you need to set aside, and the daily or weekly amounts aren’t as high as most would expect. Essentially, you’re ensuring it seems doable and that adjustment to your mindset can have an incredible impact.
2. Review Your Finances
Now that you know how much you need to save each day or week, it’s time to review your finances. You need to know precisely where all of your money is going, how much you have available for savings now, and whether there’s a shortfall.
Begin by listing out all of your income, regardless of its source. Include traditional paychecks, bonuses, cash from side hustles, investment earnings, and anything else that comes in somewhat predictably. Then, you need to outline your expenses, including recurring bills, debt payments, savings account deposits (not related to the $10,000 savings goal), retirement plan contributions, groceries, gasoline, or anything else that is supported by your income.
In most cases, it’s also wise to review your bank statements to identify additional spending that isn’t captured in your expenses figure. That ensures you aren’t overlooking activities that use your income to cover them.
Total up your income, then subtract your expenses and spending. That shows you how much cash you currently have available to hit your savings goals. If the remaining money is at least $833, you could potentially save $10,000 in a year without any major changes, suggesting you properly captured all of your expenses and spending.
If you have less than $833 available, then there’s a shortfall you’ll need to cover if you want to get $10,000 saved in a year. However, that doesn’t mean you can’t hit that target. It just shows how much you’ll need to adjust your financial picture to make it happen.
3. Create a Plan
At this point, you can start making a plan to ensure you hit your $10,000 savings goal within a year. In many cases, a multi-faceted approach is best if you have a shortfall.
Begin by evaluating your expenses and spending to find opportunities to save. Simple options like canceling a streaming service or getting quotes for a better auto insurance rate can get you moving in the right direction. Similarly, eliminating unnecessary spending on niceties or splurges could free up more cash than you’d expect, so don’t overlook minor adjustments, as they can add up.
Next, consider if there are opportunities to boost your income. If you perform well at work, you could explore requesting a raise. Getting a side hustle is another path toward more income. You could also look at paring down your belongings and selling unnecessary items to get some quick cash that lets you jumpstart your progress.
Finally, have a plan for where the money will sit while you work toward your goal. In many cases, a high-yield savings account is a solid choice, especially if the money will function as an emergency fund or you need to use it not long after you get the balance to $10,000. You can earn interest as you stash cash, and those earnings can move you closer to the target. Plus, a high-yield savings account is reasonably liquid and doesn’t typically come with the loss risks associated with investing.
If the $10,000 savings goal is associated with a purpose that’s farther into the future, then you could try investing instead. Just make sure you create a diversified portfolio and carefully research each investment before committing funds. There’s more risk with investing than using savings accounts, but the returns could potentially be higher.
If you’re new to investing, choosing index funds or ETFs is often better than individual stocks. Those come with an inherent degree of diversification, which is beneficial. However, you still need to research your options, as some may have better track records than others.
Do you have any other tips that can help someone who’s trying to figure out how to save $10,000 in a year? Have you used some of the strategies above and want to let others know how well they did or didn’t work for you? Share your thoughts in the comments below.
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Image and article originally from www.savingadvice.com. Read the original article here.