The Ulitmate Guide to Saving $10,000 in a Year

Hitting five figures in your savings account is a major milestone. $10,000 can buy a car, support a down payment on a house, keep you safe in case you lose your job, or even pay for a guide to help you summit Denali.

If you just want a chunk of money to sit in long-term investing, $10,000 can help get you to a place where you earn $1,000 per year in passive income. 

Whatever your reason for seeking to save $10,000 in a year, below I’ll guide you through everything you need to know to get there. 

Break it down into smaller pieces

Depending on your income or current savings strategy, $10,000 may be a very daunting goal. Sadly, there’s no magic way to earn $10,000 quickly (if you find it please let me know!).

The best way to start working towards this goal is to figure out how much you need to save and how often. Here’s a list to get you started:

Be realistic about your goal

Take a look at the numbers above. Will they be realistic targets when you consider your income and time? You can set a good benchmark for deciding how much to save monthly by calculating 20% of your take-home pay. With this math, your after tax take-home needs to be at least $50,000 for it to be relatively comfortable to try to save $10,000 in a year. 

If $833.34 is significantly more than 20% of your take-home, then I suggest you either re-evaluate your goal or start thinking about a side hustle (more on that below!). 

To learn more about realistic goal setting click here. 

You Need a budget 

If you need to increase the amount you save there are two ways: spend less or earn more. A budget addresses the first one, it allows you to fully understand how much you’re spending and analyze where you can cut back. 

If you don’t know where to start with building out your budget, go for the 50/30/20 model. This idea was popularized by Senator Elizabeth Warren in her book All Your Worth: The Ultimate Lifetime Money Plan. 

The model is effective in its simplicity – 50% of monthly after tax dollars go to needs, 30% to wants and 20% to savings. 

Start from there and then adjust accordingly. If you live in a higher cost of living area your budget might look more like 60/20/20. Personally, because I travel as much as I possibly can, my budget is 40/20/20/20. I add an extra category just for travel. 

Budgeting for needs

This category is what you have to spend – rent or mortgages, utilities, insurance, debt repayments, car payments, and groceries. 

 This is the area that requires some big life changes if you’re overspending. The first budget I set had me significantly over the 50% mark. I decided I had to move to a much cheaper apartment.  When I started looking around I found there was something grounding about going apartment hunting with a very specific number in mind. In the end, I was able to make a much more informed decision for myself.

I also had to revisit my grocery spending. First I decided to make Aldi my go-to grocery store. I’m a sucker for a boutique grocery store and unfortunately, there’s one that’s only a mile away from me. Once I took a hard look at my grocery spending I realized that all of my small trips had added up in a big way.

How to adjust if you spend too much on needs

I realize for some people options will be limited, but I do recommend getting creative here to try to hit that 50% mark. Do you need a car? Could you pick up a side hustle? Can you channel your old man and watch the thermostat a little more closely? Can you supplement your rent by AirBnBing your couch? Try to think outside of the box.

Remember, things like groceries need to be split out. There are groceries you need and then groceries you want.  For example, the bottle of wine I picked up with my groceries last night is not a need.

I don’t recommend being militant about tracking in this way though. Just use it as a thought exercise to keep in mind when you’re at the store. Would you rather have that bottle of wine, or is there another want on your list that’s more pressing? 

Budgeting for wants

After plotting out my own personal budget with the 50-30-20 rule I learned that I was spending too much money on eating out. I couldn’t believe the way these things added up, if you had asked me I would have said I didn’t eat out much at all.

I also have a bit of an issue with impulse purchases. Something occurs to me and it’s just a swipe away on the Amazon app. This is because I am by nature the type of purchaser called an “impulsive” – I think of something and enjoy the thrill of the purchase. Often I regret it later but might be too lazy to return it, so the new item just takes up space.

Reviewing the areas where you are spending money that are choices is your best opportunity for cutting fat on your spend and increasing your savings. 

Your Achilles heel probably looks different than mine. For some people it’s services like yoga classes, for others it’s too many things, like books that you could easily find at the library. 

The important thing is bringing to the surface the information. Where are you overdoing it that doesn’t really add to your life in the way that seeing $10,000 in your account would? 

How to adjust if you spend too much on wants

My best advice if you’re over budget on wants is to break down your spending into broad categories for the last month and start to see where you might be overdoing it. Just building awareness around your own habits could potentially be enough. 

When you know where you could cut back, every time you’re about to whip out your card, ask yourself if you’d rather have the short term satisfaction of this immediate purchase, or the long term satisfaction of a big fact $10,000 in your account.

Choosing long term satisfaction is not always easy. We’re wired to prioritize immediate gratification over long term success. Building this habit will take time, and you won’t always be perfect. You can read about my own slip up here.

Another strategy is to go on a spending fast. Take the main categories on which you overspend and set your monthly budget to $0 for a month. The idea is to force yourself to build new habits. If you eat out too much – you build habits around meal planning and cooking. If Ubers are your problem you push yourself to walk or bike.

What to do with your savings

The absolute best way to save is to automate it. Whether or not it’s a standard savings account or a brokerage account – just send the money automatically so it’s never yours in the first place. 

I do recommend making this money a little difficult to tap into. If it’s too easy (like a savings account attached to your checking) that money might just find its way out of that account.

There’s solid science behind automating your savings (one I write about in emergency saving as well). As humans we have a strong pull to not lose something, it’s twice as strong as our desire to acquire something. So once you have money, it becomes difficult to “let go of” by saving it for your future self.

There are endless choices for how to automate your savings. Personally, I use Betterment, but started with Acorns. You can check out a list of Nerdwallet’s recommendations on savings apps here.

When you choose where to put your money there are two things to keep in mind:

1. If you use a low interest savings account, the value of your money slightly declines throughout the year because of inflation. 
2. If you invest, there is always a chance that you will lose some of your money to market fluctuations. You will also need to pay taxes on earnings from those investments when you sell them.

Neither solution is perfect, but pick the one that matches your risk tolerance. 

Maybe you can’t get to the $833.34 monthly mark that will take you to $10,000 until you re-work your other categories, but saving something is always better than saving nothing. The financial security of having an account that is there to catch you in emergencies is worth more than any item money can buy.

You may need to earn more money

As mentioned earlier, if you don’t make at least $50,000 after tax (roughly $70,000 total salary) then your best option for hitting the goals of saving $10,000 in a year may be to make more money.

Yes, you could opt for a super frugal lifestyle and save more than 20% of your take home dollars. There’s a personal choice to make there though – what’s a bigger sacrifice, frugality or a few hours of your time?

If you do decide to seek out more money you have options. The first place to start is to simply ask for a raise. What’s better than making more money without doing more work?

This may not be an option for you, but I encourage you to at least try. There’s nothing wrong with hearing “no”.

You can also choose to switch jobs. The market is competitive right now and with inflation, chances are good that you can swing a higher paycheck by switching employers. 

Personally, I have a really good situation in my current 9-5 and have no desire to switch. I also just got a raise so that option is not on the table. If you are in a similar boat and still need to pull in more cash each month, then it’s time to take on a side hustle. 

Side hustles that pay

Not all sides hustles are created equally. There’s always an effort/money trade off and ultimately it’s up to you. From my experience here are a couple of ideas to get you started:

• Dog walking. I used to use Rover for this, but I found the effort of doing meet and greets with my own dog to be cumbersome for the payout. However, if you can find regular clients where you don’t pay a portion of your earnings to a platform, the payout for the effort can be huge
• Air BnB. By far the most lucrative side hustle I have ever taken on. I kept all of my weekends available on the app and would stay with my partner when I had guests. If this is an option for you then just a few nights a way from home each month could very well get you to your goal.
• Bartending. Restaurants are scrambling to find workers right now. It’s a great time to offer up a couple of nights a month to tend bar. If you’re an extrovert, this is a really fun way to get you to your goal.
• Drive for Uber or Lyft. I hate driving so I don’t take this one on. However, I think the flexibility being a driver offers is really appealing. If you have extra time, hit the streets! If not, no problem.
• Other ideas: become a task rabbit, deliver groceries or for PostMates, offer your professional services on UpWork, or rent your car on Turo.

The options for side hustles are pretty well endless. It’s a matter of choosing one that works for you and your schedule. If you don’t want a regular commitment then driving or delivery might be better than bartending. If you don’t have a car or don’t like driving, then UpWork might be a better option. To learn more, Side Hustle Nation is a great resource. 

My final note on side hustles – the worst advice I see come up often is starting an online business, be it blogging, influencing or e-commerce. Yes, these areas can be SUPER lucrative, hence the reason I started a blog. But keep in mind there’s no overnight success here. You’d be starting a business and that takes a lot of time and effort. Make an informed decision if that’s the right path for you. 

Celebrate along the way

As you work towards your goal of saving $10,000 in a year, do not forget to celebrate each milestone. If saving were easy, everyone would have big fat bank accounts. You’re doing something difficult, so celebrate it!

Oftentimes we over focus on how far we have to go and forget to see how far we’ve come. Here are the milestones when I encourage you to take a minute to give yourself some recognition:

1. Your first deposit. Remember a journey of a thousand miles starts with a single step, and you just took your first step!
2. When you hit 4 figures. Holy shit, you now have more in savings than most people!
3. Your fourth deposit. Perseverance is a bitch, but you’re doing it!
4. $3,333. You’re a third of the way through! Damn look at you.
5. $5,000. Half way? You’re on fire.
6. $6,666. Two-thirds? Woah, you must have some pretty sexy money habits built up by now.
7. $8,500. So close! You’re killing it.
8. 10,000. You did it. Now go dance your ass off to “I’m Too Sexy”. 

In closing…

Persevering throughout the course of an entire year is no easy task. Set yourself up for success by tackling it in bite size pieces, setting a budget, and always remembering to celebrate along the way.