How to Save $5,000 in One Year

1. Break It Down Into Months

If $5,000 a year feels like a lofty goal, try breaking it down into 12 months. To have $5,000 by the end of the year, you'll need to save about $417 a month—or about $97 a week to reach your financial goal. If this doesn't quite fit your budget, start with a smaller goal that may feel more attainable, like $50 a week. Saving $50 a week will still net you $2,600 by the end of the year.

How to Do It

Try setting aside a consistent amount from each paycheck to equal your savings goal. To keep yourself on track, schedule automatic transfers from your checking account to a dedicated savings account. Or, if you receive your paycheck through direct deposit, ask your employer to transfer part of the funds to your savings account. Use a high-yield savings account for better returns.

2. Track Your Spending

Track your spending to better understand your spending habits. This includes spending on essentials like groceries and utilities, along with discretionary spending on extras like dining out and streaming services. Once you know where your money is going, you can better decide how much you can comfortably afford to save each month.

How to Do It

Create a budget to understand where your money goes every month and what changes you may need to make to meet your financial goals. You can use a budgeting app, budgeting software or simple spreadsheet to track your actual spending against expected spending. Then look into how to funnel more of your discretionary income into savings.

3. Cut Your Expenses

The less you spend each month, the more cash you can put aside toward saving $5,000 in a year. Use the results from tracking your expenses and creating a budget to decide where you can cut. Spending less on extras like takeout, entertainment and other "nice-to-haves" is often the easiest place to start. But you can also find ways to save on necessities, like groceries.

How to Do It

Determine which extras you really need and which you can cut out for now. Even decreasing a daily coffee shop run to a weekly one can help, or doing more meal prep rather than eating lunch out. Reduce impulse spending by waiting a few days before making a purchase (and maybe adding that money to your savings instead).

To spend less at the grocery store, try clipping coupons, buying in bulk or switching to the generic store brand. You can also use a cash back credit card to earn cash rewards when you buy essentials, like groceries and gas. Some of your monthly bills may be negotiable too. Ask your providers for a lower rate on your memberships, streaming services and other recurring expenses.

4. Take Advantage of Windfalls

One of the best ways to boost your savings is to take advantage of any financial windfalls that come your way, such as a work bonus, tax refund or gift. Casino wins and inheritances are other common types of financial windfalls. When you receive funds that aren't part of your standard budget, it's important to manage the windfall wisely. Keep in mind that some windfalls may also count as taxable income, lowering the final amount you net.

How to Do It

Try to put some of the windfall into your savings even if you plan to use a portion of the newfound funds to cover expenses, pay for a large purchase or pay down debt. Remember, the more you stash away, the faster you can meet your $5,000 savings goal in a year.

5. Join an Accountability Group

A financial accountability group is a structured group that helps participants set financial goals and share progress. Receiving social support from others working toward their own goals may help you stay motivated to reach your savings goal. Being able to talk openly about your wins and missteps with others can help you stay on track.

How to Do It

Personal finance coaches and certified financial planners (CFPs) typically offer private accountability groups to clients—often on Facebook. You can also form a financial accountability group with friends who are working toward similar financial goals, use an accountability app or find a group on social media.

6. Get a Side Hustle

Side hustles can help you bring in more cash to put toward your savings. Many side hustles, like dog walking, allow you to set your own schedule and may not require any prior experience, while others allow you to make extra money from home. You may also be able to find a side hustle that allows you to monetize a favorite hobby or passion, like selling artwork online.

Keep in mind that income earned from side gigs is usually taxable, but you may be eligible for some deductions too.

How to Do It

Find a side hustle that aligns with your schedule, interests or experience. Popular options include driving for a rideshare company, tutoring, making deliveries, babysitting and taking care of pets. You can also sell items online, rent out your car or an extra room, or start a freelance business.

7. Try a No-Spend Challenge

No-spend challenges turn saving money into a game. When saving feels more fun, you might be more motivated to stay on track and reach your goal. No-spend challenges can vary, but generally revolve around a commitment to not buying anything outside of the essentials for a set period of time, like a week or a month. The savings from even a brief no-spend challenge can add up quickly.

How to Do It

Set your own no-spend challenge or find one online to join. No-spend challenges can have themes, like a no-spend month. Or, you can keep it simple and commit to only eating out on weekends or not buying anything online during a challenge. Looping in friends can make challenges more fun, while trying different no-spend challenges throughout the year can help keep you motivated long-term.

Tip: If a no-spend challenge doesn't fit your needs, try a different type of savings challenge to help your money grow.

Where Should I Keep My Savings?

Keep your savings separate from the account you use to pay bills and spend leftover cash to reduce the temptation to spend the funds. A high-yield savings account is a safe place to grow your savings, and you can earn more interest than with a standard savings account. To stay on track with your savings goal, set automatic transfers from your checking account into your high-yield savings account at regular intervals, or have the money directly deposited from your paycheck.

Tip: You can use an online savings calculator to see how your savings will grow over the year and beyond.

The Bottom Line

Saving $5,000 in one year is a sizable challenge, but it can be possible with the right strategies in place. Track your expenses, set a budget and mix and match strategies to fit your unique financial situation—or change things up during the year to help you stay motivated. Find what works for you to help you save money this year, and well into the future.