For most, $10,000 is a lot of money. Typically, that amount of money doesn’t just appear out of thin air without some financial strain. However, if you think about $10,000 as saving a little over $27 each day, it becomes much more realistic. The trick to meeting any money challenge is to practice consistency and self-discipline with your personal finances. By following these eight steps, you can transform an intimidating $10,000 savings goal into a feasible financial achievement.
Step 1: Know your why
Saving money can feel uninspiring if you don't have a clear objective in mind. You might be tempted to dip into your savings account, undermining your progress. When thinking about the future, especially if you're saving $10,000, prioritize long-term happiness instead of immediate satisfaction. Knowing your “why” can help you make your savings plan a financial priority.
The reason you’re saving could be to replenish your emergency fund after using it for unexpected expenses. Your “why” could also be to prepare financially for your first home, tackle credit card debt, or save up for your dream vacation. Whatever the reason, identifying your purpose can help you stay motivated and on track to achieve your financial goal.
Step 2: Break the goal into manageable sections
When faced with a challenging savings goal, it's common to feel overwhelmed or discouraged by the sheer size of it. Large goals can also make it easy to fall into the trap of procrastination, causing you to neglect the goal for a few months. However, reaching your goal at the last minute or falling just short of your money goal is better than not attempting to save at all. By dividing your objective into smaller, more manageable sections, you'll be able to stay focused on your goal throughout the year.
Short-term financial goals serve as a stepping stone to the goal in its entirety. To reach $10,000 in one year, you'll need to save $833.33 each month. To break it down even further, you'll need to save $192.31 each week or $27.40 every day. These smaller chunks are much more realistic and simple to comprehend, making it easier to track your progress.
Step 3: Create (or update) your budget
If you don’t already have a budget for college, you should create one to know where your money is going. A budget helps you track your income and expenses over time. When you first create one, you’ll want to make sure to list all of your expenses– both fixed and variable.
Some common budget categories to consider are housing, transportation, food, utilities, entertainment, and insurance. Additionally, you should set aside a specific category for your savings goal. Allocating a fixed amount of money can keep your savings on track without much effort on your part.
Remember, creating a budget doesn't mean you have to give up everything you enjoy. It's about finding a balance between your needs and wants while also saving for your future. With a little planning and discipline, you can achieve your financial goals and have peace of mind knowing where your money is going.
Step 4: Reduce your expenses
After your budget review, you can start taking steps to reduce your expenses. This could mean eliminating certain non-essential expenses, like streaming services or food delivery. Alternatively, you can begin to reduce the cost of any expenses you can’t (or don’t want to) eliminate.
For example, you wouldn’t stop grocery shopping, but you might implement some of these money-saving tips for the grocery store. You also wouldn’t ignore the need for a new winter coat or interview outfit. However, you could shop secondhand to find a quality piece at a lower price. Perhaps, you usually purchase several brand-new books each year. Instead, you could get a library card, borrow books from a friend, or download free digital versions of books to read.
Substituting more affordable alternatives can help you save money without reducing your quality of life. Plus, there are plenty of cheap date ideas and budget-friendly ways to satisfy your FOMO; you just have to get creative. Remember, it's okay to spend money on personal enjoyment, as long as it fits within your budget.
Step 5: Make more money
While cutting expenses is a practical way to manage your budget, there may come a point where you can't reduce your expenses further. When you reach that limit, you might need to consider increasing your income. Luckily, there are plenty of ways to make more money in college.
If you're not already employed, you can consider taking on a part-time job. Similarly, if you already have a job, you could pick up extra hours. In situations when your schedule doesn’t allow for a traditional job, you can add a flexible side hustle. Activities, such as pet-sitting, doing yard work, or selling items you no longer need, could help you make more money.
However, once in a while, you’ll get lucky and won’t have to work for your extra money. It’s a good idea to be resourceful and put your unexpected money towards your goal. Birthday gifts and work bonuses are examples of “found” money. Additionally, a smart way to use your tax refund could be to allocate this money to reach your savings goal. Finding these extra funds can give your financial goal a significant boost.
Step 6: Be strategic with your savings
One of the simplest strategies for setting aside money is to pay yourself first. This method includes treating your savings as if it were a bill to be paid. Automate your savings each pay period or month, just as you would do for a payment to your utility company or cell phone carrier.
Moving money from your checking account to your savings account can be done manually or through automatic transfer. Furthermore, you can choose to put your money in a high-interest account that will help your savings grow more quickly. Depending on the timeline of your financial goal, you might consider options such as a certificate of deposit (CD) or a high-yield savings account. Before getting started, be sure to research which savings accounts best suit your needs.
For a more engaging way to achieve your financial goals, consider participating in a savings challenge. These small, monetary activities are both motivating and rewarding. Plus, fun money saving challenges can help you put away some money while also teaching you new and effective ways to manage your finances.
Step 7: Reflect and adjust
Try to reflect on your financial journey throughout the year. You should also check the status of your budget after any major financial changes. For example, you could receive a large sum of money or add a four-legged member to your family. Whether your money situation changes for better or for worse, you should adjust your savings plan accordingly.
You can set a reminder on your phone to review the progress of your savings goal each month. See what's working and what's not. If you find that you’re falling short of your savings goal, you can adjust your budget or identify additional ways to cut expenses. If your income increases, you can allocate more money towards your goal, ensuring you don't spend the extra money impulsively. The more you save, the more financial freedom and security you'll have in the future.
Step 8: Celebrate your progress
Each time you hit a savings milestone, you should celebrate– no matter the size. Whether you saved your first $1,000 or managed to stick to your budget for three months straight, your financial wins are worth celebrating. Reinforcing your positive money habits can keep you motivated on your financial journey.
To celebrate, you can treat yourself to a nice dinner, plan a picnic with a friend, or host a movie night with family. If you prefer to celebrate alone, you can take a relaxing bath, go for a walk in nature, or read a new book. It's beneficial to acknowledge your progress, but it's equally important not to break the bank in the process. Keep your celebrations simple and enjoyable, and don't let them undermine the progress you've already made.
Hopefully one year after reading these eight steps, you’ll have a cool $10K tucked away in your bank account. With the right money mindset, this goal is financially possible. Yet, don't be too hard on yourself if you slip up or miss a savings milestone. Life happens, and setbacks are a normal part of the process. Instead, focus on getting back on track and keep moving forward. With dedication and perseverance, you'll reach your $10,000 savings goal in no time.
📝Think you're great with money? Take the quiz "Are You Good at Managing Your Money in College?" to prove it.
👛You might have to live on a minimalist budget to reach your goal of $10,000. Read How to Live a Minimalist Life: 8 Guidelines to Follow to make the transition easier.