Life is full of big purchases and when you reach a certain age, these purchases come around every week. Some are essential, whereas others only arise from accidents or emergencies. And then there are big purchases you don’t necessarily need. You will still survive if you don’t have it, but it’s something you want more than anything else in the world.
Of all the common money mishaps people make regardless of age, giving into temptation and making big purchases they cannot afford is one of the most egregious. They think about the now too much and simply assume that things will work out okay. However, this is rarely the case. Instead, you need to take a more considered approach to not just save, but also survive when planning a large purchase.
What Does A Big Purchase Entail?
Big purchases mean varying things to various people. However, several common purchases could be considered large.
Buying A House
Unless you are one of the ultra-wealthy entrepreneurs, buying a house is arguably the biggest purchase anyone can make. With house prices on the rise all over, it will only become more challenging to buy a house and get on the property ladder if you aren’t already, but it can be hugely beneficial if you save enough for a downpayment and continue to pay off your mortgage. Buying a house is not the sole expense, though. You will also need furniture and everyday essentials, such as kitchenware, bedding, and much more. Considering you often have to buy all of this in one go, the cost can become extraordinary.
Buying A Car
Most people also need a car to get to work, run errands, and have a more convenient way to go on vacation rather than lugging a suitcase onto the bus. However, cars–especially brand-new cars–can be expensive. There are various ways to pay for a car, and some people recommend paying cash instead of finance so you’re not locked into monthly payments for the next 24 months.
If you like to treat yourself or your partner, you may consider buying jewelry. You can buy cheap jewelry, but these pieces are often low-quality. They break easily or the finish wears off after a few wears. If you want to make a statement, such as purchasing high-quality and long-lasting jewelry like an engagement ring if you’re planning to propose, you may need to consider saving for a big purchase.
Buying Something You’ve Always Wanted
There are many things you need to buy, but if you only focus on what you need, you won’t have anything you want. Sure, you can’t always justify these purchases over more pressing issues, like a new washing machine, but you should still be allowed to have some fun. Everyone has that white whale they’ve always wanted, so if you have the funds (or can save the funds) why not indulge yourself?
How to Save and Survive When Planning A Large Purchase
It’s not enough to start saving for a big purchase. You also need to ensure you have enough money to survive. This factor is why you need to learn the best ways to approach saving so you can make that purchase without sacrificing too much.
Define What You’re Going to Buy
While there are some examples of big purchases above, these are not the only large purchases you may need to make. You could want (or need) to purchase a new dishwasher or dryer. Maybe you need to get new windows fitted or you fancy yourself a football owner and have enough spare change to purchase a team. Knowing what you’re going to buy gives you an idea of how much it costs, how much it might cost later, and how long it will take you to save.
Decide If It Is Worth It
Whenever you look at a big purchase, your immediate reaction is to consider that it is worth it. Otherwise, you wouldn’t be thinking about buying it, right? However, there are levels to this. Some purchases are worth it. They are usually the more essential purchases like buying a car to help you get to work. Other purchases could be a little impulsive. You may really want that signed photo of your favorite movie star, but will buying it fulfill you in the way you need? If the answer is most likely no, then you don’t need to make a big purchase.
Determine How Much You Have Now
Maybe you’re lucky and already have some, not not a lot, saved up already. That’s great news because it means you might be able to determine if you can pay for it now and avoid all this saving nonsense. However, before you confirm your order for that solid gold toilet seat, consider where the money has come from. If it is your emergency savings account, it’s best to hold off on your substantial purchase. You don’t want to encounter a torrid rainy day in a few weeks where that fund would have come in useful, but you may be able to offset some of the total cost with other savings.
Pay Yourself Out Of Your Income
Instead, you can start paying yourself out of your income. This approach means you still have plenty of money saved up for an emergency and can still make small but satisfying progress toward your large purchase. Look at how much you earn each month and then consider how much you can realistically save. It’s always better to underestimate because you never know what expenses could crop up, but you should start saving regardless.
Set Up A Savings Account
Saving becomes much easier if you have a savings account. Not only does this take the money out of your current account–making it impossible to spend accidentally–but it could also come with interest that yields interest. Of course, this interest won’t make much of a difference, but the more you put in, the more you get back.
Audit Your Home For Things You Could Sell
If you want to save up quickly, you can audit your home for things you could sell. Every home has some clutter they don’t know what to do with, so selling your books online or going through your closet for clothes you don’t wear anymore could bring in a little extra cash to help you reach your savings goals. You never know how much people will be willing to pay for some items, so you never know if you are sitting on a variable goldmine.
Set SMART Saving Goals
SMART saving goals are an excellent way to gain perspective and motivate you to save money sensibly without risking financial troubles because you’ve put away too much. SMART stands for:
Rather than simply plan to save, you need to give yourself concrete numbers and timeframes. It’s not enough to say you want to put a deposit down. You need to know how much you should save. Although it seems like a lot (because it is) a savings goal of $400,000 for a down payment eventually seems more achievable than an abstract idea.
The 50/30/20 Rule
You can also take better control of your savings by following the 50/30/20 rule. What is this rule? It means that out of all of your income, you spend 50% on your needs, 30% on your wants, and 20% on savings to ensure financial balance and still enjoy some flexibility. However, this is not a hard-and-fast rule. So you can adjust the 30% and 20% to suit your needs if you have a more relaxed few months. While this might mean you don’t see people as often or miss a few movies or gigs, you can reach your savings goals much faster.
Try Microsavings Apps
Microsavings might sound a little like a scam, but it’s useful to earn some extra money with your regular purchases. Rounding up to the nearest dollar when you visit the supermarket deposits the difference into a savings account. It may be a lot, but it can make a difference when you consider your savings over a year. If your big purchase is under $1000, you could save around a quarter through microsavings!
Set A Time Limit
Savings time limits are an excellent way to kick yourself into gear and ensure you stick to your plan. This is part of why SMART goals work so well, but even if you don’t take the SMART approach, you still need to give yourself a time limit. Sometimes, these limits are out of your control. Your rent may be going up soon, or you have a specific start date for your new job across the country and need enough money. Other times, you have total control of the limit. Determine what’s doable and set a date from the moment you start saving.
While saving for large purchases can be stressful and may force you to adjust your spending habits and lifestyle for a long time, it will all be worth it in the long run. Whether you’re buying a home, a car, or something that can help you and your family thrive, understanding why saving is so crucial ensures you can avoid money mistakes and get better control of your finances.