Whether you're planning on buying a car or want to take a vacation abroad at the end of the year, it's imperative that you save for the occasion. Not many of us can walk into a car dealership and buy the first vehicle we see with cash on the spot.
Saving is an absolute necessity when it comes to being able to make larger purchases that require a little planning and foresight beforehand.
Create a Savings Account Specific to Big Purchases
Create a separate account that is used only for your upcoming large purchase. Sure, it can be easy to lump the money into your main savings account, but it can become confusing when you don't know what exactly you've saved for the purchase and what was already in there.
Most banks offer free savings accounts with no minimum deposits, so it's practically goof-proof to open another account for yourself and begin using it. You can also link your main checking account to the new savings account online, making it effortless to transfer money from one to the other.
Put Money Aside Each Week
Get in the habit of putting a little money aside into the new savings account every week or every pay period. The amount you put in is totally dependent on what you can afford and the type of purchase you need to make.
For instance, if you'd like to buy a $25,000 car at the end of the year, you'll probably need to put more than $50 aside every week. Alternatively, if you put a smaller amount into your savings account each week, that amount will gradually increase and you won't feel the sting from a portion missing from your paycheck as much.
Don't Forget About an Emergency Fund
Don't forget that you and your family need an emergency fund just as much as a big purchase account. The problem a lot of people have is that they don't bother to accumulate an emergency fund and then, when something comes up, they dip into their account that's being used to save for a large purchase.
For example, if your car breaks down and you need money to have repair work done, and you also don't have an emergency fund, there goes your vacation account to pay for those repairs.
Create a Deadline
It's important that you create a deadline for when you absolutely need that money for the big purchase. One example of this would be if you would like to take a vacation with your family in the summer; you'll obviously need to have the money needed in your account before the time comes for you to book hotels, flights and make vacation plans.
Be realistic about your goals and deadlines, as over-analyzing what you can put into your big purchase fund can leave you feeling disappointed and upset.
Automate Your Savings
Most banks offer online account setup, which is ideal for those who want to do their banking on the internet. This is especially advantageous to people who want to automate their savings.
If you're afraid that you're going to forget to put money aside into your big purchase fund each week, set up automatic withdrawals from your checking account to the savings account. This takes the guesswork out of saving up money for a large purchase in the future because it is essentially done for you.
Pick Up Extra Work and Stay on Budget
The best way to save up for a large purchase is to both pick up extra work and stick to a regular weekly budget. If you're currently working, try to get some overtime or ask if there's a possibility for you to work extra hours. Now might be the time to ask for that much-needed pay raise that you should've gotten years ago.
If you can't necessarily pick up extra hours or get a pay raise, try selling some unnecessary items that you haven't used in awhile by having a garage sale or listing them for sale online. Do side projects for people who might benefit from your work, such as helping an elderly neighbor clean their house or mow their lawn.
When it comes to the grocery shopping and everyday living, sticking to a budget will put more money back into your account, which can then be transferred into your big purchase savings fund. One way to save some cash is by not eating out as much or cutting down on the amount of spending you do at the local grocery store every week.
Sticking to a budget isn't just a great way to save extra money, but it's a good habit to get into as well.
Jessica Kane is a writer for Checkworks, the best place to order checks online!