Sometimes, we need to make large purchases, like when it comes to buying a home. Whether it is a home renovation project or a new car, creating a smart financial savings plan is important. Follow these steps to ensure you will be financially ready for your next ‘big ticket’ item:
Decide How Much Money You Need To Save
Consider the cost of your purchase. Will you have to save for 100 per cent of it or do you already have money put aside that you can dip into? Will you be putting a certain amount on your credit card or using money from a loan? Decide on a dollar amount that you need (all things considered), and this will be your goal.
When Do You Want To Be Able To Purchase This Item?
Depending on what your ‘big ticket’ item is, you may already have a date in mind. Your purchase may be time-sensitive, like roof repairs or a summer vacation, or arbitrary, like an item you hope to afford in the near future. Whatever the purchase may be, having a timeline for saving is important. The best goals are ones that are actionable and time-sensitive; come up with an end-date (however arbitrary it may seem), and create daily, weekly and monthly goals working up to this time.
Start a Plan
Since you know how much you want to save, and when you want to save it by, it is time to come up with a plan to make it happen. First things first: do the math! How much do you need to save per week to arrive at your goal? For example, if you hope to save $7,500 in 3 months, assuming there are 13 weeks in these 3 months, you would need to put aside $576.92 per week. Now look at the numbers for your own goal – do you need to extend your end date to make it work? Perhaps you might be able to save quicker than you thought? Make sure you are comfortable with your numbers.
Now here comes the hard part, figuring out where this extra money will come from:
Look at Spending Habits – The Easiest Way to Save is to Reduce Unnecessary Costs
Use an app, or simply grab a pen to paper, and analyze your current weekly and monthly spending. Is there something you can do without, or cut back on?
- Monthly Bills – Are there services you are paying for that you no longer use? Maybe you have two Netflix accounts in your household, or your phone plan is outdated and you are overpaying. Write down all your monthly expenses and see what you can cut down on. Call your phone and TV service providers and see if you are eligible for a better deal.
- Food and Drink – Ah, one of our biggest expenses. If you are like most people, you find yourself grabbing a latte from a café daily or going out for lunch during your break. Look back at the past two weeks: how much did you spend on food and drink? The amount will probably surprise you! Cooking at home and bringing a coffee-to-go is one of the easiest ways to save some extra cash. It may be a hard habit to break but every time you skip on the café, consider how much money you would have spent and put that amount into a savings box…then watch your savings grow!
- Make Extra Money – Adding Lump Sums to Your Savings is the Easiest Way to Watch Your Funds Grow
There are many ways to make some extra cash. Whether it is putting in some overtime at work, taking on a side job or selling items online, any extra funds will bring you another step closer to making your goal a reality.
Take a Break From Other Savings Goals
Focus On What is Most Important to You Right Now. Are you currently saving money for reasons other than buying a home? Consider taking a break from these contributions to have extra funds for your big purchase. Having multiple goals to save for can feel overwhelming; stick with one at a time.
Saving takes a lot of discipline, and it is not always fun to do, but we can feel good about making these choices knowing that the end result will be worth the small sacrifices and extra work.
If buying a home is on your list of ‘big ticket’ purchases and you are looking for some help, feel free to contact me at 416.960.9995 or send me an e-mail at elli@ellidavis.com – I am always happy to help!
