How to Save $5,000 Yearly

Setting a goal for your savings account helps you focus on your future and commit to making smarter financial decisions. When you tell yourself that you must save $5,000 each year, you give yourself a goal to reach. From there, you can break down your budget so that you have a monthly goal in mind. With dedication, you can make cuts to your budget each month to make your main goal once a year.

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Instructions

- 1
  
  Decide what to include in your savings goals. For example, you may receive an annual bonus from your employer. If you receive the same amount every year, you may want to consider this in your total. If you do not always receive a bonus, or the amount varies, you may not want to consider that in your income.
- 2
  
  Determine how much you must save each month to reach your savings goals. If you included occasional income such as a bonus, subtract that amount from your $5,000. If you do not include occasional income, you will need to save around $417 each month to reach your goal.
- 3
  
  Create a budget to determine how much you can afford to save towards your savings goal each month. Determine your monthly take-home income. Your income includes paychecks from employment, Social Security payments, retirement income, child support or any money you receive regularly each month. Write down your total monthly income.
- 4
  
  Write down a list of all of your monthly costs, including both fixed and variable expenses. Some items to include are mortgage payments, utility bills, auto insurance, debt payments, transportation expenses and groceries. Make sure you account for occasional costs such as entertainment expenses.
- 5
  
  Deduct all of your monthly expenses from your total current income. The remainder represents how much money you can put towards your savings goal each month.
- 6
  
  Review your expenses if your excess income does not cover your monthly savings goal. Make adjustments to your expenses until you have enough extra income to cover the cost of your savings. For example, you can cut down on your entertainment expenses, lower your cell phone plan or start using coupons to reduce your grocery bills.
- 7
  
  Open an interest-bearing savings account to store your monthly savings. You can set up direct deposit to transfer the money automatically each month, or transfer the money yourself.

Tips & Warnings

When trimming your budget, start with nonessential expenses, such as cable TV, high-speed Internet or expensive smart phone plans.
Track your spending throughout the month to ensure you stay on target. Overspending could cause you to fall short of your monthly savings goals.