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We all want to save more money. I get it. But sometimes, it seems so hard to put extra money aside. However, imagine what you could do with $5,000 of extra savings. Today, I will show you how to take that big savings goal and make it realistic with actionable tips to save more money. If you want to learn how to save $5,000 in a year, you’re in the right place. Let’s get started.
What Could you Do with $5,000?
First, goals work best when you begin with the end in mind. If you want to save $5,000, think about how you’d use the money.
Maybe you want to take a family vacation. Or perhaps you’re getting close to having a down payment for a house. Or maybe you’re just looking to boost your retirement savings by $5,000.
Whatever your reason, there are countless ways to use an extra $5,000. Start by figuring out why you want to save $5,000, and then use that as your motivation to start and keep saving.
How to Save $5,000 per Year: How to Do It
Let’s jump into some specific ways to save $5,000 per year. As we go through these tips, you’ll notice a theme. Saving money requires either reducing your expenses or increasing your income. I’ll show you some ideas for both of these tactics, and then you can choose which ideas are best for you.
1. Track Your Spending
It’s a cliché, but it’s the truth. If you want to save money, you must track your spending. It’s so important.
Here’s why. When you track your spending, you start to understand where your money is going. And once you know where it’s going, you’ll have a clear set of clues about where you can take action to reduce your spending. Said differently, you start to prioritize your spending based on what’s important to you, saving money in the process.
However, I’m not talking about tracking your spending the way your parents do. I’m talking about modern technology that automatically syncs your transactions and categorizes them.
If you want to save $5,000 in a year, you’ll need to put away just under $100 per week. While there are countless ways to reach that goal, I want to share with you a few easy tricks that can help you get there.
2. Adjust Your Thermostat
First, turn down the thermostat. It sounds so easy, but it can make such a big difference.
According to Energy.gov, you can save 10% on your heating and cooling just by dialing back your thermostat 7 to 10 degrees from its typical setting eight hours each day.
So, for example, assume you turn your heat down from 72 to 65 while you sleep. Not only will this help you sleep better, but you could say 10% on your energy bills.
EnergyStar says the average cost of heating and cooling is $875 per year. So, if you turn down your thermostat, you’ll save almost $100 per year.
Want to make this even easier? Use a smart thermostat to automate your savings.
Potential Savings: $87 per year
3. Increase Your Insurance Deductible
Next, if you’re in a stable financial position and are comfortable taking a bit of risk, it can make a lot of sense to raise your insurance deductibles. Why? Because when you increase your deductibles, your premiums decrease.
According to an Insurance.com survey, you can save $260 per year on average by increasing your homeowner’s deductible from $500 to $2,500.
The same is true for your car insurance. According to an InsuranceQuotes.com survey, the average person can save 9% on their car insurance by increasing their deductible from $500 to $1,000. If the average cost of car insurance is $1,600 per year, this means saving almost $150 per year.
Before raising your deductible, make sure you can afford to do so. If you can, this is an easy place to find savings.
Potential Savings: $410 per year
4. Get a Better Bank
According to a MoneyRates survey, monthly account maintenance fees have continued to inch up, with the average monthly fee now at $13.29.
And that’s not even counting fees for things like overdrafts (which you should avoid like the plague).
Instead of paying these outrageous fees, get yourself a better bank that doesn’t charge a monthly account maintenance fee.
My personal favorite is CIT Bank. Not only are there no account maintenance fees, but they also consistently pay some of the best interest rates on savings accounts.
What’s more? Opening a new savings account is a great way to track your progress towards your $5,000 savings goal. And even though interest rates are down, savings accounts are still worth it.
Once you have a bank account you like, I suggest you automate your savings to help you stay on track towards your goal. If you’re saving up $5,000 in a year, set up a monthly transfer of $416.67. By the end of the year, you will have set aside $5,000 without much effort at all.
Potential Savings: $159 per year
5. Tackle Subscriptions
If you want to learn how to save $5,000 in a year, it should come as no surprise that one of the simplest changes you can make is scaling back subscriptions.
Let’s recap the average cost of some popular subscriptions:
Gym Membership – $58/month (according to Healthline)
Streaming Services – $47/month (according to Cord Cutters News)
Amazon Prime – $12.99/month
Cable – $217/month (according to DecisionData)
There are countless other subscriptions you may be paying for, including:
- Premium cable channels
- Music streaming
- iPhone apps
- Cloud storage
- Meal kits
- Food delivery
Don’t get me wrong. There are certain subscriptions I would not be willing to live without. For example, Apple Music is a bargain compared to what I used to spend on music on the iTunes store. But, for instance, I no longer subscribe to Netflix because I just wasn’t using it enough.
There is nothing inherently wrong with subscriptions. Keep the ones you like and use. But realize that these services can add up to hundreds of dollars per month, so be selective. If you’re willing to make some sacrifices, this is an area that can move the needle when it comes to saving.
And if you need some help canceling these services or negotiating better rates, try out my favorite bill negotiation service: Truebill. They’ve saved me hundreds, all with little to no effort on my part.
Potential Savings: $1,200+ per year
Truebill is a bill negotiation service that will help negotiate your regular bills, track your subscriptions, and help you save. You only pay when Truebill saves you money, so you have nothing to lose. Check out our review to learn more!
6. Get Cash Back on Spending
Next, some purchases are unavoidable. So, if you have to spend money anyways, I’ve got three tips to help you get cashback on those purchases.
First, use a cashback credit card. Of course, I only recommend this tip if you are religious about paying your bills in full each month. If you are, cashback credit cards can save you a fortune.
Let’s assume you spend $1,500 per month on your credit card. That’s $18,000 per year. Even if you get a simple cash back credit card that earns 1.5% back, you could earn $270 per year in cashback – all with little to no effort. If you want to take this up a notch with other types of cards, check out my guide on earning credit card points to see how much you can save.
Second, if you’re disciplined when it comes to credit cards, consider opening a new account or two to earn a signup bonus. For example, when I opened my Chase Freedom Unlimited card, I received $200 of cashback after spending $500 in the first three months. I was spending this money anyway, so it was a no-brainer.
Finally, consider using an app to save on purchases like groceries. One such example is an app called Ibotta. Using this app, users save on average $150 per year, all just doing their regular shopping. You can check out my Ibotta review to learn more.
Potential Savings: $500+ per year
7. Use Micro-Investing Apps
Another way to force yourself to save money is to use a micro-investing app like Acorns. You’ve heard of these apps – they’re the spare change investing apps.
Here’s how they work. Let’s say you buy a coffee at your favorite place around the corner for $5.42. Acorns will automatically draw the spare change, 58 cents, from your account and invest it for you.
Imagine you do 50 transactions per month at 50 cents each. In the span of a month, you will have invested $25 – all without thinking about it.
Over time, this starts to add up. And not only are you forcing yourself to set money aside, but you’re also beginning to grow wealth (in the form of dividends and share price appreciation).
Check out this comparison of my favorite micro-investing apps to find which one is right for you.
Potential Savings: $300 per year
8. Refinance Your Student Loans
This next one is a biggie.
According to Credible, the average student loan interest rate from 2006 to 2021 was 4.66% for undergraduates and 6.22% for graduates.
Investopedia says the average student loan debt is $37,584 per borrower.
If the average interest rate on those loans is 5.0%, borrowers pay an average of $1,879 per year in interest. What if you could cut that rate to 3.5%? You’d save over $560 per year.
The bottom line is this. With interest rates at historic lows, now is the time to refinance your student loans.
My number one recommended platform for student loan refinancing is Splash. They get you the best possible rate by comparing tons of lenders, and you can close your refinance in a matter of days.
Recently, I convinced a buddy to refinance his student loans using Splash. In doing so, he cut over two years off his repayment timeline and is saving over $80,000 in interest. Refinancing works – and now is the time.
Want more tips on paying off your student loans? Check out my guide on paying off your loans in five years or less.
Potential Savings: $500+ per year
9. Start a Side Hustle
Finally, if you want to learn how to save $5,000 in a year, consider starting a side hustle to make extra cash.
A few low-effort side hustles include:
- Taking surveys using apps like InboxDollars and Survey Junkie. Last year, I earned several hundred dollars taking surveys (all in only 10-15 minutes per week).
- Delivering food using a service like Doordash. It’s an excellent way to get some fresh air, and you can make some decent money doing it.
- Love dogs? Try dog sitting on an app like Rover! If you earn $25 per night by having a dog stay with you, you could earn over $100 per month doing this just four nights per month.
Side hustles are quick ways to pick up extra cash. You can easily earn $150 per month by spending just a few hours per week on a side hustle.
Potential Earnings: $1,800 per year
Using Money-Saving Challenges to Stay On-Track
Now that you have some ideas to reach your savings goal, consider how you plan to stay on track.
One of my favorite ways is using money-saving challenges. Check out some of my favorite money-saving challenges to help you reach your goal.
Two of the most popular ideas are the 52-week money savings challenge and the envelope system – both of which can help you save $5,000 in a year. You can learn about these and more when you check my free money-saving challenge printable.
Save Even More
Finally, while it is a tremendous achievement to save $5,000 in a year, consider ramping up your efforts as you find more ways to save.
For example, maybe you can save $5,000 in 6 months (~$208 per week) or even $5,000 in 3 months (~$416 per week).
Whatever your savings goal, the process is the same. Find ways to save and earn more. If you do those two things, you’re bound to have success.
How to Save $5,000 in a Year in 9 Easy Steps
I’ve given you lots of ways to save $5,000 in a year in this article. Each of these items takes minimal effort. In total, the ideas I’ve shared can help you save $5,000. Let’s quickly recap.
- Track Your Spending
- Adjust Your Thermostat (or get a smart thermostat)
- Increase Your Insurance Deductible
- Get a Better Bank (opening a dedicated account with CIT Bank)
- Tackle Subscriptions (using Truebill to cancel or negotiate)
- Get Cash Back on Spending (using credit cards or apps like Ibotta)
- Use Micro-Investing Apps (Acorns is one of the best options)
- Refinance Your Student Loans (Splash is my favorite)
- Start a Side Hustle (using apps like Doordash, Rover, and InboxDollars)
However, this is just scratching the surface. There are countless other ways to cut your expenses even further.
Get started implementing these easy tips into your life, and start saving more money!