How to Save 5000 Dollars in 12 Months

by Neal Frankle, CFP ®

You can save 5000 smackers over the 12 months no matter what your current situation is. Even if you are in debt now, you can accomplish this goal. And I’m going to show you exactly how to do that – step by step. Let’s get to work.

1. Commitment

I’ll assume that you are reading this post because you:

  1. Want to save $5000.
  2. Find it difficult to do so.

If those two statements are true you are in the right place. But this means that in order to reach your $5000 goal, you’re going to have to do some things differently than you have done up until now.

Are you willing to change? Change is difficult. A part of us always resists change – it’s only human. Anticipate your own reluctance. That means you must be 100% committed to reaching your goal even if you are uncomfortable with the changes we’re about to discuss. So I’ll ask you again:

Are you willing to do things differently even if you are uncomfortable in order to save $5000 over the next 12 months?

If you answered “yes”, let’s go on to step 2.

2. Your Options

You can save $5000 in one of three ways:

  1. Spend less.
  2. Earn more.
  3. A combination of the two.

Deep inside yourself, you probably know which of these options is most appropriate. If you look around and see that you are making as much or more than most of the people around you yet you can’t save a dime, it’s time to work on cutting your spending. (Don’t worry. We’ll discuss how to do that.)

Tip 1 – If you are using a budgeting program like YNAB (You Need a Budget) finding out where to make these cuts should be very easy. If you don’t use the program, I suggest you consider doing so immediately.

If you earn a lot less than most people in your situation then cutting spending is probably not an option. You simply need to make more money. (Again, we’ll deal with how to do that in just a bit.)

Here’s another quick way to know what your focus ought to be. Look at the chart below. This tells you how much money you need to save each month, week and day in order to reach your $5000 goal 12 months from now.

save 5000

Can you easily save $13.89 a day or $96 a week? If so, the easiest way to accomplish your goal is to cut spending. If it seems like an impossible task, you know you’re going to have increase income. If a hybrid approach seems most appropriate, that’s fine too.

3. Drill Baby Drill

It’s time to drill down now. We’re going to look at all the concrete steps you have at your disposal to succeed, decide on which to implement first and then get going.

Assume you need to increase your income to the tune of $416.67 a month. If you earn $20 per hour, you will need to work about 30 extra hours a month (considering taxes) in order to reach your goal. That’s 7 ½ hours a week. Can you get more hours at work?

If not, can you pick up a part time gig? I love the idea of starting a side business too. This could be a fantastic decision but it may take time before the cash starts pouring in. We want quick concrete progress. Make the best choice that will lead to fast results. A small side business might be great but if it doesn’t lead to savings next month, put it on the “to-do” list for now.

The other route is to cut $416 from your monthly spending. The best way to find that money is to go through your last 2 months of credit card bills and checking account statements. Get a big red pen and circle those expenses that you are willing to cut. Don’t stop until you come up with at least $416 in savings.

At first it might be difficult to find $416 in cuts. But if you remember your objective and how important it is to you, I’m sure you’ll come up with the goods.

Tip 2 – If part of your spending includes high-interest credit cards, consider rolling over your debt through to a lower cost alternative using a company like Lending Club.

4. Hit It

We’ve looked at the potential solutions and decided which one is the best to implement. Now, get to it. I know you can do this and succeed. If you’ve read this far it means you are committed and really want to be $5000 richer 12 months from now. You know exactly what to do. Now all you have to do is get going.

Set up a monthly auto-debit from your checking account of $416.67 into a new savings account where you’ll accumulate your $5000 over the next 12 months. This is an important step because it forces you to succeed. You’ll simply have to come up with the savings and/or increased earnings. You have no choice!

5. Monthly Tracking

The last step is to make sure you stay on track – accountability. The best way to do this is to ask a trusted friend to be your accountability partner. Talk to her about what your goal is on an annual and weekly basis and what you are going to do to reach those goals. Promise to show her your progress every month by supplying her with proof you have saved the $416 each month.

Anytime you embark on a worthwhile journey, you encounter challenges. But if go through each of these steps, you will accomplish your goal – guaranteed.

This is a very important endeavor and possibly a life-changing one. Once you accomplish this $5000 goal, you’ll be empowered to go on to bigger and better things. The sky is the limit from here.

Are you determined to save $5000 over the next 12 months? What are you willing to do to reach your goal? When are you going to start?

Tomorrow we’ll look at what to do with that extra $5000.

email

Subscribe & Get Your Free E-Book and E-Course as My Gift to You!

Investing Your Money Made SimpleOnce a week you'll get unique tips to make smarter money decisions about your investments, retirement, taxes, and career. You'll also get encouragement and ideas to help you get out of debt, earn more money, and generally stop worrying about your money.

Neal Frankle is a Certified Financial Planner™ with over 25 years experience. Subscribe today and tap into this wonderful, free resource!

Become a Fan! Follow @NealFrankle

{ 0 comments… add one now }

Leave a Comment


nine + 7 =

Previous post:

Next post: