Make 2022 better by saving $5000 in cash
Want to make 2022 better than 2021? Let me teach you how to save $5000 in a year.
Here are 5 steps that will help you save $5,000 in 12 months:
- Break down your savings goal into smaller steps
- Get on a budget and cut expenses
- Increase your monthly income
- Automate your savings
- Track your progress
In this post, I’ll go over each of these steps in detail, with examples and suggestions to accomplish each one. You can also download a *free* savings tracker to help you stay focused.
If you’ve struggled on your savings journey, I get it. Good intentions are easy, but follow-through isn’t. Before you know it, another year has passed and you’re not any closer to your savings goals.
That’s why it’s important to have a savings plan, and the right mindset (I go over this, too, so keep reading!). You’re less likely to wander off if you have a path to follow.
Just think of what you could do with an extra $5,000. Build up your retirement savings, pay off some credit cards, finally go on that cruise (using cash!).
Don’t let another year go by without getting closer to the financial freedom you want in your life. Follow this 52-week money challenge to save $5,000 in a year and start crushing your money goals!
Grab these free saving trackers and watch your savings grow!
5 steps to save $5000 in a year
In order to be successful with saving $5000 in a year, you’ll need a solid plan that will keep you on track.
You could just start dropping your spare change in a jar every night, but that leaves too much to chance. Instead, be intentional by creating a strategy that can guarantee you will achieve the goal you’ve set.
Here are 5 steps that will help you save $5,000 in a year:
#1 Break down your financial goals
Saving $5,000 in one year can sound intimidating. But, saving $13.70 a day sounds a lot more achievable.
You have 365 days to reach your goal. That’s 52 weeks or 12 months. Or, if you’re paid twice a month, that would be 24 paychecks.
Figure out your timeline to save smaller amounts on a consistent basis.
Break down your big goal into little steps, and just focus on the step in front of you.
That might mean saving:
- $417.67 a month
- $96.15 a week
- $208.33 every bimonthly paycheck
You can also include anticipated financial windfalls in your plan.
If you file your taxes in January, you can add a percentage of your tax refund to monthly savings in February. Maybe your Aunt Sue always gives you $100 for your birthday in July. Or, you know you’ll get a work cash bonus of at least $300 in November.
You will likely make adjustments along the way, because life happens. But if you have a timeline that breaks down your annual savings into monthly deposits, you’ll have more confidence in reaching your goal.
And, you’ll be inspired and motivated when this savings process results in a bigger account.
#2 Keep a budget and cut expenses
Now that you know how often you need to save a specific amount, you need to find this money in your budget.
That’s okay. Today is a new day and you have a new chance to make better choices.
Just because you’ve never been able to save a lot of money before doesn’t mean the money isn’t there. It’s how you *choose* to use your money that determines how much savings you have.
If you have no idea how much you spend on groceries or clothes or Starbucks every month, it’s time to start tracking your spending. Get familiar with how you’re using your money by looking over previous bank statements.
Keep all of your receipts and write down every expense for 30 days. Find the spending leaks that are draining your bank account.
Then, determine which expenses you want to reduce or eliminate, so you can start saving instead.
Here are a few budgeting tips that will help you save more:
- Limit your clothing expense to $100 a month
- Cut out your daily coffee shop drink and home-brew your own instead
- Increase savings on food by taking your lunch to work instead of spending money on dining out
- Carpool with a coworker to save on gas
- Create the saving habit of monthly meal planning to lower your grocery bill
- Reduce the additional cost of bank fees by maintaining minimum balances and paying bills on time
- Lower the cost of childcare and babysitting costs by starting a co-op in your neighborhood
You can also take a look at your monthly bills and find ways to reduce the average cost of recurring expenses:
- Get a quote to see if you can lower your auto insurance policy premiums
- Switch to a higher auto insurance deductible, if possible
- Cancel the gym and work out at home with a fitness app
- Call your cable company to cancel, and use streaming services instead
- Switch to a no-contract cell phone plan with lower fees
- Refinance your mortgage for a lower monthly payment
- Ask your bank to reduce the interest rate on your current credit card statement
Once you notice how much you’re spending unnecessarily, you’ll be amazed how quickly you can achieve your monthly savings target.
#3 Increase your monthly income to make extra money
Cutting some of the fat out of your spending will free up extra cash for your $5,000 savings goal. But, reducing expenses is a limited strategy. There are only so many corners you can cut before you’re left with a circle.
However, there is no limit to how much you can increase your monthly income.
Of course, bringing in an extra Franklin or two every month takes less work than building up a 5-figure income stream. But … both are possible. It just depends on what you’re willing to commit to.
To help save $5,000 in a year, you could shoot for a monthly income surplus of $200. There are countless opportunities to do this, but here are a few ideas:
- Get a part-time job that pays $15/hour and work a minimum of 5 hours a week
- Provide a service in your neighborhood (walking dogs, tutoring, babysitting, etc.) that generates $50/week
- Start a side gig offering your area of expertise (photography, baking, marketing, etc.) that you can charge $25/hour for and work 2 hours/week
- Drive for Uber or Lyft on the weekends
- Try your hand at retail arbitrage, where you buy discount items from a store’s clearance section, then sell it somewhere else for a profit
- Do online surveys, use grocery rebate apps, leverage online cash-back shopping portals, or take advantage of credit card cash-back promotions to add small increases to your annual savings
You could also reach your annual savings goal faster with one large transaction, like selling that third vehicle you rarely use or auctioning something valuable on eBay.
#4 Automate savings into a separate bank account
Once you reduce your expenses and start bringing in a little extra income, be sure you’re sticking to your savings plan. As your bank account grows, you might be tempted to just spend a little here … a little there …
Don’t do it. Stay focused.
First, designate a separate savings account for all that extra cash. Preferably, choose one with a higher yield, such as a money market account.
To create even more space between you and your money, keep your savings in a different bank than the one you use for everyday spending.
Then, set up automatic bank transfers to your new savings account.
Decide on a percentage or a fixed amount (based on the math you did in step 1) that you’ll contribute out of every paycheck. This eliminates the decision to do it, removes the need for action, and you’ll never even see the money.
When you set up automated transfers to a separate account at a different bank, you create barriers to your savings that lower the chances of spending it.
If you want to make it even less convenient to spend this money, you can keep it at an online financial institution. Bank charges for ATM withdrawals and minimum balance fees can motivate you to not touch it.
If you’ve set up your budget to account for these savings transfers (just like they’re a regular bill), you’ll never miss the money. And, before you know, a year will fly by and you’ll be $5,000 richer!
For more ideas to automate annual savings, read my post on 11 effortless ways to save money!
#5 Track your progress
Trying to achieve financial goals can be hard. It requires patience, sacrifice, and the discipline of delaying gratification.
But, you can make it a little more fun if you set up a tracking system so you can watch your progress increase.
When you see your balance continue to get bigger, your motivation gets bigger, too. This motivation will sustain you when you encounter setbacks.
When unexpected expenses pop up and your budget’s so tight you can’t breathe, just seeing how far you’ve come will inspire you to keep going.
How you track your annual savings progress is up to you, but here are a few ideas:
- Keep a digital spreadsheet where you record every deposit, which automatically updates the balance.
- Create a visual savings tracker that you can keep somewhere you’ll see often, like the kitchen or your bathroom mirror. This could be as simple as a spreadsheet where you track your savings balance, or a drawing that you fill in as your savings gets higher.
- Download a savings tracker app on your phone. Examples are Thriv for Android, and Loot for iOS.
- Keep a savings journal where you log deposits and keep a running total. You can keep pictures that remind you why you’re saving, decorate with motivating stickers, and leave encouraging notes for your partner.
- Take the 100 envelope challenge to help you stay on track.
How you track your annual savings progress isn’t as important as finding the system that works for you. Be sure to use a method that you enjoy using, you’re consistent with, and you’re inspired by.
The mindset you’ll need to save $5000
When it comes to achieving any financial goal (like saving $5000 in a year), you might be convinced that your biggest obstacle is not making enough money. It’s true that you might need to find extra cash in your budget if you want to start saving more.
But, your income isn’t what will hold you back. Actually, it’s your mindset.
Mastering the discipline of saving money first requires an adjustment in your thinking before an adjustment in your bank account. Once you develop the right mindset, many of the hurdles to reaching your money goals are eliminated.
Here are 3 aspects of your mindset you’ll need to consider as you start this 52-week money challenge.
#1 Willingness to take action
Many people create a list of goals they’d like to achieve, but never determine if they’re really willing to do what it takes to achieve them. However, when goals go unaccomplished, it’s usually due to a lack of willingness.
Spend some time reflecting on how willing you are to follow through with the actions necessary to reach your money goals.
These actions include getting on a budget, cutting expenses, and maybe even making more money. Are you prepared to make the sacrifices, do what’s uncomfortable, and overcome any setbacks?
If you feel some reluctance when you think about what will be required, work through those feelings of unwillingness. Get to a place where you feel open and accepting of what’s ahead.
Be honest with yourself about your level of willingness before you start. It’s not enough to just want it, you need to be willing to go get it.
#2 Commitment to less spending
Once you know you’re willing to make whatever changes are necessary, it’s time to commit to action.
Commitment requires self-discipline and the determination to finish what you start. It’s that promise to yourself that you’re not going to give up just because you feel like it.
If you want to save an extra $5000 in a year, one thing you’ll need to commit to is less spending. What will this commitment look like?
Here are a few possibilities:
- Canceling credit cards
- Meal planning your weekly meals
- Buying used clothing instead of new
- Skipping happy hour with friends
- Giving up your daily Starbucks
These are just a few actions you can commit to that will help you achieve your goal of saving $5000 in a year.
#3 An empowering belief that you can do it
If you want to save $5000 in one year, you’ll need to *believe* you can actually do it. This doesn’t just mean thinking positive thoughts. You can try to convince yourself with lots of positive self-talk, but it won’t mean anything unless you truly believe in what you’re saying.
The good news is you don’t have to be all in from the get-go. You can baby-step your way from a limiting belief to an empowering one.
You may really struggle with saving money, so you might have a limiting belief that tells you you’ll never be able to save up $5,000. This belief will keep you stuck, so you’ll need to change it. You want beliefs that empower you and support your biggest goals.
However, sometimes the distance between two opposite beliefs is an unrealistic leap for our minds to make successfully. This is when you can choose to adopt a neutral belief as you build confidence within yourself.
A neutral belief is based on circumstances you’ve personally experienced that help you more readily accept what’s possible.
For example, perhaps you know someone who is great with money management. Your personal experience has been watching your friend build monthly savings while she works extra hours and cuts down on her monthly expenses. You know it’s not an impossibility to save money, because you’ve seen someone do it.
So, your neutral belief might be “I personally know someone who has saved a lot of money, so I know it’s possible. She is a human with a brain that can make better financial choices. Because I’m also a human with a brain, I can make better financial choices, too.”
This might sound silly, and that’s okay. Sometimes you have to get a little tricksy with your mind when you’re trying to change long-held beliefs.
Just boiling your belief down to the basics (like being a human with a brain) can reveal neutral thinking that’s easy to prove and gets you closer to that empowering belief.
Reflect on your neutral belief every day, until you’re confident it’s replaced the limiting one. Then, when you’re ready, shift your belief into the next gear. Go from believing it’s possible to it’s inevitable. Move from *I can* to *I will*.
Once you’re all in with your new empowering belief, nothing can stop you!
How to stay motivated
Whether you’re trying to save extra money, lose some weight, or quit a bad spending habit, you always need to know the reason behind your goal.
Having a strong emotional connection will help you stay motivated when you hit obstacles along the way.
It’s one thing to want to reduce debt or pay cash for a vacation. But it’s important to tap into that deeper underlying intention behind your objectives.
Maybe your big “why” for saving $5000 in a year is so you can prove to yourself (once and for all) that you *can* control your spending. Or maybe you want to create lasting memories with your kids before they’re all on their own.
When you identify that reason that really resonates with your heart, write it down.
Then, read it when you feel like giving up. Remembering how your sacrifices today can create meaningful results for you in the future will help you keep things in perspective.
Don’t forget to grab your free saving trackers to help you reach your financial goals!
It can be hard to give up certain comforts in order to save money and get out of debt. But, time is going to go by whether you do hard things or not. You can wake up a year from now either $5,000 richer or not. It’s your choice.
You can also think of it this way:
Life can be tough when you’re cutting expenses, hustling to make more money, and making sacrifices to build annual savings.
But, life can also be tough when there’s no savings in the bank.
You need to choose which tough you want.
Do you want to sacrifice some comfort for a minute on the timeline of your life? Or do you want to struggle living paycheck to paycheck for the rest of it?
Look past the inconvenience and focus on the other side. Think of the reward you’ll receive at the end of all your potential saving efforts.
And, remember, in one year you’ll look back and feel good about the choices you made.
. . .
This article is for informational purposes only, it should not be considered financial or legal advice.
Not all information will be 100% accurate or apply specifically to your situation.
Consult a financial professional before making any major financial decisions.
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