Five tips to help you get saving for that big purchase.
Saving for a big purchase can be challenging, but also very rewarding.
Once you have the money for that big item and you can pay cash, you enjoy it that much more, knowing you don’t have looming debt coming along with it.
Saving for a large purchase takes some planning, but it can be done. Breaking it down into smaller doable and manageable size chunks helps. Here are some tips to save for a large purchase.
What are some helpful tips for saving for a big purchase?
1. Identify the big purchase and know the costs.
Do research on the item or project you are planning to save for. Get as accurate estimate of costs involved as possible. For example, if you are saving for a car, look up the pricing for different cars you are interested in. Also, get rates for insurance and regular maintenance costs.
When doing this, make sure you factor in inflation as pricing may increase by the time you go to make your purchase. When you are setting money aside for this item budget in a little more than you think you will need. Having a little extra money on hand is never a problem and can be saved and put towards another future big purchase item.
2. Don’t overlook your financial goals.
It is important to see your money clearly. Know what money you have coming in and what money you have going out.
If you have debt, you will want to make sure you are paying on those and ideally pay them off before you save for that big purchase item. If you have debt, you are paying interest which means you are losing money. So, focus on for example, paying off credit card debts, student loans and other debts before saving for that big ticket item if possible. If you are only paying the minimum balance due each month you are facing a never-ending interest expense and not making much headway on the overall debt.
It is also important to have an emergency fund in place for those unexpected expenses. Focus on building an emergency fund first, this should be three to six months’ worth of your net income.
3. Set a timeline for how much you need to save.
Determine how much you need to save, and how long you would like to take to save that amount, but be realistic. Keep in mind the above point of paying off other debts and having an emergency fund.
Know how much money you have left over once you have paid your other bills and have set the amount of money you have to spend on groceries, gas, entertainment, and other things. Once you know how much money you have left in your budget, maybe you decide to set $100 a month aside for this particular big purchase.
When doing this you can follow the 50/20/30 rule. This suggests allocating 50 percent of your income to necessities like rent, food and utilities. Then 20 percent towards savings and the other 30 percent for personal spending. This helps ensure that you are saving consistently and allows you to enjoy life.
4. Find the money you want to save.
You may need to adjust some of your spending habits to be able to put extra money aside for your big purchase. This may take some mindset work as well and self-discipline in your spending habits.
Places to save a few extra dollars for your big purchase:
- If you tend to stop and get a coffee or other drinks throughout the day, eliminating them and bringing drinks from home, such as coffee or sports and energy drinks. Making coffee at home or purchasing the sports drinks at a grocery store as part of your grocery budget, and bringing one along can save you big time. You may be able to save $10-20 or more each week.
- Pack lunch instead of ordering out. You could easily save $20-50 a week depending on how many times a week you typically eat out.
- Cutting back on entertainment costs can also help. Opt for free entertainment options or doing am movie night in, instead of going out. Having friends over or going to the park and everyone bring a little something for the activity or meal can save you $100 or more each month.
5. Open a separate savings account for your big purchase.
Having a separate account for your big purchase items can help you see how much you are saving each week or month. You will also be able to track if you are on schedule to reach your timeline goal.
Another benefit is you can set it up on automatic transfer to your savings account. You are less apt to spend the money on something else. You can set this up with your bank to automatically transfer a set amount of money to transfer into your specified savings account.
Some employers also offer a separate payment option directly into a savings account reducing your main paycheck that goes into your checking account for other expenses.
You may even opt for a Money Market Savings or a High Yield Savings’ Account, or other form of savings’ account that you can earn Passive Income on while saving for your big purchase.
Learning to save money ahead of time for big purchases is a beneficial and critical step to reaching your financial goals and financial freedom.
Are you ready to get saving for that big purchase?
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