So you’re thinking about making a large purchase and want to be responsible and plan for it.
Some people, like myself in my early days, may simply throw any extra money they have after expenses into a pile and hope that pile gets big enough to make the large purchase soon.
When I was younger, I received some really good advice on how to budget for a large purchase and it’s stuck with me my entire life. I didn’t necessarily follow it like I should have in my early years, but I eventually learned how valuable that advice was.
I’ve written this article with that advice in mind and added in the steps I’ve taken myself to make past large purchase. These steps have worked for me time and time again. I find that as long as I’m on a mission to get it done, I can accomplish anything.
Let me share these tips with you.
The Car Advice I Always Remembered
When I was 20, I paid off my first car. It had about 100,000 miles on it. Someone told me that I will eventually need another car and I should keep paying that car note to myself. I didn’t listen (shocker!).
However, that was absolutely fantastic advice for someone like me that didn’t save or have an emergency fund. I believe it was $250 a month I was paying towards my car.
When the car note was up, I absorbed that $250 a month into my day-to-day expenses. The weird thing was that I never felt like I had an extra $250 a month.
What I should have done was keep paying myself $250 a month and use it to purchase the next vehicle I would need approximately 3 years later.
Without calculating in any interest at all, if I had taken $250 per month and saved it for 36 months, I would have at least $9,000. I would also have the value of the car I traded in.
Lesson learned much later in life, but lesson still learned.
Now on to your large purchase…
How Much And When
Step one is finding out how much this large purchase will be so you will know how much you need to have saved up.
Know that sometimes prices fluctuate so I would fluff that price you determine slightly, depending on what the item is.
When I say “depending on the item”, think about any extra expenses that may be associated with the item. This may include taxes, insurance, or any other fees that naturally come along with the purchase.
Step two is to determine when you need to make this purchase.
What’s your goal date? Is it flexible? You could save thousands on a purchase if you time it correctly, so keep that in mind.
For example, if your large purchase is putting in a swimming pool, most people don’t think about this during the winter months. Could you save a bit if you were to wait a little while on your purchase?
Write your “how much” and “when” down as you’ll need it for the next step.
Your Large Purchase Game Plan
You have the date you want to purchase the item by and you know an estimated (on the higher side) cost.
Next, you need to know how much money you’re starting with (which may be 0 and that’s ok!).
Now let’s plug this information into a calculator to see if it’s doable.
That final calculated number is the amount you’ll have to save per month to meet your goal.
Does the number scare you? I suggest playing around with the months if your date is flexible until you find your spot of comfort.
We’re going to go over some strategies to get you more money quicker, so if you need to, come back to this calculator later on. It’s not going anywhere.
Create Extra Income For The Large Purchase
I’m the kind of girl that likes knocking things out quickly and moving on. It would feel like a gray cloud hanging over my head until I could make the purchase.
The easiest way to get cash quickly is to sell things you already own. Look through your house, check out my article on 50 things around your house you could sell quickly for cash, and start offloading items that are taking up space that you don’t love.
Could you rent out some space or something you own?
Could you pick up a temporary second job?
I set up my own Etsy shop where I sell digital items.
Whatever extra income you can come across, know that it’s a temporary gig to get you to your end goal quicker. Unless you love it and want to keep doing it – go for it.
Change Habits
What could you change to start sending more cash towards your savings to make this large purchase sooner?
Look at your budget and see if there are items you could cut back on.
For example, say you need $20,000 in twenty-four months. You need to save $834.00 per month. What if you could cut back on other things and complete this in half the time?
$20,000 total over a twelve month period is $1,667 per month. Does that sound crazy? Perhaps it does. Let’s look at it weekly.
That’s $416 per week. You were already designating roughly $200 per week so could you come up with another $200 by using those side gigs or trimming your weekly food budget?
I bet you could if you put your mind to it! Twelve months seems much more doable to me compared to twenty-four months.
Check out Debt Solutions’ article on Understanding spending habits to create better ones.
Give Your Large Purchase It’s Own Account
I absolutely would suggest placing this money into it’s own savings account. If you could auto-debit it out of your main account each week, that is ideal.
If you combine this money with your regular cash, you’re going to get lost with what is for the large purchase and what is for your regular expenses.
Not only that, but you’re keeping temptation out of your mind if the funds are not easily accessible.
Even better, perhaps you create enough income from side gigs to cover the amount you need to save. If this is the case, direct deposit all of the side gig money into it’s own savings account.
Staying on Task
It’s easy to get distracted and off track when you’re saving for something that you’re months from purchasing.
Hold yourself accountable. Make a diagram somewhere that has your goal clearly listed. Be able to color in or mark out smaller goals as you reach them. For example, have a circle for every $100 up to $10,000. Feel great when you’re able to color in or cross out one of those circles.
Breaking up a large goal into multiple small goals will help you feel like you are making progress. This will lead to your continuation of staying motivated.
If you miss out one month, don’t fret! You will have ups and downs throughout this process. Stay determined and tell yourself that you make it up the next month.
Key Takeaways on Saving for Your Large Purchase
Know that a car will always eventually break down. Prepare to never be forced to have a car loan.
When you have a large purchase coming up, planning is key. Know the amount you are going to need to spend (with some fluff) and the timeline you have to make it happen.
The shorter you can make the timeline, the better. Be willing to make some temporary sacrifices to get this done and off your plate so you can focus on other things.
Feel a sense of accomplishment with every $10 or $100 you place into the account and reward yourself with something. It could be simply movie night on the couch with your bestie to celebrate with a glass of wine.
If you want to explore more ideas to earn more, make sure you read my article on Ways to Increase Your Income and Unlock More Cash. This will give you some ideas we didn’t mention, like asking for a raise or changing your tax withholdings to get that money in your pocket sooner.
Best of luck with knocking this out quickly!
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