How To Save $10,000 in a Year: A Guide to Getting Ahead
Saving $10,000 in a year is possible and can put you on the path to financial freedom.
Contributing Writer at Tally
December 9, 2021
Have you ever had an unexpected expense arise, and you struggled to figure out how to pay for it? Perhaps you needed new brakes on your car, or you had medical bills to pay off. You may have had to take out a personal loan or use a credit card to pay for these expenses — which ended up costing you even more money in interest.
Having a savings account in place can help prevent you from taking on debt. However, saving money is something you need to think about in advance; you’ll want to make it habitual, not just something that you do when you’re in a bind.
Saving can be hard, but these practical tips for reaching your savings goal can help. We’ll start by outlining why saving money is important and how much you’ll want to set aside for savings. Then, we’ll dive specifically into how to save $10,000 in a year.
Why is saving money so important?
Saving money can offer you financial freedom. Consider an unexpected expense like your car needing new brakes — if you don’t have a savings account in place, you would probably need to borrow money to pay for the parts and labor. Borrowing money can be done by:
Taking out a loan
Paying with a high-interest credit card
Asking a friend or family member for money
If you use debt to fund the transaction, you also have to pay interest, so the transaction ends up costing you even more. Your monthly budget would likely feel the squeeze.
In an alternative scenario, imagine you’ve put money into an emergency or rainy day fund. You keep this money in a bank account until you need it. When the time comes, you pay using these funds instead of financing the transaction.
Because you don’t need to worry about interest rates or debt, you can continue to cover your monthly expenses while also working toward your financial goals.
Saving money is also important because it allows you to put money away for retirement. One survey of Americans between the ages of 40 and 73 found that 51% have less than $50,000 put away for retirement. Additionally, 67% indicated that they wished they had started saving earlier.
Putting money in an investment account allows it to grow with compound interest, increasing the likelihood that you can retire earlier and enjoy your later years of life. Saving is a primary component in an overall plan to build wealth.
How much should you have saved?
The amount of money that you need to have saved can vary and depends a lot on your personal finances. There are some guidelines that you can consider, especially if you’re a beginner just starting to save for the first time.
A rainy day fund is meant to specifically cover a one-time, unexpected expense. It’s recommended that you have at least $1,000 earmarked for this.
An emergency fund is meant to help in dire circumstances, like if you lose your job. Experts recommend that you have at least three months of living expenses stored in an account for this purpose. Ideally, an emergency fund should be equal to at least six months of expenses.
The amount of money you need to have saved for retirement will depend on how much you intend to spend once you stop working. If you cut out wasteful spending and unnecessary expenses, you may not need to have as much money saved. Having said that, many experts recommend replacing around 80% of your pre-retirement income, including Social Security benefits.
Let's say that you make $60,000 per year. Using the above recommendation you’ll need around $48,000 per year to cover your cost of living in retirement.
The amount that you need to have saved will also depend on when you plan to retire. There are retirement calculators available online to help you figure out how much to save.
How to save $10,000 in a year
Saving $10,000 in a year may seem like a lofty goal, but it’s more doable than you think. It breaks down to $192.31 per week.
If you can save $10,000 per year between the ages of 30 and 65, you’ll put away $350,000, not accounting for compound interest or growth.
Knowing how to budget and set goals will put you on the right path, but learning how to save $10,000 in a year requires a bit more than that. Below are a few tips, hacks and actionable items you can implement to help you save $10,000 in a year.
Pay down debt
Paying down debt allows you to increase your expendable monthly income and decrease your monthly bills. You’ll gain a bit of financial flexibility by freeing up income that you can put into savings or retirement accounts instead.
Save your tax refund
If you get a tax refund each spring, try not to spend it. Instead, put it into savings. Putting your tax refund into savings instead of discretionary spending can help you start saving money quickly.
If you are going to spend it, consider using it to pay down debt.
Automate your savings
By automating your savings, you won’t have to think twice about it, since those funds will never actually hit your checking account.
For instance, if you take advantage of employer-sponsored retirement plans, funds will be withdrawn from your paycheck and you won’t have the ability to spend them. You can automate making deposits into your personal savings account as well.
Evaluate your subscriptions
These days, many of us have countless subscriptions or recurring expenses. These can include:
Cable and internet subscriptions
Streaming subscriptions, including TV and music
Monthly delivery subscriptions
Cell phone plans
Take a look at the subscriptions you have and evaluate whether you really need them. Perhaps you can negotiate your cable or phone bills. Maybe you decide to keep only one television streaming service instead of two or three. Making small changes like these can add up.
Consider a spending freeze
A spending freeze is a type of savings challenge where you cut expenses for a period of time. You won’t be able to cut necessary expenses like rent or groceries, but you can cut expenses like:
Eating meals out
Putting a spending freeze in place for, say, 30 days can help jump-start your savings efforts.
Pick up a side hustle
A side hustle is a part-time job that you work to supplement your income. Examples include freelancing or driving for a company like Lyft or Uber. Some side hustles are so lucrative that they can pay upward of $5,000 per month.
Put your funds in a dedicated savings account
If you leave your money in your checking account, you may be more tempted to spend it. Putting the money in a savings account puts a layer of separation between your money and any purchases you make. You could also potentially earn more interest in a savings account than in a checking account.
There are many different types of savings accounts available for you to choose from.
Start saving money today
Saving money may seem daunting — we all have bills to pay and obligations to meet. However, with a bit of persistence, saving $10,000 in a year is quite achievable and can put you on the path to financial freedom.
Having cash on hand will not only help you pay for unexpected expenses, but it can also help you as you work toward retirement. Once you start saving $10,000 in a year, you can work toward saving $1,000 per month.
One of the best money-saving tricks is to pay down debt. This includes everything from student loans to high-interest credit card debt. If you’re looking for help paying down credit card debt, be sure to check out Tally†. The Tally app helps you manage your due dates and offers a line of credit to help you pay off credit card debt efficiently. Using Tally is an excellent way to put your financial journey on a positive path.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.