Whether you're an experienced saver who wants to switch things up or you're new to saving and looking for a motivating entry point, setting a clear goal for your savings is key.
The right number is a matter of your personal financial situation, but $5,000 may be a good goal for your needs—and an attainable one. The key is to break it down, free up funds and find ways to stay accountable and motivated about your goal. Here are seven ways to save $5,000 by the end of the year.
1. Break It Down Into Months
The first step to reaching any financial goal is to break it into bite-sized pieces. If you want to save $5,000 in one year, you'll need to save approximately $417 a month. That's about $97 a week.
Saving almost $100 a week may be a lot depending on your finances. If it's not in your budget, consider starting with a small goal, such as $50 a week, and adjust to saving more if you find that you're able to. Or, you can try these next steps to make reaching your $5,000 goal more attainable.
2. Track Your Spending
If you don't know where your cash is going, it's tricky to make the changes necessary to save more. Look through your bank or credit card statements for insight into where your cash tends to go. Knowing what you buy most can help you reel in any unwanted or unnecessary spending. Then, pocket the difference.
Next, start actively tracking where your money's going. That way you can adjust your spending to stay on course as needed. To start, create a budget. This is a framework for how much you want to spend on what each month, plus how much you want to save. Consider using a budgeting app to track your actual spending against your expected spending.
3. Cut Your Expenses
The less you spend each month, the more you can afford to save. There are endless ways to cut expenses, so look for creative, practical solutions. Consider these frugal habits that can help you cut back:
- Negotiate your bills. Lowering recurring expenses can help you save money consistently, and your monthly bills are a great place to start. Simply asking for a lower rate for your memberships, streaming services, subscriptions and insurance can yield results. If negotiating on your own sounds intimidating, consider Experian BillFixer™.
- Save on food. Shopping sales, clipping coupons, buying store brand and buying in bulk are all ways to spend less at the grocery store. In most cases, you won't be compromising quality by spending less.
- Say no to impulse spending. If you tend to splurge on retail or meals out when you didn't plan on it, try setting new boundaries around impulse spending by waiting at least a few days before you choose to act on a desired purchase.
- Save on transportation. Driving anytime you need to go someplace adds up. Depending on where you live, driving less may not be feasible. But if you live somewhere with good walkability or public transportation, choosing green transportation options can reap big savings.
- Use a cash back credit card. If you qualify for a cash back credit card that rewards everyday spending at the grocery store or gas station, using it to pay can help you earn cash that you can redeem as a statement credit. Just be sure to always pay off your balance before the end of your grace period to avoid incurring interest.
4. Take Advantage of Windfalls
One of the best ways to boost your savings is to funnel any extra cash that comes your way directly into your rainy day fund. Examples of windfalls include tax refunds, work bonuses and gifts for your birthday or the holidays. Whenever you receive more cash than you were expecting, put it directly into savings to get closer to your $5,000 goal faster.
5. Join an Accountability Group
A financial accountability group is structured to allow participants to set financial goals together and then share their progress. Having social support for your financial goals can make it easier to stay motivated and on track toward success. It can also help to have someone to share your mistakes with: When it comes to saving, everyone's had a misstep or two.
You can form a financial accountability group with friends who are working toward financial goals too. Or, you can find online accountability groups on social media or through other accountability apps.
6. Get a Side Hustle
Bringing in more cash can help you put more toward your savings. If you have time in your schedule, consider taking on a gig that you enjoy and that's lucrative. Driving for a ride-hailing company, caring for pets or animals, selling items online or starting freelance work in an area where you have skills are all ways to bring in extra money on your own schedule.
7. Try a No-Spend Challenge
With a no-spend challenge, you turn saving money into a game. Gamifying your goals can make them more fun and motivating.
Here's how it works: For a set period of time, such as a weekend or week, you'll commit to spending absolutely no money outside of the bare essentials (basic groceries, utilities, childcare, transportation to work and the like).
If you tend to go out to eat, shop or pay for entertainment on the weekends, the savings from even a brief no-spend challenge can be substantial. However much you save, put it directly toward your $5,000 savings goal.
Make Savings Automatic
To stay on track toward your goal, set up automatic transfers into a high-yield savings account. It's the ideal place to keep your savings liquid while still earning some interest. And by setting up automatic transfers, you lower the risk that you'll spend the money you intend to save. The more you can automate, the smoother your financial life can be.
In addition to boosting your cash savings, take an active approach to building your credit. Increasing your credit score can help you save money when you need to borrow down the line, such as when you're ready to buy a home or a car. To see where you stand, sign up for free credit monitoring through Experian. You'll receive individualized advice on how to improve your score, plus alerts to any changes to your credit file in real time.
