Unless you win the lottery or you get an inheritance, saving money takes time and patience. There is simply no short cut. Whether your big purchase cost 50 or 1000 dollars, only you know your finances. Sometimes that big purchase may come unexpectedly, and other times you plan ahead. I will use this opportunity to address some of the best ways to save money for a big purchase.
It can be stressful to think about the money you need for a big purchase. Whether it is to pay for wedding expenses, a new car, down payment towards a house, or your dream vacation, a great way to start is to decide how much to save each month or week to meet your goal. Let’s say you plan to purchase a new car in 12 months, and you want to have at least 5,000 dollars before buying, you have to calculate how much you need to save to achieve that goal. You have to divide 5,000 dollars by 12 months, which is 416 per month.
BEST WAYS TO SAVE MONEY
The next thing to do is to decide if your monthly expenses and savings will allow you to save towards that 5000 dollar purchase within 12 months. Sometimes, you may need to extend the timeline, or you may need to pick an extra shift at work or get a second job. Whatever it is, try to do the following to help you reach your goal.
PAY YOURSELF FIRST
No matter your goal, you should always plan to pay yourself first. You can sign up for a direct deposit to make it easier to pay yourself. You can open an online saving account to avoid easy access to the money. Once you pay yourself, decide, where within your budget you can save money.
50/20/30 RULE
One of the best ways to save money for a big purchase involves some lifestyle changes. One of the most popular rules in the finance world is the 50/20/30 rule. What does the 50/20/30 rule mean? It means you spend 50 percent of your take-home pay on things such as a mortgage, rent, and food, then 20 percent on savings and paying off your debt, and 30 percent of your income on wants and lifestyle choices. If you have a high monthly income, 30% of your income on lifestyle choices can add up quickly.
It means regardless of how much you make, if you follow this rule, you can make some lifestyle changes to incorporate a new budget into your monthly expenses. It may mean to cut that gym membership, dining out once biweekly instead of 3 times week, canceling subscriptions, or the shopping at a trendy store. Payment of rent, mortgage, savings, and debt, are usually the same each money. So not much you can do there unless you decide to share a room to split your monthly rent, or you rent your basement if you live in a house to help you achieve that end goal.
Remember, I said in the beginning, that saving money requires patience and time. If 416 a month is too steep because of your income, extend your timeline. Instead of 416 dollars per month, do 208 dollars a month and save for the next 24 months. Start small according to your means and do not try to keep up with the jones.
INVEST OR SAVE MONEY IN HIGH YIELD SAVINGS ACCOUNT
One of the great ways is to invest your money and save it into a high yield savings account. Depending on when you need the money, you can have a good return on your money. It can make a difference in reaching your goal within ten months compared to twelve.
Write down your goals and determine what works for you. Keep in mind, everyone has different financial obligations. So don’t push yourself too hard, and remember patience is a virtue. You will buy that new car in no time! You should always work around to determine the best way to save money for a big purchase.
TIP: Although I mentioned the 50/20/30 rule, you can move the percentage around to fit your financial goals, as long as you are saving money and able to live and afford your necessities.
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Next time,
Charly
Thank you! Love this!
I’m always looking for new ways to make the most of my “extra” money – thank you!
It is so helpful to plan ahead for major purchases. Another important “savings” fund would be to stash some cash away every month into your emergency fund. That way, when there is an unexpected expense, you don’t have to take money from the savings you were planning to use for a special big purchase.
This is great.
Thanks for this! I’m trying to save for a big move. (Shipping cars, plane tickets, first, last, deposit, etc.) Now is a pretty tough time to save, with everything that is going on. I was unfamiliar with 50/20/30. I’ll take this into account.
Some good saving advice there
Thanks for the tips! Always looking for ways to save money that are easy.