How to Save $1,000 in One Year: Your Next Money Victory

To save $1,000 in one year, you need to save $83.33 per month. That’s $2.74 per day unless it’s a leap year, then you can save $2.73 per day.

But you knew that already. Saving $1,000 isn’t a math problem. Most of personal finance isn’t.

• It’s a “life got in the way” problem.

• It’s a “I have rent to pay” problem.

• It’s a “work hasn’t given a raise in years” problem.

For me, it’s a “my depression requested I order ramen… again” problem.

Saving money isn’t about the numbers. It’s about the situation, the circumstances, the person doing the savings. You! So, the real question isn’t ‘how to save’ but ‘how do you save $1,000?’

Here’s how to create your savings plan:

1. Hack your motivation

2. Lay your foundation

3. Crunch your numbers

4. Pick your path

5. Recrunch your numbers

1. Hack your motivation

Though the years seem to fly by, one full year is surprisingly lengthy. I certainly can’t stay focused that long, and I recommend you don’t place that pressure on yourself.

Set mini-goals that match your motivation instead.

Break down your savings plan into timelines that fit your schedule. Do you get paid weekly? Maybe monthly check-ins work better for your financial flow. And for all my travel nurses, Broadway stars, or anyone else juggling funky 10- or 15-week contracts, adjust checkpoints to your calendar.

Maybe you’d rather aim for specific milestones instead. Need some quick wins to kickstart your momentum? Start by saving $10, then $50, and eventually $100. Thrive on challenges, even when competing against yourself? Challenge yourself to reach $100 as fast as possible.

You understand your situation and, more importantly, your motivation. Use that to create a strategy that suits you.

Reminder: Adjust Money Goals To Your Calendar

2. Lay your foundation

Setting up your financial infrastructure is crucial. The way you bank can either work for you or against you.

Start by opening a high-yield savings account. These accounts function just like normal savings accounts except they’re way better. You can earn upwards of 4% interest*. This means your money is earning more while you work hard to save.

Pro Tip: Don't get bogged down trying to pick the very best high yield savings account, just pick one with a high interest rate and FDIC-insurance and get started! Personal I've used Capital One, Discover, and SoFi savings accounts, and ultimately had a similar customer experience with each of them. It's worth noting that a HYSA is not the same as a certificate of deposit or a CD. While some of the CD rates today may offer impressive returns, they typically require your money to be locked for a set period of time. Because of this, even the highest CD rates don't beat the best savings accounts, in the opinion of this money coach.

Next, decide if you’ll do all your banking in one place. There are two options, and being honest will help you pick the right one.

Option 1: Manage checking and savings at a single bank.

This option offers the convenience of instant transfers between your checking and savings accounts. This is perfect if you’re one of my girlies wanting to save a specific amount daily, like $2.74, or frequently move money between accounts. Plus, it’s helpful for those of us who struggle to keep track of login details–no shade here, this is about finding what works best for you.

Option 2: Separate checking and savings across different banks.

This strategy has been a game changer for many of my clients, so pay attention. The key advantage here is the intentional delay when transferring money out of savings, usually about 3 business days. For example, if you make a transfer on a Friday, it might not hit your checking account until mid-next week. So, if you tend to pull from savings to cushion weekend spending, this is for you.

3. Crunch your numbers

I know that loving math is a hot take, but I need you to bear with me for a bit of number crunching. I promise it won’t be too painful–we’ll keep it to 4 simple steps. But remember the more accurate these numbers the better your chances of success:

1. Calculate your monthly take-home pay. This is how much actually hits your bank account, not the full amount before taxes and deductions.

2. Add up your recurring bills. Don’t forget to include annual and quarterly bills. For instance, if your car insurance is $600 every six months, count it as $100 monthly.

3. Estimate your variable spending. It’s okay to round up here (but never round down!).

4. Calculate the gap between your income and expenses. This is how much you can save per month!

Income — Bills — Variable spending = Gap (saving money goal)

(P.S. Need help with the math? That’s exactly what I’m here for. Schedule your discovery call today!)

If this number is higher than $83.33, great news–you’re on track to save $1,000 in a year. Set up an automatic transfer and keep up the good work.

But for most of us, it’s not that simple. If this number is less than $83.33, don’t panic. Even if it’s significantly lower or negative, we’ll learn how to grow this number next.

4. Pick your path

Now, let’s figure out how to ‘grow the gap,’ so you can stash away more cash each month. The good news is the solution is simple, but the bad news is it’s not always easy to implement. There are only three ways to grow the gap, your circumstances will guide what’s most realistic for you.

1. Spend less

2. Earn more

3. A bit of both

We’ll start with spending less.

I suggest everyone explore spending less first. Why? It’s often the most immediate way to make a difference. Most of us can decide to change our spending habits today, but demanding a raise today? That’s a bit tougher.

If you can afford to spend less (Is that a pun?), calculate how much you’d need to trim to save $83.33 per month. For example, if you’re saving about $25, aim to find another $60 by tweaking your bills and variable spending.

But, you might find that spending less isn’t an option. There’s a lower limit to how much you can cut from a budget. You need money for basic necessities, so if that’s all you’re spending on, we’ll need to look elsewhere to grow the gap.

Let’s pivot to increasing your income.

For some, this idea might sound crazy. For others, it’s a breath of fresh air from budgeting and frugality. That’s because personal finance isn’t just about numbers; it’s about you! It’s called personal finance for a reason, amiright?

But there’s a catch when it comes to earning more. With Uncle Sam taking a slice of your earnings, it’s no longer one-to-one. If you can save $25 per month, earning $60 more won’t cut it after taxes. Instead, aim about 20% — 30% higher than your savings goal. In our example, that means earning an extra $75 since about $15 will go to taxes.

There may be cases where this isn’t applicable, but it’s worth considering when taking on a side hustle or working overtime.

Finally, there’s the happy medium.

This is where most of us land. And I think that’s great! Focusing on both cutting back and boosting income gives you double the power. It doubles your chances of success and hones two different financial skills–which is pretty rad in itself.

5. Recrunch your numbers

The final step is to account for the changes you’ve made and recalculate your numbers. Hopefully, with tweaks here and there, your monthly savings are approaching $83.33. Even if it’s not quite there yet but closer than before, give yourself a pat on the back. Progress is progress, and that’s what counts.

If you’re not quite hitting that mark, head back to step four and look for more changes you can make. You might need to start considering longer-term adjustments. Consider options like negotiating a raise, finding a more affordable place to live, or negotiating better car insurance rates. It’s okay if these things take time; what matters is that you keep working at it. Every change, big or small, brings you closer to your goal of saving $1,000 in a year!

Here are some bonus tips:

• Build a support system; financial changes are easier with allies by your side.

• Turn everything into a game; challenge yourself to make an extra $100 one month, then aim to save an extra dollar a day the next.

• Celebrate your victories; this journey isn’t easy, and beating yourself up won’t make it any more fun. Instead, celebrate each win to stay motivated.

Remember, don’t compare your journey to anyone else’s. This is about you and your unique circumstances. How you save your first $1,000 won’t be the same as me, your neighbor, or anyone else — it’s about finding what works for you.

So, how will you save $1,000?

*Interest rates are as of April 2024 and may vary.